PwC global power & utilities

Blockchain – an opportunity for energy producers and consumers?

www.pwc.com/utilities 2 Blockchain – an opportunity for energy producers and consumers? Table of contents 1. Blockchain: introduction, definition and development history 4 2. A look at other sectors: blockchain experience in various areas of application, with a particular focus on improving the consumer perspective 9

2.1. Blockchain applications in different sectors 9

2.2. Blockchain applications serving as a basis for cryptocurrencies (Bitcoin) 11

2.3. Private blockchain models (Nasdaq) 12

2.4. Smart contract applications based on private blockchains (R3 & Barclays) 13

2.5. Smart contract applications based on public blockchains (Ethereum) 14

3. A look around the world: international blockchain experience in the energy sector from a consumer perspective 15

3.1. Possible use cases for blockchain technology in the energy sector 15

3.2. Selected current projects and market players 20

3.3. Assessment of the current state of the art and of the prospects for blockchain projects in the energy sector 24

4. A look at energy law: current legal framework for the application of blockchain technology in dealings with consumers and prosumers and future legal challenges presented by blockchain 25

4.1. European energy law 25

4.2. Applicable primary and secondary domestic legislation 26

4.3. Energy law and consumer protection 28

5. Regulatory challenges posed by blockchain applications in the energy sector 29

5.1. Current regulatory framework 29

5.2. Changed market roles under a blockchain-based market model 30

5.3. Obstacles hindering the implementation of blockchain applications and issues to be addressed 32

5.4. Blockchain potential from a regulatory perspective 33

6. Blockchain risks and opportunities from a consumer perspective 34

6.1. Blockchain opportunities in the energy sector 36

6.2. Blockchain risks in the energy sector 38

6.3. Outlook on possible long-term social consequences 40

7. Summary and outlook 41 Appendix 1: List of experts interviewed 43 Appendix 2: Sources and relevant links 44 Contacts 45

This is a study conducted by PwC on behalf of Verbraucherzentrale (consumer advice centre) NRW, Düsseldorf Blockchain – an opportunity for energy producers and consumers? 3

Executive summary

Efficient peer-to-peer transaction Current barriers hindering the Opportunities for prosumers platform implementation of blockchain applications Blockchain technology strengthens the Blockchain is a special technology for market role of individual consumers peer-to-peer transaction platforms that In theory, blockchain systems no longer and producers. It enables prosumers, uses decentralised storage to record all require either intermediaries or a i.e. households that not only consume transaction data. central authority. Conflicts are to be but also produce energy, to buy and resolved using “swarm” principles, i.e. sell energy directly, with a high degree The first blockchain was developed based on the collective opinion of all of autonomy. The current legal and in the financial sector to serve as the parties involved. But it is still difficult regulatory framework for consumers basis for the cryptocurrency “Bitcoin”. today to put such models into practice. and prosumers in the energy sector is More and more new applications have In addition, there are a number of clearly defined and provides protection recently been emerging that add to legal and regulatory requirements that on many levels to consumers in the technology’s core functionality – blockchain projects must also comply particular. However, in the medium decentralised storage of transaction with. In any case, the actual technology to long term, this framework will data – by integrating mechanisms that behind blockchains has not yet reached probably have to be adjusted to reflect allow for the actual transactions to be maturity and is therefore still being the requirements of decentralised effected on a decentralised basis. These developed. transaction models. mechanisms, called “smart contracts”, operate on the basis of individually Some level of maturity in financial Wide range of energy use cases defined rules (e.g. specifications as to services but concepts only in energy quantity, quality, price) that enable an and other sectors Blockchain technology shows a lot autonomous matching of distributed of promise. Other than being used to providers and their prospective An entire eco-system of companies has execute energy supply transactions, customers. sprung up around Bitcoin that build on it could also provide the basis for the virtual currency and its underlying metering, billing and clearing processes. Lower costs, faster processes and technology. Other financial use cases Other possible areas of application are greater flexibility of the technology are currently being in the documentation of ownership, developed and trialled by many major the state of assets (asset management), Blockchain technology changes the banks and start-up companies. guarantees of origin, emission way we transact, with the underlying allowances and renewable energy transaction model shifting away from a Other industries are only just starting certificates. centralised structure (banks, exchanges, out on blockchain development. Some trading platforms, energy companies) start-ups are currently entering the Blockchain technology has the potential towards a decentralised system (end market with blockchain projects. In the to radically change energy as we know customers, energy consumers). Third- energy sector, a small number of pilot it, by starting with individual sectors party intermediaries, whose services projects are trialling the technology, first but ultimately transforming the are needed today in most industries, are some of them funded by large energy entire energy market. no longer required in such systems – at companies. In New York in April 2016, least according to the blockchain theory for instance, decentrally generated – given that transactions can be initiated energy was sold directly between and carried out directly “from peer neighbours via a blockchain system for to peer”. This can cut costs and speed the first time. The goal is to establish up processes. As a result, the entire a fully decentralised energy system in system becomes more flexible, as many which energy supply contracts are made previously manual work tasks are now directly between energy producers and carried out automatically through smart energy consumers (without involving a contracts. third-party intermediary) and carried out automatically.

1 IEA, World Energy Outlook, 2015. 4 Blockchain – an opportunity for energy producers and consumers?

1. Blockchain: introduction, definition and development history

Blockchain is a technology that enables so-called “peer-to-peer” transactions. With this type of transaction, every participant in a network can transact directly with every other network participant without involving a third-party intermediary.

The blockchain innovation is that Figure 1: How blockchains change the way we transact transactions are no longer stored in a central database, but distributed to all participating computers, which store Traditional transaction model Blockchain transaction model the data locally. The first relevant blockchain application was Bitcoin, a Providers so-called “cryptocurrency”. Over recent e.g. sellers, electricity years, Bitcoin has become the basis for producers, lenders other blockchain applications, most of Intermediary, platform which are currently being developed in e.g. finance. A number of businesses and exchanges, traders, initiatives have recently been launched banks, energy that apply the blockchain principle companies Customers to other industries, among them the e.g. buyers, energy energy sector. Blockchain applications consumers, borrowers are generally considered to be a very promising technology but they are still at an early stage of development. • Multi-tiered transaction model • Transactions are carried out What is blockchain? relying on a central authority directly between providers and • Transaction data is primarily their customers stored by the central authority • All transaction data is stored on a The aim of this study is to analyse ( ) distributed blockchain , with all the potential impact of blockchain relevant information being stored identically on the computers of all technology on the energy sector and participants to explore what opportunities it may • Ideally, all transactions are made hold for energy customers and energy on the basis of smart contracts , i.e. based on predefined consumers. Born as a niche product on individual rules concerning the fringes of the market, blockchain quality, price, quantity etc. • Largely automated, decentralised has for some time now been garnering transaction model with no need the attention of experts in various for third-party intermediaries industries, and has increasingly been in the spotlight of the media. Yet many decisionmakers, e.g. in the financial sector, are unsure how to respond to this trend: in a survey conducted by PwC in March 2016, 57% of respondents said so.1

1 PwC Global FinTech Report, March 2016 Blockchain – an opportunity for energy producers and consumers? 5

In many cases, this uncertainty of many other network participants. can be explained by an insufficient Traditional intermediaries, e.g. a bank, understanding of how blockchains work. are no longer required under this model, Essentially, a blockchain is a digital as the other participants in the network contract permitting an individual party act as witnesses to each transaction to conduct and bill a transaction (e.g. a carried out between a provider and a sale of electricity) directly (peer-to-peer) customer, and as such can afterwards with another party. The peer-to-peer also provide confirmation of the concept means that all transactions details of a transaction, because all are stored on a network of computers relevant information is distributed to consisting of the computers of the the network and stored locally on the provider and customer participating in a computers of all participants. transaction, as well as of the computers

Figure 2: The blockchain process

A provider and a The transaction The data block The verified block The transaction is customer agree a is combined with is stored in the is combined with confirmed to both transaction other transactions decentralised all other blocks parties made during the global network in previously verified, same period to a tamper-proof thereby creating create a data block manner and thus a (continuously verified growing) blockchain

How does a blockchain work? Figure 3: The verification process Where a provider and a customer agree to enter into a transaction, they determine the variables of this transaction by specifying the

Individual transactions are recipient, the sender and the size of the combined to form a block. transaction, among other things. All information relating to an individual transaction is then combined with The data contained in each the details of other transactions made block is verified using during the same period to create a new algorithms that only produce the correct hash block of data. This is comparable to 53l4hfi73rtp2fh73p... 53l4hfi73rtp2fh73p... (e.g. 53l4hfi73rtp2fh73p...) sending emails, which are also split into only if the right combination separate data blocks. Blockchains are is found. different in that this process relates to a 53l4hfi73rtp2fh73p... single standardised transaction.

The new block is added at 53l4hfi73rtp2fh73p... the end of the continuously Each transaction is encrypted and growing blockchain. The distributed to many individual data stored on each 53l4hfi73rtp2fh73p... blockchain (across all computers (peer-to-peer), each of which blocks) is also continuously stores the data locally. The members verified. 53l4hfi73rtp2fh73p... of the network automatically confirm (verify) the transactions stored on the individual computers. 6 Blockchain – an opportunity for energy producers and consumers?

The data stored in a block is verified What is the blockchain Companies and developers may decide using algorithms, which attach a unique development history? to build their applications on either hash to each block. Each such hash is public or private blockchains. On a a series of numbers and letters created Today’s blockchain applications can public blockchain, the identity of all on the basis of the information stored in be divided into three broad categories participants remains anonymous. the relevant data block. If any piece of based on their stage of development, Bitcoin and Ethereum are examples of information relating to any transaction namely stages 1.0, 2.0 and 3.0. The this. In private blockchain systems, all is subsequently changed as a result of category “Blockchain 1.0” comprises participants are known and identified tampering or due to transmission errors, virtual (crypto)currencies such before being given access. Some e.g. the exact amount of the transaction, as Bitcoin that can be used as an advantages of private blockchains are the algorithm run on the changed block alternative to real currencies (e.g. that they allow for simpler governance will no longer produce the correct hash the euro or the dollar). To this day, structures and that they can be operated and will therefore report an error. Bitcoin continues to be the blockchain at lower cost compared to public application best known to the general applications. Banks and payment service All number/letter combinations are public, and becoming more so. However, providers are therefore bound to use continuously checked for correctness despite the fact that more and more private blockchains for their existing and the individual data blocks are users are adopting the currency, with business models, among other reasons combined to form a chain of individual traded volumes on the rise, the absolute because this will allow them to retain data blocks – the blockchain. Due to share of Bitcoin transactions in the some degree of control as well as the interlinking of these number/letter international foreign exchange markets revenue potential. combinations, the information stored on is still minimal. At present there is no the blockchain cannot be tampered with indication that Bitcoin may ever come The next blockchain generation, (at least this would require a great deal close to reaching the dimensions of referred to as “Blockchain 3.0”, of effort). This continuous verification other international currencies. remains a vision for now. Blockchain 3.0 process (called “mining”) is performed is the stage where the smart contract by the members of the blockchain, who The next stage of development is concept is developed further so as are rewarded for this service according to enable smart contract models, to create decentralised autonomous to the computing power they contribute. which are collectively referred to as organisational units that rely on their “Blockchain 2.0”. A “smart contract” own laws and operate with a high The verification process ensures that represents a digital protocol that degree of autonomy. all members can add to the blockchain automatically executes predefined but no subsequent revisions are processes of a transaction without possible. This enables direct, peer-to- requiring the involvement of a third peer transactions between persons or party (e.g. a bank). Returning to the organisations that used to require the example given at the start of this services of an intermediary in order chapter, it would for example be for their transactions to be legitimately possible to create a fully automated recorded. For example, while a bank is smart contract between an energy currently needed as an intermediary to producer and a consumer that effect a financial transaction between autonomously and securely regulates two parties, the same transaction can both supply and payment. If the be executed and documented directly customer were to fail to make payment, between the two parties if a blockchain the smart contract would automatically is used. arrange for the power supply to be suspended until payment has been received, provided the parties had previously agreed to include such a mechanism in their contract. This development poses a threat to the traditional business models of banks, which may be in danger of being excluded from the market segment of “Today’s blockchain payments. applications can be divided into three broad categories based on their stage of development, namely stages 1.0, 2.0 and 3.0” Blockchain – an opportunity for energy producers and consumers? 7

How the blockchain works in detail Each blockchain is essentially a so-called “DApp” (decentralised application) operating on the basis of a peer-to-peer protocol and coming with the special feature that it provides distributed storage functionality for storing transaction data.

