In a working paper published on Dec. 20, Mel T. Devine, Marianna Russo and Paul Cuffe proposed a new mechanism for forward selling renewable electricity generation and tokenizing the interaction between renewable energy providers and consumers.
Researchers at Ireland’s Economic and Social Research Institute (ESRI) have proposed that using a blockchain-based “forward trading system” can provide a more effective incentive for the smart management of renewable energy consumption.
Blockchain-based forward trading, the paper outlines, implies a transactive framework in which a renewable energy provider – say, a wind or solar farm – directly sells consumers “a claim on their future power output in the form of nonfungible blockchain tokens”:
“Claims on future electricity production can be directly traded between generators and consumers through blockchain in a cyber-physical marketplace … power contracts for future delivery are transacted on the blockchain. These claims on future generation could be embodied as nonfungible blockchain tokens with future electrical power delivery as the underlying asset.”
Automating renewable energy trading and management
Its benefit is that it can purportedly tackle the ever more complex nature of interactions that are evolving in the energy distribution network. Moreover, the mechanism includes the use of smart contracts to automate energy control, trading and management within a distributed framework:
“Using the flexibility of smart contract code, which executes irrevocably on a blockchain, the realized generation levels will offset the token holders’ electricity consumption in near real-time.”
Blockchain for a green future
In parallel to the consumer-oriented approach taken by the ESRI researchers, power utilities have increasingly been adopting blockchain-based approaches to monetize their renewable energy investments.
In December 2019, Japan’s second-largest power utility, the Kansai Electric Power Co Inc (KEPCO), extended its trial of a blockchain-enabled renewable energy trading platform developed by Australian tech firm Power Ledger.
KEPCO will trial the blockchain platform for its transactions of non-fossil fuel value certificates (NFVs), which provide energy retailers with proof that the portion of energy under the certificate is generated from renewable energy sources.
These NFVs can then be used by KEPCO’s clients to offset claims by carbon disclosure initiatives – something that is becoming increasingly relevant as international efforts gain momentum to establish new frameworks that support lower-cost green energy sources.
In June 2019, South Korea’s largest power provider, Korea Electric Power Corporation, signed a contract with two domestic power suppliers to establish a blockchain-powered system for transacting renewable energy certificates.
Blockchain Technology to Be Standardized by 2021
Blockchain technology will most likely be standardized by 2021, according to American business and financial services company Moody’s.
Per the research report published on Sept. 5, these standards will probably be established in the blockchain industry by 2021 and will be positive for “future securitisations using the technology.” The company claims that this could result in time and cost savings, automation and faster data availability.
Blockchain interoperability to come
Furthermore, Moody’s Investors Service states that the industry standards could also bring better interoperability and other operational efficiencies. Senior research analyst at Moody’s Frank Cerveny noted:
“Standardisation of blockchain technology would make its benefits more accessible for securitisations. … Standardisation would improve interoperability across systems and market participants, but also reduce counterparty concentration, operational and legal/regulatory risks for transactions that use blockchain technology.”
The announcement claims that this initiative is primarily driven by the International Organization for Standardization. The researchers also note that the current lack of standardization and interoperability limits operational efficiency gains and heightens potential risks.
As Cointelegraph explained in a recent article, blockchain interoperability the ability to share information across different blockchain networks without restrictions.