DApps are open-source applications which represent a The proof-of-work and proof-of-stake concepts contract between a network and its users and which run on a distributed register (the so-called “ledger”), such as the Bitcoin The purpose of the verification process is to achieve or Ethereum blockchains. What makes this type of application consensus on the content of the distributed ledger. special is that no single organisation controls these contracts Consensus-based verification is a decentralised (i.e. or holds a legal claim over them, but that all decisions (e.g. embedded on the blockchain itself) and automated process. on protocol adaptations) are taken by consensus between the users on the basis of computer code. The following two mechanisms are most commonly3 used to establish consensus: In order for an application to qualify as a genuine decentralised application, both its protocol and data must Proof of Work be stored on a public, decentralised blockchain (to avoid a central point of failure) and validated using a decentralised The proof-of-work concept is the consensus mechanism verification mechanism (e.g. “proof of work”). most frequently used in conjunction with blockchain technology, and relies on so-called “miners”. Each block Properly decentralised applications ensure that a reliable is verified through mining before its information is record can be kept of all transactions and business deals, stored. The data contained in each block is verified using even in the event that key websites and interfaces go algorithms which attach a unique hash4 to each block based offline. Also, no one can subsequently revise or erase the on the information stored in it. These hashes can be either ledger. ordinary hashes or cryptographic hashes. The complexity of this task lies in finding a specific hash corresponding to the DApps can be classified as follows: block’s content. The level of complexity (difficulty) adjusts flexibly in response to the computing power available on • Type 1: decentralised applications that have their own the miners’ network, so as to ensure that new blocks can blockchain be hashed at predefined intervals (Bitcoin: 10 minutes, - Examples: Bitcoin, Altcoin, Litecoin Ethereum: 10 seconds). Even if only a single piece of information relating to any transaction is subsequently • Type 2: decentralised applications that use the changed, for example if the amount of a transaction is blockchain of a type 1 DApp altered as a result of tampering or due to transmission - Example: Omni Protocol (a software layer built on top errors, the algorithm applied to the block will no longer of the Bitcoin blockchain) produce the correct hash. The hashes computed for the - Type 2 DApps are protocols and use their own tokens same block, which was stored many times around the decentralised network as described above, are compared • Type 3: decentralised applications that use the so that changed blocks can be identified and declared blockchain of a type 2 DApp invalid. The verified, correct version of a block is identified by the majority of participating computers and added to - Example: the SAFE Network, which uses the Omni the other blocks previously verified, thereby extending Protocol to issue “safecoin” tokens. 2 the blockchain. Once the block which contains the initial transaction is added to the blockchain and this addition has been stored by a sufficient number of network participants, the transaction is confirmed to both parties.

2 Source: David Johnston/Decentralized Applications 3 Other consensus mechanisms: federated Byzantine agreement (FBA), deposit-based consensus, Byzantine fault tolerance 4 Hash algorithms are used to convert data of an arbitrary length to a fixed length, thereby creating a hash. The hash value represents a checksum which is used to encrypt a message of variable size using a hash function. No two encrypted messages may be based on the same hash value, nor will the hash value provide any clues as to the message content. 8 Blockchain – an opportunity for energy producers and consumers?

is one example of a DApp issuing its Figure 4: Peer-to-peer transactions5 tokens through mining.

• Fundraising: tokens are distributed to those who funded the initial Transaction 1 Transaction 2 Transaction 3 development of the DApp.

Owner 1's public key Owner 2's public key Owner 3's public key • Development: tokens are generated using a predefined mechanism and are available for the future development of the DApp (with ash ash ash consensus being established by proof of stake). erify erify

Execution of transactions ner s signature ner s signature ner s signature ign ign In blockchain transactions, cryptographic proof replaces the third-party Owner 1's private key Owner 2's private key Owner 3's private key intermediary. The chart below shows a peer-to-peer transaction conducted without the assistance of any third- party intermediary. In this context, it is important to distinguish between the two components of a blockchain address, namely the private key and the public The mining process can also be used to What are tokens? key. The public key can be used to view take decisions on changes to a DApp. the transaction history of a user but it Decisions made in accordance with The term “token” may refer to several cannot be used to make a transaction the proof-of-work principle are taken things: a token can be used to grant users unless the private key is also known. on the basis of the amount of work the access to a (de-)centralised computer The private key is what is needed to individual stakeholders have performed application, act as a key for the execution access an account and actively execute a to verify a block. of digital transactions or represent a transaction. currency unit (e.g. bitcoins). Proof of stake The chart illustrates how Owner 1 DApp tokens must be generated and transfers a token to Owner 2 by The proof-of-stake approach simplifies distributed according to a standard digitally signing a hash of the previous the mining process where a large number algorithm or set of criteria. Tokens transaction and the public key of the of tokens need to be verified. While constitute the basis for using an next recipient (digital signature). under the proof-of-work principle, a application, and are also a reward for The transaction is then added to the large group of distributed users are contributions by users. Yet tokens do blockchain. The party receiving the continuously verifying the hashes of not represent any assets, nor do they information/payment (Owner 2) can transactions through the mining process give rights to dividends or equity shares. verify the “chain of ownership” by in order to update the current status of Although the value of a DApp token may verifying the signatures using the public the blockchain assets, the proof-of-stake increase or decrease over time, it would key of Owner 1 stored on the publicly concept requires users to repeatedly be a misconception to think of them as a accessible blockchain. What they cannot prove ownership of their own share type of security. check is whether a previous owner had (“stake”) in the underlying currency. already used the same token prior to the Where the proof-of-stake method is What mechanisms are used to current transaction (“double spending”). used, the work required to carry out distribute tokens? Double spending can be verified either the verification process is allocated by a central authority or, in the case of between the individual members based There are three general mechanisms Bitcoin, through a verification process on their stake in percent. For example, DApps (e.g. Bitcoin, Ethereum) can use carried out by a decentralised authority. if a user owns a 10% share of the to distribute their tokens (e.g. bitcoins, total outstanding blockchain assets, ethers): mining, fundraising and the user will have to carry out 10% development of the required mining activity. This approach reduces the complexity of the • Mining: tokens are distributed as a decentralised verification process and reward to those participants who can thus deliver large savings on energy solve certain verification operations and operating costs. most quickly (with consensus being established by proof of work). Bitcoin

5 Source: Satoshi Nakamoto Blockchain – an opportunity for energy producers and consumers? 9

2. A look at other sectors: blockchain experience in various areas of application, with a particular focus on improving the consumer perspective When it comes to the practical application of blockchain technology, by far the most progress has been achieved in the financial sector. In finance, unlike in other industries, blockchain solutions are not only used and developed by small communities but also by established players, e.g. international commercial banks.

For the most part this can be explained 2.1. Blockchain by the fact that in the area of financial applications in different services, the blockchain transaction model can deliver huge cost reductions sectors and make processes more efficient, all within a short length of time. As is shown in the overview below, From a consumer perspective, the blockchain applications are being most interesting questions are which developed for a variety of industries and blockchain model – public or private use cases. – will win the day and how smart contracts will be used in the future.

Figure 5: New blockchain applications

Financial services Non-financial services

Digital securities trading Digital identity Proof of ownership and title transfer Protects privacy of consumers equityBits, Spritzle, Secure Assets, Coins-e, Sho Card, Uniquid, Onename, Trustatorm DXMarkets, Muna, Kraken, BitShares

Foreign exchange Proof of ownership Currency exchange/conversion Authentication & authorisation Coinbase (Wallet), BitPesa, Billion, Ripple, Stellar, The Real McCoy, Degree of Trust, Everpass, Kraken, Fundrs.org, MeXBT, CryptoSigma BlockVerify

Reviews/recommendations Data storage Enables authentication of ratings and reviews Storj.io, Peemova Blockchain TRST.im, Asimov (recruitment services), The World Table

Peer-to-peer transactions Diamonds/gold/silver Verification by network participants Diamonds: Everledger, gold & silver: BTC Jam, Codius, BitBond, BitnPlay (Donation), BitShares, Real Asset Co., DigitalTangible DeBuNe (SME B2B transactions) (Serica), Bit Reserve

Digital content Network infrastructure Storage & delivery Ethereum, Eris, Codius, NXT, Namecoin, BotProof, Blockcai, Ascribe, ArtPlus, Chainy.Link, ColoredCoins, Hello Block, Counterparty, Stampery, Blocktech (Alexandria), Bisantyum, Mastercoin, Corona, Chromaway, BlockCypher Blockparti, The Rudimental, BlockCDN 10 Blockchain – an opportunity for energy producers and consumers?

All these developments are still at a very Figure 6: Blockchain applications in the financial sector early stage of development, with the primary focus of most projects being on refining their concepts or running first pilots. Yet initiatives such as Onename give us a glimpse of the potential impact Smart contracts Private blockchain technology may have in areas outside finance. Onename creates Blockchain applications Private blockchain serving as a basis for virtual IDs that uniquely identify users models (Nasdaq) and allow them to log on to social cryptocurrencies (Bitcoin) networks using their own identities. Transactions Its IDs, which build on blockchain 2.2 2.3 technology and are thus tamper-proof as well as unforgeable, are already being Combination of public Combination of private used on the Internet today, for example blockchains with smart blockchains with smart in blogs, forums or digital exchanges. contracts (Ethereum) contracts (R3 & Barclays) From today’s perspective, it may have Smart quite a futuristic feel to think of digital contracts 2.5 2.4 driving licences or identity cards, which are potential future developments of this technology, given that such digital IDs are not currently a legally valid form of identification, and as such are not recognised by any government at present. But they do provide an outlook on what blockchain technology may make possible in the future.

Another example is the Swedish start- These developments will broaden up company Bitnation. Its application the range of possible blockchain stores public administrative acts on applications. In the following parts of a blockchain, for example contracts, this chapter we describe the different insurance policies or official certificates. types of blockchain models using In a few isolated cases this is already examples from the financial sector. used in practice, for example in Estonia, which has recognised marriages via The insight gained here will allow us Bitnation since 2015. Bitnation has to draw some conclusions as to what not yet succeeded in establishing other developments we may be about to see comparable use cases of its blockchain, in the field of energy. In particular, the though. Honduras, for instance, has matter of which of the two blockchain abandoned the planned migration of its models is likely to be used in the land registry onto the blockchain. energy industry will have a significant impact on the potential advantages and In the financial industry, in contrast, disadvantages the technology may have the number of functioning blockchain for consumers. applications is growing by the day. The technology and its various use cases have made plenty of headway since the first blockchain application Bitcoin was launched in 2009. The two most important developments in finance that can currently be observed are the trend “In the financial industry, to build smart contract applications on blockchain technology and initiatives to in contrast, the number create private blockchains. of functioning blockchain applications is growing by the day” Blockchain – an opportunity for energy producers and consumers? 11

2.2. Blockchain Payments made using Bitcoin can be It remains to be seen whether and to applications serving as a clearly and unambiguously verified, what extent the average consumer which makes system-related accounting will value the enhanced protection basis for cryptocurrencies errors impossible. Contrary to what against tampering and the – theoretical (Bitcoin) is often assumed, this high level of – cost savings delivered by blockchain transparency also results in a loss of applications such as Bitcoin as a Bitcoin was the first blockchain-based anonymity. Each step of all money meaningful and notable improvement application and has become the most transfers made via Bitcoin is publicly on the traditional payments system. widely known cryptocurrency. The accessible on the Internet. Though The latter normally offers free money technology has been enabling users to the accounts, and thus the users, transfers, high security standards and transfer bitcoins between them without participating in a transaction are a considerably higher processing rate involving a third-party intermediary anonymous, once the login name (alias) of money transfers per second (50,000 since 2009, with Bitcoin not only being of a user is known, the user’s entire under the Visa system vs. 7 in the case the name of the system as such but also transaction history can be found on the of Bitcoin) even today. of its currency unit. blockchain and traced back to the user.

Users do not need profound technical In the seven years of the system’s understanding to install and operate operation no one has ever succeeded the system; it can be accessed relatively in subsequently altering a Bitcoin easily even by inexperienced consumers. transaction or attacking – or at least Moreover, access to the Bitcoin system disturbing – the network. Nevertheless, is not restricted. Every user can log on there have been incidents in the past, to the system and even develop new among them cases where bitcoins applications building on the Bitcoin have been stolen through manipulated blockchain. When registering via the exchanges.6 Bitcoin website, users choose a so- called “wallet” (which represents their Outside the virtual environment, where electronic purse) and a Bitcoin address. bitcoins can be used to pay in online Bitcoin addresses are similar to email shops etc., there are growing numbers of accounts, via which users can send restaurants, hotels or record stores that bitcoins to other users. Whenever a accept bitcoins as a means of payment. transaction is made, the corresponding The Swiss municipality of Zug has even information is broadcast to the entire become the first public administration Bitcoin blockchain via the associated to accept Bitcoin payments. Exchanging peer-to-peer network. The wallets bitcoins for real products, however, calculate the account balances based remains difficult. One former problem on the tamper-proof information for consumers, which was posed by stored on the blockchain, and can be the strongly fluctuating exchange rates configured so as to execute only certain of the digital currency against “real” transactions, for example only if the currencies, has in the meantime been sender disposes of a sufficient fund largely eliminated, thanks to apps which of bitcoins. This provides receiving offer to exchange bitcoins against euros users with comprehensive protection at the time of making payment. against fraud or non-payment. Still, inexperienced users in particular are also exposed to some risk when using Bitcoin, for example if they forget their access details, which means that their stored assets will be irretrievably lost. It is also not possible to reverse transactions that were made erroneously.

6 The Mycoin case, where the operators of a Hong Kong-based exchange were able to steal several million euros’ worth of bitcoins using a Ponzi scheme. 12 Blockchain – an opportunity for energy producers and consumers?

2.3. Private blockchain Figure 7: Comparison of public and private blockchains models (Nasdaq)

Private blockchains have been Public blockchain Private blockchain developed primarily on the initiative of financial services companies. Users can access a private blockchain only if the operator controlling the blockchain, • Trusted intermediary no longer • Operator can control who receives for example a bank, uniquely identifies needed access • Operator cannot manipulate data • (Ex-post) interventions possible them and grants them access to the • No incentive to charge additional • Greater anonymity possible blockchain. fees • Lower operating costs • Faster transactions Private blockchains are therefore usually seen as an opportunity for banks and A typical example of a private In addition, the platform records exchange operators to protect their blockchain system is the initiative individual steps before and during business cases, as they would allow of the US stock exchange operator transactions. Users can thus keep track them to reroute their customers to a Nasdaq. Nasdaq is currently trialling of who purchased which shares of a blockchain they control. In addition, its first private blockchain application company and how they were sold on. At they could continue to charge fees on its blockchain-based Private the end of last year this system replaced for services that can be provided Market platform, which is used for the previous manual process operated automatically, and hence at almost no pre-IPO trading activities (start-ups on the basis of documents and records cost, by blockchain applications. At the selling shares to investors prior to maintained by lawyers, accountants and same time, blockchain models provide going public). In the past, lawyers, consultants as well as on the basis of banks with an opportunity to automate accountants and consultants have been spreadsheet data provided by the start- their processes, making them more required to execute and clear such ups themselves, which used to be prone efficient and cost-effective. Another transactions. In particular, the task of to errors. advantage private blockchains offer verifying the information exchanged from the perspective of the operator is between buyer and seller has been a According to Nasdaq, the first that, technically, the rules governing time-consuming and costly exercise, transactions carried out for a total of 6 the blockchain can be changed easily, since otherwise both parties run the risk start-up companies and their investors which would make it possible for the of breaching procedural legal provisions have been successful, following which operator to also reverse transactions in the run-up to a transaction. For the application is to be migrated to on an ex-post basis. Also, the operator this exact purpose, in 2015 Nasdaq other areas soon. Other than improving would be the central authority verifying developed a cloud-based platform called transparency and providing a record- all transactions. As no global peer-to- LINQ, built on a private blockchain, keeping functionality, the platform peer network would be required in this which stores information on current delivers additional user benefits by case, transactions could be processed shareholdings and related changes, reducing costs and accelerating the at lower operating costs and at a faster the prices of shares issued in each process. Nasdaq does not pass on rate. Furthermore, at least in theory, investment round and information on its entire cost savings to customers, greater anonymity could be provided, available stock options. though, but continues to charge a fee in as the transaction history would no exchange for providing the service. longer have to be publicly accessible. Conversely, this would also mean that private blockchains no longer offer protection against tampering, or only to a certain extent, which was one of the Figure 8: Nasdaq’s LINQ platform key characteristics of blockchains in the first place. Traditional process Blockchain system

On closer examination, it becomes High Lower clear that many private blockchain costs costs models no longer operate according to the principles originally described for blockchain systems, because - among other things -they offer at least a theoretical possibility of tampering Start-up Investor or ex-post revisions by the operator. Start-up Nasdaq LINQ Investor Private blockchains are quite similar to conventional client/server or cloud structures in this regard. Blockchain – an opportunity for energy producers and consumers? 13

2.4. Smart contract Derivatives are reciprocal contracts applications based on used in the financial sector. Similar to a bet, the value of a derivative is private blockchains dependent on the future value of a (R3 & Barclays) certain underlying asset, e.g. the price of a share, an interest rate or the price The LINQ application described in of a commodity, at a specified future the previous example has no smart point in time. Derivatives trading today contract functionality thus far, and so requires filling in a large number of is primarily a tool to maintain a record paper or digital documents, similar to of past transactions. In the medium the situation in the bond market cited in term, though, companies are bound to the previous example. start building smart contracts on private blockchains in order to achieve greater Barclays has been developing a automation. blockchain tool that besides recording all transaction data in a manner similar In this particular area all eyes are on to Nasdaq’s LINQ platform, implements the 45-strong consortium of major a first version of a smart contract for international banks funding the start- the settlement of derivatives. The up company R3. Banks like Barclays, vision is for the smart contract to be BBVA, Credit Suisse, JPMorgan, Royal capable of automatically transferring Bank of Scotland, Deutsche Bank and the value of a derivative to the account UBS have been working with R3 since of the transaction’s beneficiary from 2015 to apply blockchain technology the account of its counterparty. The to real currencies such as the euro or current legal framework still requires the dollar. The aim of this collaboration the counterparty owing the payment is to develop common industry to authorise automated transfers, but standards permitting use of blockchain technically it is already possible today systems across multiple banks. On to fully automate the process without 3 March 2016, R3 successfully used leaving any possibility for intervention its proprietary Corda blockchain for by the parties. the first time to trade bonds as part of a pilot project involving a total of This is another case where the 40 banks. technology has the potential to cut costs and speed up processes by automating The Corda blockchain, much like any manual tasks. In addition, the parties other private blockchain, has some involved are afforded greater certainty benefits for banks, e.g. it allows them about the payments receivable or to use the transaction platform whilst owed by them, as the smart contract receiving exclusive access to the data. A can determine the derivative’s status particular focus of the project is on the definitively and also settle it. integration of smart contracts. In April 2016, British banking giant Barclays demonstrated for the first time how the Corda blockchain can be combined with smart contracts in order to trade derivatives. “The vision is for the smart contract to be capable of automatically transferring the value of a derivative to the account of the transaction’s beneficiary from the account of its counterparty” 14 Blockchain – an opportunity for energy producers and consumers?

2.5. Smart contract However, not even Ethereum can a decisive factor that will determine applications based entirely allay the security concerns of what advantages or disadvantages the the general public when it comes to technology will have for consumers. on public blockchains public blockchains. In June 2016 it was Also, the individual models actually (Ethereum) revealed that a user managed to siphon implemented in practice would not 3.6 million ethers (the original currency necessarily have to conform fully Outside the financial services unit used on the Ethereum blockchain) to the underlying theoretical ideal: industry and its participants’ efforts worth €50 million from the investment gradations are possible. For instance, it to defend market shares by building fund “The DAO”. The hack exploited can be assumed that a future company private blockchain systems, efforts an integrated smart contract, whereas operating a private blockchain in the are underway to also develop public the underlying blockchain has operated energy sector will charge a fee for blockchains that could be used in flawlessly to date (see chapter 6). its use in order to increase its own combination with smart contract Although the exact circumstances of the profits. It could just as well be the case, applications. The Ethereum project case have not been determined as yet, though, that changes in the competitive in particular is widely seen to be a the incident can be considered a setback environment will increase competition strong contender in this field. The for the acceptance of public blockchain between different operators to such an cryptocurrency project developed by the applications. At the time of writing of extent that they will be forced to pass 22-year-old Russian developer Vitalik this study, “The DAO” was working to on at least part of their cost savings to Buterin has been garnering lots of public resolve the issue. consumers. interest since the start of this year. A comparison between Ethereum and Ethereum has caught the attention R3 highlights the two fundamental of established companies such as and diverging trends that can be Microsoft, Samsung or RWE. RWE observed for blockchain solutions with is planning to use the Ethereum integrated smart contract functionality. blockchain in cooperation with the Which blockchain model will come German start-up company Slock.it to to be applied in the energy sector is operate charging stations for electric cars (see chapter 3). The main reason for this initiative is that Ethereum is considered to be capable of building a common and automated international payment system. This is a very positive development for consumers, as it could provide a nearly free alternative to the private blockchains currently being built in the financial sector. In addition, Ethereum provides an opportunity to implement smart contracts on a public blockchain.

Figure 9: Comparison of public and private blockchains

Public blockchain

Public structure enables Decentralised data storage Anonymous wide variety of applications No ex-post revisions Higher operating costs & verification performed by possible Free access Users can trade with all P2P network No operator fees users

Registration Smart contract Blockchain Manipulation Costs preparation Invitation-based Contracts are made Centralised data storage & Ex-post revisions Lower operating costs Know-your-customer between customers verification performed by possible(e.g. in the case of Operator fees controls through operator’s platform operator legal dispute)

Private blockchain Blockchain – an opportunity for energy producers and consumers? 15

3. A look around the world: international blockchain experience in the energy sector from a consumer perspective

Various companies are currently developing blockchain applications for the energy sector. None of these have moved beyond the concept or pilot stage yet. One trial run in New York in April 2016 saw decentrally generated energy being sold directly from one neighbour to another via a blockchain system for the first time.

International energy companies are 3.1. Possible use cases for • New decentralised business models also working on blockchain-based pilot blockchain technology in no longer require third-party projects. All these applications are intermediaries. designed to interconnect prosumers the energy sector >> in principle, this also applies in the and/or provide a direct link between energy sector energy suppliers and energy consumers. Some of the basic assumptions driving Blockchain technology may thus pave blockchain developments in the • Whether the technology will succeed the way for a further decentralisation of financial industry can also be applied to will be determined not only by energy systems. the energy sector: the technical capabilities of the system but will also be dependent • Decentralised storage of transaction on the applicable regulatory and data increases security and ensures legal framework, the technology’s greater independence from a central scalability and resilience as well authority. as the economic viability of >> in principle, this also applies in the investments. energy sector >> in principle, this also applies in the energy sector • Blockchain technology has a wide range of uses; blockchains The energy sector differs from the can help to make payments via financial industry in that the physical cryptocurrencies, to digitise product itself (e.g. electricity) must also contracts, to manage digital content, be taken into account. Transactions here to verify transactions, to execute not only involve values and information, trades or be used in many other but also the trading of energy which is areas. The next big development delivered via network infrastructure. step is expected to involve smart contracts. The overview below shows possible use >> in principle, this also applies in the cases of blockchain technology in the energy sector energy industry. 16 Blockchain – an opportunity for energy producers and consumers?

Figure 10: Overview of possible blockchain use cases in the energy sector

Applications with a focus on transactions and smart Applications with a focus on Applications with a focus on contracts (automated execution of transactions) documentationof ownership distributed transaction records

Decentralised energy Register recording ownership transaction and supply Metering and billing of and current state of assets system electricity consumption (asset mgmt.)

Providers e.g. sellers, electricity producers, lenders Intermediary, platform e.g. Other smart exchanges, traders, banks, energy contract Guarantees of origin, companies Metering and billing ofheat Customers e.g. buyers, energy applications, e.g. certification of renewable consumers, borrowers use in the fields of electric energy • Decentralised buying/selling of mobility, smart devices energy (primarily electricity) • Special opportunities and use cases Guarantees of origin, for prosumers Billing ofelectric mobility certification of emission • No supplier-switching process (“roaming”) allowances Cryptocurrency integration

A key application –which we will return Some consumers are also producers: to throughout the course of this study so-called “prosumers” not only consume as our basis for evaluating the potential energy but also dispose of generation of blockchain technology in the energy capacity in the form of solar systems, sector – is to develop a decentralised small-scale wind turbines or CHP plants. energy transaction and supply system. Blockchain technology could enable them to sell the energy they generate Other use cases mostly leverage the directly to their neighbours. blockchain’s functionality to provide a distributed and secure record of Blockchain systems initiate and transmit transaction data accessible to all transactions whilst recording them in a participants (e.g. documentation of tamper-proof manner. All transactions ownership, metering and billing of made between individual parties are consumption). directly executed through a peer-to- peer network. A fully decentralised Decentralised energy transaction energy transaction and supply system and supply system as illustrated in Figure 11 can be considered to represent the ultimate If the experience gained with level of energy-related blockchain blockchains in the financial sector applications from a theoretical are applied to the energy context, perspective. blockchain technology appears capable of enabling a decentralised energy supply system. It may be possible to radically simplify today’s multi-tiered system, in which power producers, “Blockchain systems initiate transmission system operators, and transmit transactions distribution system operators and suppliers transact on various levels, whilst recording them in a by directly linking producers with tamper-proof manner” consumers, provided we manage to adjust the way the networks are controlled so as to reflect the new requirements. Blockchain – an opportunity for energy producers and consumers? 17

• Blockchain technology makes it • Decentralised storage of all the first is in the verification of possible for energy networks to transaction data on a blockchain renewable electricity and of emission be controlled through smart would make it possible to keep allowances (emissions trading). The contracts. Smart contracts would a distributed, secure record of ownership history of each certificate signal to the system when to initiate all energy flows and business could be recorded exactly on the what transactions. This would be activities. Both flows of energy and blockchain. This would provide a based on predefined rules designed transactions, which would in part be tamper-proof and transparent way of to ensure that all energy and storage initiated by smart contracts, could managing certificates for renewable flows are controlled automatically be documented in a tamper-proof power and emission allowances. so as to balance supply and demand. way if recorded on a blockchain. Another use case, which is related For example, whenever more The combination of smart to the Internet of Things, is to set energy is generated than needed, contracts controlling the system up a blockchain-based register smart contracts could be used to and distributed ledgers securely that records and regulates the ensure that this excess energy is documenting all activities would also ownership and current state (asset delivered into storage automatically. have a direct impact on network and management) of assets such as smart Conversely, the energy held in storage operations. meters, networks and generation storage could be deployed for use facilities (e.g. solar systems). whenever the generated energy • Another potential future area of output is insufficient. In this way, application is to use blockchains • Customers could use blockchain technology could directly for the purpose of documenting cryptocurrencies to pay for the control network flows and storage ownership and related transactions, energy supplied. facilities. Smart contracts could by providing secure storage of also be used to manage balancing ownership records. The possibility activities and virtual power plants. of storing all transaction data in a tamper-proof and decentralised way opens up great opportunities in the field of energy certification. Two applications come foremost to mind:

Figure 11: Cornerstones of a decentralised energy- transaction and supply system

Decentralised energy transaction and supply system • Transactions (consumer-producer matching) are effected either fully automatically (based on smart contracts) or manually (e.g. Brooklyn) • Transactions are recorded on a blockchain in a tamper-proof way • Energy is delivered via the network (e.g. power grid)

Supply and demand are balanced by Energy networks Secure storage e.g. emission allowances, smart contracts (balancing market, controlled by of ownership renewable energy certificates, microgrids, virtual power plants, storage) smart contracts records asset management

Transaction data is stored on the blockchain using a decentralised mechanism, with parties Distributed, Payments identifying themselves through their digital in addition to traditional secure record of via crypto- identities – e.g. in the context of energy means of payment transactions currencies storage, renewable energy, electric mobility, energy trading

Components of a blockchain-based energy system

Smart Sensor Smart- Smart devices/ techno- phone meters homes logy apps 18 Blockchain – an opportunity for energy producers and consumers?

Where individual blockchain Traders buy and sell energy on the applications are combined, a exchanges and banks act as payment decentralised energy transaction and service providers, handling the supply system can become possible transactions made by the parties for the future. Energy that is generated involved. Blockchain-based energy in distributed generation facilities processes would no longer require would be transported to end users via energy companies, traders or banks smaller networks. Smart meters would (for payments). Instead, a decentralised measure the amount of energy produced energy-transaction and supply system and consumed, while energy-trading would emerge, under which blockchain- activities and cryptocurrency payments based smart contract applications would be controlled by smart contracts empower consumers to manage their and executed through the blockchain. own electricity supply contracts and consumption data. Transposing these mechanisms to the German energy market shows that an energy supply without brokers or energy companies is possible. Under the current system, energy is produced in centralised generation facilities and delivered to industrial and domestic users via the distribution networks operated by energy companies.

Figure 12: Transformation of market structures on introduction of decentralised transaction model

Traditional processes Processes in a blockchain-based system

Network and Photovoltaics network operator Energy company Wind Storage (RES in general) Bank Payment service provider

Meter Conventional Conventional operator Blockchain generation Network and network operator Residential Traders user Trading platform

Industrial user

Electricity Industrial user Residential user Payment / fee Storage Photovoltaics Data / blockchain (RES in general) Blockchain – an opportunity for energy producers and consumers? 19

Other possible uses of blockchain Moreover, the blockchain’s In principle, other related applications technology in the energy sector functioning as a distributed record outside the electricity sector are also of transaction data can be used to possible, for example when it comes to Besides being used to create a create a comprehensive archive of billing customers for the energy they decentralised transaction model as all electricity billing data. Following use for heating space and water, an outlined above, there are other areas in a smart meter rollout (which would activity which is now mostly carried which blockchain technology could be be a prerequisite for this), blockchain out by professional providers of meter- applied in the energy sector. technology could become a tool reading services such as Brunata, consumers can use for meter reading ISTA or Techem. Suspected cases of Blockchain technology could be used and billing purposes in connection with overcharging and oligopolistic control to build a simple, blockchain-based their digital electricity meters. The key are frequently reported for this market billing model and thereby help remove here is the added control consumers segment, where tenants in particular one of the largest barriers currently would gain over their electricity supply have few options at their disposal to preventing users from adopting electric contracts and consumption data. challenge the fees they are charged. In a mobility on a large scale. Widespread blockchain-based system, tenants could use of electric vehicles (EV) can only An important current development that select their meter readers by picking a become a reality if EV drivers can access will fundamentally shape the framework service provider that offers a good deal charging stations everywhere. One for the above applications is the German and using the blockchain to exchange issue we face today is how to simplify Act on the Digitisation of the Energy their smart meter data with them in a billing at charging stations, which may Transition (Gesetz zur Digitalisierung transparent way. be located in public spaces where they der Energiewende), which entered its can be used by anyone. Blockchain final reading stage in the German technology could be one option (besides federal parliament, the Bundestag, in other advanced payment models) on June 2016 and is expected to enter which to base a model under which into force in 2017. The primary focus EV drivers could park their cars, for of the act is to introduce an obligation example to go shopping, whilst the car to install intelligent measurement autonomously logs on to a charging equipment for the purpose of metering station and is recharged automatically and transmitting the energy demand (in the long run maybe even through of consumers and the energy output of induction). Once the driver leaves producers. Aspects of electric mobility the parking lot, the charging station are also to be a part of the concept would automatically bill them for the underlying the act. Both charging points electricity received, using blockchain for electric cars and their users are technology. expressly defined as end users for the purposes of the act. Where charging Another area of application that points are to be fitted with intelligent might become more important in measurement systems, the envisaged the near future is the integration of statutory provisions for their installation blockchain technology in the area and operation thus apply. of smart devices. With smart devices communicating with each other as well as with other devices both inside and outside of homes and businesses in the future, a communications medium will be needed that is capable of transmitting and storing the related information and transactions. Using blockchains for this “Another area of application purpose could be a good option. that might become more important in the near future is the integration of blockchain technology in the area of smart devices” 20 Blockchain – an opportunity for energy producers and consumers?

3.2. Selected current projects and market players

At present, RWE and Vattenfall are spearheading the development of energy-related blockchain applications in Germany. It can be assumed that other energy companies are also working to implement blockchain solutions, but are not yet visible on the market.

The chart below provides an overview of companies currently known to be working on blockchain projects for the energy sector.

Figure 13: Map of key blockchain players in the energy sector

Bitcoin Crypto- Solar Ripple Ethereum Coin Coin currencies …

Energy International energy companies companies

Developers/ tech firms

Block- POWR Power- Exergy Brooklyn Microgrid Solar Charge Pilot project peers Distribut- Pilot project connecting Change Blockchain trialling a Peer- ed servers 10 households in Brooklyn Platform applica- decentra- to-peer to provide through a blockchain- for the tions in lised energy marketing heat for based microgrid exchange the area system of electric- homes, of Solar- of electric ity with sup- Coins mobility/EV ply billed Projects charging via block- chain Blockchain – an opportunity for energy producers and consumers? 21

Brooklyn Microgrid using a central blockchain. This set-up of the option to trade energy with one (TransactiveGrid) demonstrates what a future distributed another. With this new technology, power grid managed autonomously by a the market can reach a point where a www.brooklynmicrogrid.com local community might look like. single person with a single solar panel can participate in the end user market. Implementation of the project requires This is an opportunity for prosumers The “Brooklyn Microgrid” project is both smart meter technology and that allows them to no longer just feed currently being developed in the USA blockchain software with integrated their excess energy into the grid against by TransactiveGrid, a joint venture smart contract functionality: smart payment of a fixed fee, but to market it between LO3 Energy and ConsenSys. meters are needed to record the quantity individually. The aim of the project is to test how of energy produced, blockchain software blockchain technology can be used to is needed to effect transactions between In the future, the project is planned to effect direct neighbour-to-neighbour the neighbours, and smart contracts are be operated by a cooperative community sales of solar energy. The technology needed to carry out and record these organisation, with neighbourhood used in the project builds on the transactions automatically and securely. residents being the shareholders of the Ethereum blockchain. company. These plans envision that all The transactions made as part of the renewable generation assets would be Since April 2016, an initial pilot project pilot project are executed manually. For owned by the community itself, with run in Brooklyn has been exploring the future, it is planned that the system members deciding collectively how to how to integrate buildings equipped can be controlled by means of an app apply the revenue generated. This will with distributed energy resource that could be used to specify certain allow people to own part of a solar systems (in this case: solar energy) parameters, for example at what prices panel, for example in urban areas where in a decentralised peer-to-peer power electricity is to be purchased from the not everyone has access to a roof. To grid. The rooftop photovoltaics systems neighbours. All transactions are then date, more than 130 homeowners and installed on five of the buildings to be carried out fully automatically tenants have registered to participate participating in the neighbourhood according to pre-agreed rules. in the project, either as a prosumer or project generate solar energy. All energy as a consumer of electricity. It will still not used by the buildings themselves is One of the project’s goals is to create a be some time, however, until this larger sold to five neighbouring households. local community market for renewable group can actually join the project, as All buildings are interconnected through energy. In this way, it can be tested the technology must first be developed the conventional power grid, with whether consumers actually make use further. transactions being managed and stored

Figure 14: BrooklynGrid project

Microgrid

Electricity

Data

Token system (Blockchain) 5 households produce Power productionis Electricity surplus 5 households buy energy surplus metered on a second- and demand is energy surplus by-second basis, with calculated using (at present: manually) information converted to fictitious tokens blocks

In future: Buyers and sellers to use app allowing them to specify their preferences (e.g. donate 10% of electricity, sell more when prices go up, ...) Payment through energy tokens → no intermediary In future: microgrid to be expanded required

Parties can decide individually with whom to enter into a contract and transactions are executed immediately 22 Blockchain – an opportunity for energy producers and consumers?

Vattenfall: Powerpeers RWE and Slock.it: Oneup: POWR www.powerpeers.nl BlockCharge www.oneup.company www.slock.it

In June 2016, Vattenfall announced The Netherlands-based start- the launch of the start-up company The Ethereum-based start-up company up company “Oneup” (formerly “powerpeers” in the Netherlands. Slock.it from Germany and RWE have BigDataCompany) has developed a According to Vattenfall, many launched two projects in which they similar prototype for a decentralised customers want to be more engaged are working to simplify the charging energy-transaction and supply system in the energy-generation process and of electric vehicles (see chapter 2.5). and tested it using the energy data of to have greater control over how the The first project explores how a ten households. As in the Brooklyn case, energy they consume is produced. blockchain-based system integrating households located within the same As was also the case in the previous smart contract functionality can neighbourhood generate solar energy example, the mission of the start-up be used to charge electric vehicles. in distributed generation facilities. company hence builds on the idea of Blockchain technology can provide a Any energy that is not consumed sharing energy through a peer-to-peer common, simple and secure payment by a household itself is delivered network. Powerpeers users can offer system in this context. The project’s to its neighbours and billed using a their self-generated energy and share vision is for electric vehicles to interact blockchain system. it with other participants. Consumer automatically with charging stations participants can also choose from whom to manage the billing process for the All transactions are made on the basis to purchase their electricity, e.g. family electricity received during a charging of smart contracts. Each building has members, friends or neighbours, or also session. Ultimately, the project partners a smart meter that is connected to a from certain wind, solar or hydropower envisage that every car will have a chip Raspberry Pi – a mini computer – which suppliers. How much energy is provided with a cryptocurrency installed, which in turn is connected to a network. by each chosen supplier can be viewed will permit the vehicle to autonomously The Raspberry Pi is configured with a online. manage the payment process for smart contract that checks in real time electricity.7 Slock.it and RWE are whether the conditions for a contract The project does not require blockchain currently working on a prototype which are met, and signals to the system technology, but rather places its is to undergo testing at a later stage. whether a household is in a position emphasis on the idea of sharing self- to provide energy or whether it has generated energy with others through The second project currently being a demand for energy. The software a peer-to-peer network. Using a developed by RWE and Slock.it, automatically initiates the energy blockchain as the data medium was Blockcharge, focuses on enabling transfer and corresponding payments tested as part of the project, yet the electric cars to be recharged using a using its own cryptocurrency. current payment system is not based smart plug – a plug that is operated on this technology but is operated in a by an app. Blockcharge smart plugs LO3 Energy: Exergy conventional manner, with payments would not only be available at charging www.projectexergy.com being made in euros. stations, but could also be installed in any location with power infrastructure. Consumers could control the smart The Exergy project developed by the plug using an app without this US-based company LO3 Energy is requiring the involvement of a third- a research project aimed at heating party intermediary. Each charging homes using the heat generated in data session would be visualised in the app, centres. Heat generated from computing allowing the consumer to monitor and and the use of other electrical devices manage the process. All transactions is to be captured and stored with the would be managed using a blockchain- help of a technical module, in order to based system, with all charging and be re-used in other applications. The transaction data to be stored on the concept builds on a storage system for blockchain. The aim is to develop a thermal energy operating in conjunction contract-less payment system not relying with an interface directly delivering on third-party intermediaries. the heat to existing heating systems in homes. The system is supported by a blockchain system which allows participants to purchase (stored) heat via a cryptographically secured system.8

7 https://Bitcoinblog.de/2016/02/26/rwe-und-slock-it-wollen-ethereum-fuer-elektroautos-nutzen/ 8 http://lo3energy.com/projects/ http://lo3energy.com/projects/ Blockchain – an opportunity for energy producers and consumers? 23

Other blockchain applications developed by start-up companies

The SolarChange project was created to financially reward producers of solar energy via a blockchain. For every megawatt of solar energy fed into the grid the producer is awarded one SolarCoin, which they can either store in their SolarCoin wallet or 9 Cryptocurrencies convert to bitcoins . The project was launched by the company SolarCoin, which has developed its own cryptocurrency – similar to Bitcoin – for the purpose of selling solar energy. www.solarchange.co/ http://solarcoin.org

Sun Exchange offers investors an opportunity to fund small-scale solar projects and receive monthly returns measured in relation to Peer-to-peer lending the size of their investment. www.thesunexchange.com/

The Austrian company GridSingularity is developing a blockchain- based platform that is intended to connect energy producers, Decentralised energy-transaction network operators, regulators and consumers. Specifically, the and supply system project’s mission is to build a DApp platform for the energy industry that will cover all parts of the supply chain. www.gridsingularity.com

MPAYG from Denmark is also working to leverage blockchain technology to enable consumers in developing countries to benefit from distributed generation. www.mpayg.com Decentralised energy-transaction The Bankymoon initiative based in South Africa has developed and supply system, supply of solar a Bitcoin-based billing system for smart meters that operates in energy to developing countries connection with the crowdfunding platform Usizo. Donors can use the crowdfunding platform to donate bitcoins to schools that have a smart meter in order to provide energy directly to the school of their choice. www.bankymoon.co.za

In the field of smart devices, Slock.it is not only working with RWE but also collaborating with Samsung and Canonical. As part of its ARTIK series, Samsung offers a range of intelligent applications in the fields of smart home, personal monitoring, smart cities and automotive. Canonical provides apps for these applications via its Ubuntu Core platform that can be used to Smart devices control these smart devices. Slock.it’s blockchain technology is intended to make the applications more secure. www.artik.io www.insights.ubuntu.com www.slock.it

Following the implementation of its LINQ platform, Nasdaq has presented a new authentication service offering to make solar energy certificates available via a blockchain. The new service works by connecting solar panels to an IoT-enabled device (IoT = Internet of Things) that measures the wattage of the power Solar power certificates produced and fed into the grid. Certificates supporting PV growth can be bought and sold anonymously via Nasdaq’s LINQ platform. In May 2016, solar energy produced in the Midwest was shown in New York as a data block. www.ir.nasdaq.com/releasedetail.cfm?releaseid=948326

9 http://www.fintechblue.com/2016/05/blockchain-electricity/ 24 Blockchain – an opportunity for energy producers and consumers?

3.3. Assessment of the databases: this is a belief shared by Considering the present state of the current state of the art most experts we have interviewed. At technology and the progress that has least judging from the current state of been made since the first blockchain and of the prospects for developments, these would be faster application was launched, it appears blockchain projects in the and less costly to operate, with the safe to assume that solutions will be energy sector added benefit of being largely already found to resolve currently open issues. available. While blockchain-based data Experts believe that one particular As of now – at June 2016 – all energy- transmission and data storage as such requirement is that people’s awareness related blockchain applications are still can currently be provided at minimal of the opportunities provided by in a concept or prototype stage, both in cost, the verification process leads to blockchain applications must grow in terms of their underlying technology very high hardware and energy costs. step with the technology’s development. as well as in terms of their possible The cumulative energy costs of some Critics assume that the technology use cases for consumers. Nevertheless, public blockchains have been driven is developing faster than the public’s the technical potential of blockchain to immense levels due to the many understanding of how to use it applications is clearly apparent even decentralised transaction verification responsibly. today: particularly decentralised energy processes that are carried out supply relationships as well as the simultaneously. It must be mentioned, Applications and their use for execution and recording of transactions though, that new applications have been customers are realistic prospects, so the potential able to achieve great progress in this for blockchain technology in the energy area. Whether users’ awareness of the sector is promising. technology will grow will also be The answer to the question of whether dependent on the availability of Evaluation of the technology’s blockchain technology will be a more concrete suitable applications for maturity as compared to suitable tool for the energy sector than consumers. At present, blockchain is a conventional databases and solutions alternatives purely technology-driven development. will also depend on technological There are no suitable applications progress. The state of the technical Its decentralised structure for the available for customers who wish to infrastructure, data security and the execution of transactions and the actively control and manage their scalability of the technology are key storage of data is seen by experts energy supply, nor are there automated aspects here. Implementation of a to be the key benefit of blockchain software solutions for customers who decentralised energy-transaction and technology. With data being stored in do not want active control of their supply system will require technical several locations at once the information energy supply. The first group of end infrastructure that includes for example becomes more difficult to tamper with, customers require suitable applications smart meters for all consumers. whilst being available everywhere. they can use without difficulty. These Data security must be guaranteed by apps must be user-friendly, easy to use ensuring that the software is proof However, the majority of experts and effective. No such applications have against tampering and attacks. Also, a also believe that there are alternative emerged as yet, although individual framework for incidents like the case solutions capable of ensuring the companies and start-ups are working involving The DAO (chapter 2) must functioning of a decentralised supply to develop solutions. Customers who be created. The technology must be system. The trend to revert to more do not wish to actively manage their capable of being deployed on a large decentralised forms of supply, e.g. energy supply, for example because scale, with computing processes fast customer self-generation or distributed they do not own a smartphone or do enough to ensure that energy can be generation from renewable energy not want to spend any time on doing supplied and transactions executed in sources, is already being promoted this, require automated software real time and without any delay. In the in Germany as it is, with the country solutions. Blockchain technology will following chapters we will discuss these managing its transition towards a not succeed in the energy sector unless prerequisites and the way in which they sustainable energy system (the so- such applications are developed and influence the development of blockchain called “energy transition”). Blockchain used on a large scale. Or rather: only a applications in the energy sector. technology is not a necessary small group of consumers will be using requirement for the operation of such a blockchain applications within small, decentralised model and its associated decentralised networks without this data flows and transactions. Both affecting the majority of consumers. transactions and data flows could just as well be recorded in conventional Blockchain – an opportunity for energy producers and consumers? 25

4. A look at energy law: current legal framework for the application of blockchain technology in dealings with consumers and prosumers and future legal challenges presented by blockchain

The German Energy Industry Act contains provisions on energy supply contracts which are aimed at balancing consumer protection interests with the interests of energy suppliers.

Some relevant legal principles have 4.1. European energy law law further provides that consumers are their basis in general civil law, most to have a general right to be supplied importantly in the provisions of the Europe has been pursuing the goal with electricity and that legal provisions German Civil Code and the case law of establishing a competitive internal must be in place to ensure the protection established in relation to this. This legal market in electricity and gas since 1998. of “vulnerable customers”. framework and a series of other acts and Several directives have been adopted regulations must be taken into account to this effect, each of which has been One characteristic feature of all when implementing blockchain projects. transposed into domestic legislation. blockchain models is that they transfer The law on consumer protection and The latest legislative initiative is the so- control over data back to the consumer. data protection is comprehensive and called “Third Energy Package”. One of Blockchains and the smart contracts must be taken into account for every the main objectives of the Third Energy implemented on the basis of them blockchain project. Package is to separate the business of could empower consumers to manage operating transmission networks from their own electricity supply contracts Except where noted otherwise, our supply and generation activities, either and consumption data. Control over following evaluation of blockchain through ownership unbundling or by this data would therefore largely reside models from a legal (chapter 4) and establishing so-called “Independent with the consumer. With network regulatory (chapter 5) perspective System Operators” (ISOs) or operator data (regulated business) and considers the technology in the context “Independent Transmission Operators” supplier data (competitive activity) of its key application, the creation of a (ITOs). being separated directly at customer “decentralised energy-transaction and level, blockchain technology has the supply system” (chapter 3, pages 17 et Another goal underlying the provisions potential to be an efficient measure seq.). The focus of our analysis is on the of the Third Energy Package is to for the implementation of unbundling electricity market. strengthen consumer rights, including requirements, which may result in the right of consumers to switch their increased competition and more gas or electricity supplier at no extra efficient prices for end customers. charge within a timeframe of no more than three weeks. In addition, the EU has set itself the target that at least 80% of consumers are to have smart electricity meters installed by 2020; EU 26 Blockchain – an opportunity for energy producers and consumers?

4.2. Applicable primary The provisions set out in section 41 7. information on residential customers’ and secondary domestic of the Energy Industry Act, for rights in relation to dispute example, can serve as a starting point resolution procedures available to legislation for the drafting of future energy the customer in the event of a legal supply contracts to be made via dispute, including information on Where contracts are made using blockchain applications. Section 41 the conciliation service for consumer blockchain applications, the civil law sets out the minimum content and complaints to be established principles governing the conclusion of formal requirements for energy supply pursuant to section 111b including contracts as set out in section 145 of contracts entered into with special-rate its address and website, information the German Civil Code (Bürgerliches customers (this also includes ordinary on the supplier’s obligation to Gesetzbuch, BGB) and the rules residential customers if they are participate in any conciliation governing contractual liability as set out supplied by any supplier other than the proceeding and the contact details in sections 241 et seq. of the German statutory default supplier or under any of the consumer service established Civil Code apply. tariff not falling within the scope of the by the Federal Network Agency for statutory rules on deemed basic supply matters pertaining to electricity and Furthermore, there are additional or last-resort supply contracts): gas.” legal requirements for energy-related contracts which must also be taken “(1) Contracts for the supply of energy In addition, the specific rules for into account. A specific area of law to residential customers other than energy bills (whether for the supply of dealing with energy supply contracts has for the supply of energy under a basic electricity or gas) issued to end users emerged, which has its basis in general statutory supply must be drafted in a must be complied with. The basic civil law principles and is today largely clear and comprehensible manner. All principles are set out in sections 40 determined by EU legislation. These such contracts must at least include and 42 of the Energy Industry Act, energy-specific provisions are set out provisions on: with details provided in the Statutory in the German Energy Industry Act Electricity Supply Regulations and (Energiewirtschaftsgesetz, EnWG). The 1. the contract’s term, price variations, the Statutory Gas Supply Regulations aims of the Energy Industry Act are to termination deadlines and notice respectively. These are mandatory provide a secure, affordable, consumer- periods as well as the customer’s requirements that must be taken into friendly, efficient and environmentally right to rescind the contract, account when developing blockchain friendly supply of energy to customers. projects, provided the existing statutory Ensuring functioning competition in the 2. the supply and services to be framework is to remain unchanged. supply of energy (electricity and gas) provided, including information on and securing an effective, reliable and any maintenance services offered, forward-looking energy supply system are important objectives underlying the 3. the available methods of payment, current legal framework. In general, domestic energy law must promote 4. the liability of the parties and the implementation of EU legislative damages or compensation payable requirements (see section 1 of the on a breach of contract, Energy Industry Act). 5. supplier switching, with the option The purpose of all these provisions is to switch supplier to be provided at to strike a balance between consumer no extra charge and with all supplier protection interests on the one hand and switches to be effected in a timely the interests of energy producers and manner, energy suppliers on the other hand. The basic provisions in this area, which is 6. how the customer can obtain up- mostly governed by statute law, can be to-date information about the found in sections 36 to 42 of the Energy applicable tariffs and maintenance Industry Act. fees, Blockchain – an opportunity for energy producers and consumers? 27

In addition to the Energy Industry Act, can therefore be expected to become However, a key prerequisite for various regulations must be taken even more important than they are blockchain models that are used for into account or adapted accordingly today. more than just virtual transactions (as in the implementation of blockchain opposed to Bitcoin, for instance) is that applications: • Data protection requirements the fundamental physical data (e.g. (e.g. the provisions set out in the metered electricity consumption) can • The German Electricity Third- German Federal Data Protection Act be provided in a tamper-proof way. Party Access Regulations (Bundesdatenschutzgesetz, BDSG) Meter operators’ tasks of certifying, (Stromnetzzugangsverordnung, approving and regularly inspecting StromNZV) set out the general Meter operators are especially affected the measurement equipment used provisions governing access to the by the introduction of blockchain would therefore be activities of utmost public power grid. All prosumer technology. Germany, unlike other importance. It must be ensured that all applications must comply with the European countries, has also liberalised metering data is recorded and collected general rules for use of the public the meter operation business. The legal in accordance with the provisions networks. principles governing this type of activity of the German Measurement and are defined in the German Meter Verification Act (Mess- und Eichgesetz). • The German Electricity Operation and Metering Regulations The security requirements for meters Network Tariff Regulations (Messzugangsverordnung, MessZV). and data transmissions are bound to (Stromnetzentgeltverordnung, increase even further where blockchain StromNEV) provide the rules for the The regulations set out the requirements applications come into play. tariffs network operators charge for and rules for the operation of meters granting access to their electricity and the metering of energy. Under In the context of blockchain applications networks to third parties, as well as the current framework, it is not relating to electric mobility, the for setting the tariffs charged for use the party that owns a connection German Charging Station Regulations of the electricity networks for the (the “connection customer”, i.e. the (Ladesäulenverordnung, LSV) are also purpose of delivering electricity to landlord) but the party that uses the of relevance. These regulations were consumers. These regulations also connection (the “connection user”, adopted under section 49(4) of the apply to all blockchain applications i.e. the tenant) who has the right to Energy Industry Act and set out the using public networks. choose a third-party metering service framework for the expansion of the provider. Where a third-party meter public EV charging infrastructure • In addition, there is a statutory operator has been appointed, the in Germany. They provide technical obligation for certain suppliers meter operator is responsible for specifications for the connection of to provide at least a so-called transmitting all data to the relevant electric vehicles to charging points, “basic” electricity or gas supply to network operator in compliance with such as power output (kW) and residential customers, the details of the applicable deadlines, with the permitted plugs. A definition of public which are set out in the Statutory network operator then forwarding all vs. non-public charging points is also Electricity Supply Regulations data to the relevant market participants provided. The regulations do not (Stromgrundversorgungsverordnung, for billing purposes. Under the Meter contain any express provisions relating StromGVV) and the Statutory Operation and Metering Regulations, to the execution of transactions, so in Gas Supply Regulations meter operators are required to enter principle they allow for all possible use (Gasgrundversorgungsverordnung, into a meter operator contract with the cases to be implemented. In relation to GasGVV). These regulations place relevant network operator that describes blockchain technology, the Charging an obligation on the largest energy the necessary process for replacing a Station Regulations are relevant insofar supplier active in a supply area (the meter (e.g. deadlines, commissioning as prosumers operating their own solar “statutory default supplier”) to also etc.), the requirements the meter systems may produce and supply power supply energy to customers who do operator must meet (e.g. registration for electric cars. Other business models not have a supply contract with any with the local calibration office) as well envisage using blockchains for the other supplier. Where the statutory as the technical requirements for the purpose of billing charging sessions (e.g. rules on basic supply contracts apply, measurement equipment used. Blockcharge). the supplier must contract with the relevant customer, i.e. the supplier It is to be expected that blockchain has an obligation to supply energy to applications will fundamentally the customer at defined prices. transform the market role of meter operators, as they will no longer be • Where contracts are formed required to perform the aforementioned through blockchain applications, tasks of collecting and transmitting this will require high levels data. All information will be shared of standardisation. The rules directly between energy producers and controlling standard terms of energy consumers. business as set out in the German Civil Code (sections 305 et. seq.) 28 Blockchain – an opportunity for energy producers and consumers?

4.3. Energy law and unbundling measures provided in data activities are prohibited unless consumer protection the Energy Industry Act relate to the authorised. According to this principle, unbundling of accounts as well as to the collection, processing and use of information unbundling, functional personal data is generally not permitted. Under German law, there is no single unbundling and legal unbundling. It is permitted only where it has a consumer protection act governing all Unbundling was introduced as a clear basis in law, i.e. the processing legal matters relating to consumers. regulatory tool in order to ensure that of personal data in a specific context is Many individual acts contain legal all market participants can operate permitted by law, or where the affected provisions that serve to protect under the same conditions. If energy person has given their consent to their consumers, whether directly or companies not only sold energy but data being collected, processed and indirectly. A multitude of measures are also operated the energy networks, it used. currently in place for the protection would be possible for them to transport of consumers. Due to information their energy through the network at Other important principles are the asymmetry, consumers are generally lower charges or even for free. This concepts of data avoidance and data in an inferior position when they deal would place their competitors at a minimisation. According to these with producers or sellers of goods competitive disadvantage, in that the principles, all data processing systems and services. Statutory consumer incumbent supplier would have superior should be designed so as to ensure protection provisions are adopted to knowledge about the capacity available that no or as little personal data as redress this imbalance of power and or about customer switches. It is the possible is used and that data should be protect consumers, but protection is also objective of unbundling rules to prevent anonymised or pseudonymised to the provided through the work of consumer discrimination, cross-subsidies and extent possible. organisations. other distortions of competition and From 2018, the European General Data The aim of all consumer protection thus ensure a level playing field for Protection Regulation (Regulation efforts is to protect consumers in all market participants. This is to be (EU) 2016/679) will also apply. The aim economic, digital and health matters. achieved by weakening the monopoly of this regulation is to harmonise the Economic consumer protection position of vertically integrated rules for the processing of personal data measures in the energy sector involve enterprises – businesses operating by private-sector businesses and public- ensuring that markets operate fairly, across all parts of the supply chain, sector entities across the EU. that suppliers provide non-harmful for example production, transmission, products and services, that consumer trade, sales – and thereby promoting Overall it can be said that diverse information is provided in a transparent competition. Please see chapter 5 for provisions have been adopted for the manner and that consumer rights can be a discussion of the changes that could protection of consumers and prosumers exercised effectively. Digital consumer result from the use of blockchain which are embedded in a European as protection involves the protection of technology and the regulatory well as domestic legal framework. As consumer data. challenges this would pose in the area of unbundling. regards the energy-related blockchain use cases for which prototypes are Economic consumer protection Digital consumer protection currently being developed based on through unbundling the current state of development of the technology, the protection of consumers In the field of energy law, unbundling The Federal Data Protection Act sets out provisions for the handling of and prosumers can be guaranteed is the primary tool used to increase under the existing legal framework. The competition and thereby prevent personal data that is processed manually using information or communications way and extent to which blockchain excessive prices for consumers. technology has a legal impact on Unbundling provisions impose an systems. The provisions of the act define the rules for how to deal with individual consumers and prosumers should obligation on energy companies to continue to be reviewed and assessed as separate their network and sales personal data, i.e. pieces of information that relate to the personal or factual the technology progresses and new use activities in order to ensure the cases emerge for consumers. neutrality of the entity operating the circumstances of a natural person, e.g. network, which is also a requirement their telephone number, email address, under the Energy Industry Act. The IP address or employee number. A key principle underlying the act is that all Blockchain – an opportunity for energy producers and consumers? 29

5. Regulatory challenges posed by blockchain applications in the energy sector

If a decentralised transaction model were to be implemented on the basis of blockchain technology, this would probably transform current market roles, with the changes to be reflected in the regulatory regime. All energy consumers would have to manage their own energy balances. Meter operators would no longer be required to collect data themselves, as all transaction data would be recorded automatically on the blockchain.

5.1. Current regulatory A key prerequisite for the regulatory • to the relevant distribution system framework regime to function properly is that each operator (DSO) customer is accounted for as part of a balancing group – by clearly assigning • to the relevant balancing group The current regulatory unbundling customers to balancing groups and their manager, who in turn charges the provisions require energy companies suppliers to the responsible balancing balancing energy (cost-generating) to separate their network activities group managers (which may or may not it has been allocated to the suppliers (regulated business) from the supply be the same entity). using its balancing group. of energy to customers (competitive activity). Customers have the right to The meter operators obtain readings The above shows clearly that a simple freely choose their electricity supplier of the verified meter data relevant for delivery of electricity entails complex (or gas supplier) in a liberalised billing and transportation charging settlement processes across the electricity market. In order to ensure purposes and pass them on to the other entire electricity market and that the that customers can smoothly transfer players involved: corresponding meter readings are between suppliers, so-called balancing required for various purposes. groups were introduced. This made • to the relevant electricity supplier for it possible for each customer to be billing purposes In order for the market model to assigned to a supplier in a simple way. function properly, each customer must • to the relevant transmission system be clearly assigned to a balancing group. Another significant area of regulation is operator (TSO) for clearing and Balancing group managers are required the so-called clearing process, which is settlement purposes. The TSO to provide security in order to ensure run to reconcile planned consumption collects all data for each balancing that the costs incurred in relation to against customers’ actual consumption group and aggregates it in order balancing energy can be recovered. as recorded by their meters. The to determine the balancing energy difference between these is referred costs to be allocated to the balancing to as balancing energy and the costs group. incurred in relation to this are charged to each electricity supplier according to causation. 30 Blockchain – an opportunity for energy producers and consumers?

5.2. Changed market roles This would result in the following and accurately through blockchain under a blockchain-based changes: technology (smart contracts). The transaction data necessary to market model • All energy consumers would determine network tariffs would be have to become balancing group provided to meter operators (and One major benefit of a blockchain-based managers and to comply with thus also to network operators) by transaction model is that all electricity the requirements of this market the blockchain. So the responsibility delivered to the networks can be clearly role (provision of security, risk of meter operators could be limited attributed to individual customers in management etc.). Most notably, to providing reliable and tamper- small time units (down to time windows energy consumers would have to proof meters. of only a few minutes). This means that submit their own demand forecasts all electricity produced and consumed to the relevant network operator. • Distribution system operators can be settled very precisely at variable In the electricity sector, the would also receive the information prices. The physical electricity as such provisions set out in the “Market on transactions they require to would continue to flow to the end user Rules for Balancing Group Invoicing charge their network costs to directly from the closest generator. A and Settlement” (Marktregeln customers from the blockchain. significantly improved database would für die Durchführung der allow for network operations to be fine- Bilanzkreisabrechnung, referred to • Provided the decentralised tuned better at both distribution and as “MaBiS”) must be complied with; transaction model is fully transmission levels. A simplified clearing in gas, it is the administrative ruling implemented, transmission system process would lead to less balancing on gas balancing handed down operators would no longer require energy being charged to market by the Federal Network Agency in data for clearing purposes, as all participants. December 2014 (the so-called “GaBi transactions would be executed in Gas 2.0” decision). real time and settled only on the The chart below shows the current basis of actual consumption. market roles and what would change if • The role performed by meter the system were based on blockchain operators would change: they technology. would no longer have to collect and record data themselves, as all Blockchain technology allows for consumption and transaction data direct contractual relationships to be would be exchanged automatically established between energy consumers and energy producers. Both energy consumers and energy producers could act as prosumers.

Figure 15: Current market roles vs. market roles in a blockchain-based system

Current market roles Market roles under a decentralised transaction model (blockchain)

Meter Distribution Transmission Meter Distribution Transmission operator system operator system operator operator system operator system operator

Producer 2 Producer 2

Producer 1 Energy Energy Producer 1 consumer consumer (contractual counterparty) Energy company, electricity (balancing group supplier or aggregator manager) Balancing group (balancing group manager)

Balancing group Contracts, data flow

Electricity Blockchain – an opportunity for energy producers and consumers? 31

The following regulatory areas must also Regulation of commercial be reviewed: activities

Financial market regulation It must be clarified whether a blockchain model would mean that With financial transactions being shifted all parties supplying energy (and thus from energy companies or banks to a possibly also energy consumers) have peer-to-peer system, the question arises to meet the requirements set out in the of who will be responsible for ensuring German Trade, Commerce and Industry that financial transactions (especially Regulation Code (Gewerbeordnung). payments for obligations arising under supply contracts) are properly settled. Liability It would probably not be possible to impose such an obligation on energy It is conceivable that the idealistic consumers themselves, maybe not even blockchain model envisaging a system on their energy suppliers. Instead, an entirely without a responsible central actual responsible entity, e.g. a platform authority cannot be realised in the operator, would be needed that would foreseeable future, as this would require meet the requirements to be satisfied clear and transparent liability rules by a financial service provider, namely to ensure that such a platform can compliance with the German Banking be operated securely. Rules would be Act (Kreditwesengesetz), application needed to govern the liability of the for a licence from the German Federal parties involved in the case of payment Financial Supervisory Authority defaults, technical failures or intentional (BAFIN) and compliance with the tampering, to mention a few examples. requirements of the REMIT and MIFID regulations. As the energy supply business usually involves use of critical infrastructure, a clear emergency plan is required to define the procedures to be followed in the event of a complete or partial failure of the system.

“One major benefit of a blockchain-based transaction model is that all electricity delivered to the networks can be clearly attributed to individual customers in small time units” 32 Blockchain – an opportunity for energy producers and consumers?

5.3. Obstacles hindering • Who is the registered electricity So one major obstacle hindering the implementation of supplier? The party supplying the adoption of blockchain-based the energy to the energy consumer transaction models is that they would blockchain applications will, through this act, become an have to meet the current regulatory and issues to be addressed electricity supplier. For this role, requirements. Some of the benefits they require a licence as well that can be delivered by a decentralised If energy is to be supplied directly as IT interfaces so as to be able system of peer-to-peer relationships from an energy producer to an energy to provide the necessary data. would thus be lost. consumer, followed by a financial Blockchains are not yet reflected in transaction between the parties, and all the current market rules and market A rollout of blockchain technology of this is to be effected on the basis of communication processes and should would have a huge impact on blockchain technology, this raises the explicitly be taken into account. competition in the German energy following questions: But in any case, the energy supplier market. There is a chance that small or would have to apply for a licence, local businesses would encounter fewer • Who performs the meter which generates significant costs (if or reduced barriers to market entry, operator role? As the energy they have not already obtained one; which would make it harder for other consumer (see Figure 16) would this will not be the case for most market players to prevent them from be the party taking the electricity prosumers). participating in the market. from the network, the energy consumer would have to provide its • Who performs the balancing Yet, conversely, a blockchain rollout meter readings to its distribution group manager role? Given might also reinforce anticompetitive system operator. The customer that all energy consumers must be trends in the energy market. For would therefore have to register assigned to a balancing group, a example, as was shown in chapter 2, as a meter operator. An alternative blockchain model would require the one possible development is that solution would be to retain the setting up of an individual balancing established energy companies develop meter operator role as it is currently group for each energy consumer. private blockchains, which would defined in section 21b of the Energy Balancing groups can generally be permit them to lock small suppliers Industry Act. implemented down to customer out by not allowing them into the level, but managing a balancing transaction model and thus the market. • Who is responsible for group can present a significant submitting schedules and financial and organisational Another obstacle to the implementation forecasts to the transmission challenge. of blockchain applications is the current system operator? The uncertainty regarding their legal transmission system operators need recognition, owing to the fact that to produce forecasts for the entire blockchain systems no longer require market for each day, which they a central authority, at least when they prepare on the preceding day at operate strictly in accordance with the latest, on the basis of so-called blockchain principles. The corrective schedules (which are submitted element in such systems is provided to them by the balancing group by “swarm intelligence”. Today’s legal managers). So the issue also arises of systems, in contrast, are based on a who is to submit these schedules to clear allocation of organisational and the TSOs. legal responsibility. Blockchain – an opportunity for energy producers and consumers? 33

5.4. Blockchain potential • Verification & certification: “So one major obstacle from a regulatory Figure 15 illustrates another strength of blockchain technology hindering the adoption perspective – the option to clearly verify the of blockchain-based source of electricity. Thanks to Our initial analysis of the regulatory its synchronicity (generation transaction models is that issues to be addressed in connection and consumption) and capability they would have to meet with blockchain applications has also to provide clear and verifiable revealed the areas where the technology records, blockchain would be the the current regulatory can potentially deliver its benefits: first technology to make it possible requirements” for the source of electricity to be • Direct customer-to-customer determined. Guarantees of origin transactions & financial could be issued with greater settlement: Customers could take certainty. This would also make over the supply business themselves. it easier to issue certificates for This would facilitate community emission allowances and energy- funding of energy assets, regional efficiency improvements, which energy pools and regional energy would in turn simplify the complex self-sufficiency. The new technology systems currently used. could help implement this in a more efficient way whilst providing • Clearing & settlement: It is not a verifiable record. It is already only prosumers who may stand to possible for citizens to participate benefit, but also transmission system in energy projects today, but this operators, as using blockchains still requires the involvement of would allow them to clearly many other actors, such as banks attribute clearing data to individual and energy companies. Blockchain market participants. The planned technology would allow them to introduction of smart meters will realise concepts such as “From your only help to allocate consumption region - for your region” on their quantities to a balancing group and own initiative and on their own to the electricity suppliers using that terms. balancing group. A blockchain-based system would make it possible for the energy consumed to be clearly traced back to the point where it was generated. Overall, this would lead to significant cost reductions, with end users directly benefiting from a more efficient system. 34 Blockchain – an opportunity for energy producers and consumers?

6. Blockchain risks and opportunities from a consumer perspective

If the decentralised transaction model outlined for the energy industry in chapter 3 were to be adopted, this would fundamentally transform the relationships between energy producers, energy suppliers, network operators and consumers.

Consumers would probably benefit from As has been described in the previous • Prosumers will enter the fray and greater transparency and flexibility. chapters, blockchain technology is become more active participants in a Lower transaction costs due to the currently still in its infancy, and the decentralised market elimination of intermediaries and a energy sector is no exception. However, larger number of market participants the experience gained in the financial • Blockchain applications will first be would mean falling energy prices. As industry and with initial projects in the used in the electricity sector, with with any new technology, unresolved energy sector allow us to guess at the other sectors and use cases to follow technical issues and a lack of long-term positive and negative consequences later experience also mean an uncertain this technology is likely to have for future, which poses some risks. Time consumers. We have evaluated the Even though we cannot reliably predict will tell whether other technologies or opportunities and risks for consumers the exact developments to come, it does intelligent databases and protocols can based on the following assumptions: seem safe to assume that blockchain provide more appropriate solutions from technology has the potential to bring a consumer perspective. • If applied in the energy market, about substantial structural changes, blockchain technology will replace at least in the energy industry. These (some of) the intermediaries will deliver opportunities but also entail currently operating there and lead to risks for consumers, which we have a fall in transaction costs summarised below.

• The possibility to fine-tune network operations and the deployment of smart meters, smart contracts and other new technologies will enhance flexibility and promote customisation across all segments of energy consumption and sales (e.g. customers configuring their individual power mix, taking advantage of lower electricity prices in the evening etc.) Blockchain – an opportunity for energy producers and consumers? 35

Figure 16: Opportunities and risks from a consumer perspective

Opportunities + Risks —

• Lower transaction costs due to the cutting • Complete loss of data on loss of ID out of intermediaries • Currently high transaction costs for • Falling prices as a result of greater market public blockchain systems transparency • Possibly lack of acceptance on the part of • Simple option for customers to become a consumers service/electricity provider • No authority in the case of disputes, no • Transactions are generally made more direct possibility of escalating conflicts simple (documentation, contracts, payment) • Risk of fraudulent activities at the interface • Greater transparency thanks to between the real world and the digital decentralised data storage blockchain world (e.g. the smart meter/ blockchain interface) • Flexible products (tariffs) and supplier switching • Lack of long-term experience • Strengthening of prosumers thanks to • Technical problems with initial independence from central authority (direct applications possible to start with purchases/sales of energy • Insufficient or inadequate functionality and security risks due to lack of standardisation • Networks must cope with greater flexibility

“The experience gained in the financial industry and with initial projects in the energy sector allow us to guess at the positive and negative consequences this technology is likely to have for consumers” 36 Blockchain – an opportunity for energy producers and consumers?

6.1. Blockchain On the other hand, there are the Transparency opportunities in the operating costs of blockchain systems, which include transaction fees for energy sector Use of blockchain technology would blockchain transactions. The required ensure greater transparency for computing power and related energy consumers. It would allow consumers Lower energy bills for consumers use might also have to be factored to track exactly where the electricity in. The actual costs of blockchain they purchase was produced. Direct Blockchain models operate on the applications cannot be projected today. transactions between energy providers assumption that all providers transact It is becoming clear, though, that there and energy consumers would enable directly with their customers. One will be differences in terms of cost the parties to specify exactly the consequence of this would be that the between private and public blockchains. “contractual counterparty”, i.e. the wind intermediaries previously operating Private blockchains usually involve or solar farm delivering the energy. This in the market, among them trading lower transaction costs and operate would make it possible to determine platforms, traders, banks or energy on the basis of simplified verification precisely the source of the electricity companies, might no longer be needed processes (for instance, proof-of-work supplied, for example in terms of the at all but in any case they would be verification uses up more energy than percentage share of renewable energy. reduced to a considerably smaller the proof-of-stake process), which Every energy consumer would specify role. This could lead to a significant decreases costs. these aspects individually and to an decrease in system costs. The types of unprecedented level of granularity. system costs that could be reduced or All cost considerations must also factor even completely eliminated include the in the investment required to make Accordingly, the entire transaction following: the electricity networks more flexible: history stored on the blockchain blockchains can only be used effectively (energy consumed and payments made) • no or lower costs to account for the if the power grid is capable of coping would also become transparent. The costs (including personnel and other with a larger number of individual availability of a full transaction history operating costs, infrastructure etc.) energy producers and of managing and the possibility of running analyses and profit margins of the above greater flexibility, all of which is also on this basis would afford customers companies that are currently active essential to ensure supply security. an as yet unrivalled level of clarity. in the market but will have no or The smart meter rollout planned to Commercial and large customers who only a reduced role in the future be launched in 2017 will provide already have such data at their disposal system favourable conditions for more flexible today would be charged less for them, power markets. Another point to be • no or lower operating costs for meter whilst probably having more details considered is that maximum cost reading, billing etc. available on which they could base their benefits can only be achieved if as many analyses. • no expenditure required for payment providers and customers as possible reminder and debt collection agree to use blockchain applications A point to be critically reviewed in processes that are based on common standards this context is what drawbacks this and rules. This would prevent the • no costs for bank payments level of transparency would entail, as parallel emergence of incompatible (especially direct debits for payments under the basic blockchain model all applications. by customers) transactions are publicly accessible. The individual users would use aliases, but • possibly lower transportation Another factor enabling savings on it is theoretically possible to “decrypt” charges energy bills is that energy consumers a certain number of aliases without would also have considerably greater • no certification costs for renewable authorisation, which might pose a risk. flexibility in choosing their supplier. electricity In blockchain-based transaction systems customers almost constantly The above cost reductions would lower switch supplier, as they can find new the energy bills of consumers, whether transaction partners and contract with directly or indirectly. them within extremely short timescales (down to a few minutes). Blockchain – an opportunity for energy producers and consumers? 37

Local value creation and prosumers

Blockchain technology could give a boost to a currently emerging trend: the rise of the role of the prosumer. Lower transaction costs and simpler billing processes would enable small providers or energy consumers to participate in the market not only as consumers but also as providers. Consumers who operate their own solar systems, for instance, could more easily sell on the electricity they produce to their neighbours or feed it into the network. This would improve the economic viability of solar systems, small-scale wind turbines or customer-owned CHP plants, which in turn would increase the number of prosumers. Consumers also stand to benefit from a more diverse product offering and lower prices. In addition, blockchain models could facilitate the realisation of community- funded energy projects.

Simplified routes to market for distributed energy generators would further boost the growth of renewables. Indirectly this might also have a positive effect on the economic structures in their region. Distributed generation can provide economic stimulus through services, for example in the fields of maintenance or operations. Increased deployment of windpower could be a particular benefit in areas with little infrastructure and slow economic growth. 38 Blockchain – an opportunity for energy producers and consumers?

6.2. Blockchain A decentralised blockchain system DAO (Decentralized risks in the energy without any superior authority might Autonomous Organization) also turn out to entail drawbacks sector for consumers, as at least under the The DAO is a complex type of models discussed today there is no DApp. It can best be understood Blockchain technology is still in its responsible entity that could intervene as a new kind of organisation that infancy at present, which means that it in a regulatory capacity, provide simple is similar to a digital company or comes with a range of uncertainties and services or revise previously executed investment fund but not a legal risks. Outside the Bitcoin context – the transactions. One recurring issue entity. The DAO was created as a most established blockchain application raised in connection with blockchain self-governing body operating on to date – no long-term experience is technology is what happens when democratic principles that is not available. After a somewhat rocky start, a user has forgotten their personal influenced by outside forces. This Bitcoin itself has proven to be a reliable access details needed to access their principle can currently be observed and robust system. own account. In this case, users are in practice in connection with the irrevocably locked out of their accounts recent hack into the system. The Many experts also suspect that and lose their settings, information and DAO token holders are currently blockchain technology might not be as assets stored in them. discussing different approaches for scalable as needed. Given the extremely responding to this incident, which fast rate of data growth, the sheer data Security risks will subsequently be translated volumes accumulating after several into code and implemented on the years of operating a blockchain place Non-cryptocurrency use cases of basis of a democratic process. At high demands in terms of security, blockchain technology are far more the time of writing of this study, speed and costs. complex and require the direct the introduction of an externally- participation of end users. These led management and governance As a new technology operating on the applications must therefore be scheme was ruled out. basis of a completely new transaction particularly secure but user-friendly at model, it is to be expected that the same time. Still, there will always The DAO’s by-laws are embedded in blockchain technology will at least to be a risk of tampering (e.g. attacks the Ethereum blockchain. The DAO some extent be rejected by some energy by hackers) and technical faults (e.g. concept builds on smart contracts players, among energy consumers and system failures). which are: in part by the general public. Just how realistic the hacking scenario • immutable (from the perspective The anonymity underlying the is was proven by the attack on the of individual participants): only blockchain concept also entails the risk application “DAO” (Decentralized a majority of DAO token holders of the system being used for the purpose Autonomous Organization), which came can decide by vote to adapt the of illegal activities (e.g. organised to light as we were still working on this code (and thus the DAO itself) crime). In particular, cryptocurrencies study. The DAO, an application built such as Bitcoin have repeatedly made on the Ethereum platform, is described • unstoppable: the program runs the headlines on account of insolvent below. on the Ethereum blockchain, exchanges set up by dodgy founders or which consists of thousands blackmailing services using Bitcoin. of independent nodes. In order to stop the program, you would require a majority of these nodes, which is all but impossible in actual practice

• irrefutable: all actions executed by the program are transparent and recorded on the Ethereum blockchain for eternity Blockchain – an opportunity for energy producers and consumers? 39

The DAO protocol has no artificial Whether the overall impact of intelligence, which means that blockchain applications on energy certain activities – for example consumers will be positive or negative manufacturing products, writing will also depend on how they are code, developing hardware – implemented. It is to be expected that cannot be performed by the DAO applications with a primary focus itself. The DAO therefore relies on creating distributed records of on so-called “contractors” who transactions will deliver positive results participate on its behalf in the sooner than comprehensive applications physical world. These contractors which enable decentralised transactions are connected with one another to be carried out on the basis of smart and carry out so-called “proposals” contracts. Private blockchain models are – provided these have been likely to generate lower costs but this accepted by the DAO. would come at the price of throwing out the principle of a decentralised Proposals are submitted by DAO organisation. And they would also raise token holders, who can then profit the question of what advantage such from the sale or use of the products solutions would have over traditional created. In addition, so-called database-based processes, as the key “curators” are elected in order aspect of decentralised and tamper- to prevent attacks. The curators proof data storage would then become maintain a whitelist on which of secondary importance. all contractors (i.e. the entities authorised to receive ethers from the DAO) are listed. The curators make sure that each proposal – which is submitted in the form of a smart contract – actually contains what the relevant DAO token holder and contractor allege it contains. They further verify whether a proposal was made by a real person or organisation.

DAO token holders have the right to collectively decide on proposals “The anonymity underlying the (with their right to vote being blockchain concept also entails proportionate to the number of tokens they hold) and participate the risk of the system being in the profits based on their share used for the purpose of illegal of funds held in the DAO if the proposals executed are successful. activities (e.g. organised crime)”

As is the case with Bitcoin, owing to the international nature of the network it is unclear which country or courts would have jurisdiction to certify any identity information, or in what way legal jurisdiction could be established. 40 Blockchain – an opportunity for energy producers and consumers?

6.3. Outlook on possible is translated into digital code based on to make sure that the potential benefits long-term social a decentralised democratic process. delivered by a decentralised structure can The rules are digitally implemented be fully exploited. consequences by means of smart contracts, with the rights of all contracting parties being Blockchain applications operate on A rollout of blockchain technology in enforced automatically. Blockchain the principle that decisions are taken its purest form would fundamentally technology allows for a self-regulating, autonomously by technology or by the transform the way in which our economy self-governing economic and social entire system itself. Clear rules must operates and the way in which we system to be created which is managed be defined for smart contracts, but transact. The aim behind blockchain is by computer programs and in which also at a higher level, so as to rule out to create a decentralised model for the transactions are executed by self- the system being misused or taking exchange and storage of data that is executing digital contracts. This kind unwanted decisions (e.g. by excluding controlled by a decentralised operating of decentralisation promises to reduce certain constellations that may provide a system. Decentralised systems cannot inefficiencies and mitigate corruption. As theoretical optimum but do not have the be controlled by a minority or central every individual element of the network support of society). authority and they are transparent for all processes every transaction, no single participants as well as self-governing. element can control the database as a Blockchain: the end or the whole. In this regard, decentralisation beginning of privacy? Creation of an Internet of Value also contributes to improving system security and stability. Blockchain technology has the capability In blockchain systems, data storage to map the digital daily life of each no longer requires central locations. One challenge presented by blockchain individual on a blockchain. This could Blockchain technology is the next technology is how to integrate a social result in the creation of biographical step away from a universal space of concept with no control mechanism blockchains that fully document all stages information (which was created by the into a socio-technical system. In social of a person’s life. People are already World Wide Web) towards a universal concepts, such control mechanisms are storing data recorded by health apps in space where values and value-related the result of an evolutionary cultural the cloud, including information on their interactions can be represented in a development and have brought about a heart rates, the quality of their sleep structured way. It leads to the emergence series of interconnected systems, each and their calorie intake. In the future, of a so-called “Internet of Value”, a kind with a certain degree of elasticity when it may be possible that blockchains are of trusted protocol that could, amongst it comes to dealing with inappropriate or used to provide a decentralised record of other things, provide a notarial function malicious behaviour shown by individual health data. Data privacy concerns could for all transactions carried out on the participants. These interconnected be alleviated by allowing users to use web, automated and transparent for systems can exclude participants various unrelated identities or aliases in all. Other than efficiency improvements temporarily and reintegrate them once areas where their exact identity does not and cost savings, blockchain technology their behaviour has improved, for necessarily need to be known. thus primarily promises to ensure example through the social concept of independence from human authority, forgiveness. Social systems based on Blockchain technology is freeing people with decisions being taken on the basis such collective interactions are relatively to transact on their own terms. Each of solid proof and intermediaries being stable, fair and just. Technical systems, user can send and receive payments in cut out of the process in order to gain in contrast, are based on deterministic, a similar way to cash, but they can also efficiency. Incorruptible transparency isolated concepts that ensure fast take part in more complex contracts. and automation of all transactions decisions, which may have severe Multiple signatures allow a transaction executed on the blockchain are to take consequences for individual participants. to be accepted by the network only if security on the Internet of Value to a a certain number of a defined group whole new level. Given that self-adapting and self- of persons agree to sign or verify the governing systems can change any way transaction. This allows innovative Decentralising society, creation of they like, and given that some behaviours mediation services to be developed in the decentralised organisations run counter to a system’s goals or can future. Such services could allow a third mean a disturbance to other systems party to approve or reject a transaction A blockchain represents a transparent or people, the system’s behaviour must in the case of disagreement between the digital ledger of transactions that be subject to boundaries and regulated. other parties, without having control is hardened against tampering and How to set these norms, laws and rules, of their money. As opposed to cash and revision. All information is stored in a enforce them and regulate the system other payment methods, each use of decentralised network and not controlled through computer code is one of the blockchain technology always leaves by a central authority. The blockchain most challenging tasks in this context. public proof that a transaction did take itself does not set the rules, but rather A learning process and continuous place, which can potentially be used in describes a predefined procedure which adjustment will be necessary in order to recourse against businesses engaged in ensure a well-engineered concept and fraudulent practices.10

10 https://bitcoin.org/en/faq#what-about-bitcoin-and-consumer-protection Blockchain – an opportunity for energy producers and consumers? 41

7. Summary and outlook

Financial blockchain applications have already reached an astounding level of maturity; whether the technology will succeed in revolutionising the sector remains to be seen. Initial pilot projects have provided a glimpse of the enormous benefits blockchain applications could deliver in terms of cost savings, speed and flexibility.

When it comes to blockchain Blockchain technology is a further applications for the energy sector, it’s driver pushing the trend towards a early days yet. In theory, the technology “sharing economy” based on joint has the potential to shape our future use of assets. Joint in this context energy supply too. The further course of mostly means that transactions are its development will be determined by made directly between providers and technological progress and competing their customers. Platforms support technologies as much as by legislation the matching of transactions between and regulatory practices in individual many individual providers and their countries. However, it appears safe to prospective customers (peer-to-peer). assume that blockchain technology will promote the emergence of new The chart below shows the different innovative business models in various forms such a sharing economy can take. industries.

Figure 17: Risks and opportunities from a consumer perspective

Product/service delivery

Centralised Decentralised

Centralised Energy sales (traditional energy Execution of companies) transactions, payments

Energy sales (sales only)) Decentralised 42 Blockchain – an opportunity for energy producers and consumers?

Traditional centralised business Whether the technology will succeed in models, for example hotel chains, car the energy sector will ultimately depend hire, taxi companies, are increasingly on the following aspects: coming under pressure from providers like Airbnb and Uber, who operate • What applications are available platforms through which distributed to customers? At present, (private) individual providers can blockchain initiatives are a purely offer their capacities. While product technology-driven development, and service delivery is decentralised, with no applications or alternative the arrangement and execution of the offers available that customers underlying transactions as well as the can use conveniently and easily. corresponding payments are effected Such applications would have to be through the aforementioned central designed just like apps: user-friendly, platforms. easy to use, effective.

Blockchain systems are fully • Can the overall system work decentralised, with all transactions efficiently? The costs and benefits being arranged, executed and of blockchain models cannot be fully performed on a peer-to-peer basis. This assessed as yet. Data transmission is what makes blockchain technology and storage costs will probably potentially disruptive. play a minor role. But the costs for the verification process (mining), The potential energy use cases of which is central to all blockchain blockchain technology show a lot applications, can be high. of promise. In addition to reducing transaction costs across the system, • What added value can increasing the efficiency of processes blockchains deliver to use and thus delivering cost benefits for cases with a primary focus customers, the technology can enable on recording transactions? direct interactions between all parties Blockchain applications without involved. This ensures that existing smart contract functionality generation capacity is utilised optimally, (e.g. applications documenting whilst energy is made available at the ownership) have yet to show in best price. The role of prosumers is actual practice what advantages they strengthened considerably under such a have over tried-and-tested client- model. server solutions (controlled by a central authority). It is quite likely that mixed forms – e.g. blockchain models controlled by a central, responsible authority – will also succeed in the market.

Overall, it can be said at the present point in time that blockchain technology certainly shows a lot of potential – from a customer perspective too – and should be further developed by market participants. The approaches seen thus far may have a disruptive effect in the future and might require additional regulatory intervention in an already tightly regulated energy market. If blockchains are to deliver benefits for consumers (whether as consumers or prosumers of energy), a strong focus on consumer issues will be needed. Blockchain – an opportunity for energy producers and consumers? 43

Appendix 1: List of experts interviewed

In addition to evaluating all documents available to us on blockchain models and how they could be applied in the energy sector (studies, presentations, articles, videos), we conducted telephone interviews with experts from the related fields while working on this study (in June 2016). The interviews have allowed us to discuss our findings and views with these experts and to bring their perspectives to bear on this study. We thank the experts listed below for their willingness to let us draw on their expertise in producing this study.

Interview partner Company Website or contact

Energy-related blockchain applications

www.oneup.company OneUp (NL) Mark Dijkman www.bigdata.company

Gridsingularity (international) www.gridsingularity.com Ewald Hesse

consenSys (USA) www.consensys.net John Lilic

Winwest (Austria) www.winwest.at Hein Popovic

Vattenfall (Germany) https://www.vattenfall.de/ Claus Wattendrup

Energie Steiermark (Austria) https://www.e-steiermark.com/ Martin Graf

SolarCoin (Israel) solarcoin.org/ Yau Ben-Or

Next Virtuelle Kraftwerke (Germany) www.next-kraftwerke.de/ Henrik Sämisch

Thomas Klinger, Carinthia University of Applied Sciences (Austria) www.fh-kaernten.at Christian Madritsch

Blockchain applications with a focus on financial services

Eric Demuth, Coinimal (Austria) www.coinimal.com Paul Klanschek

Other blockchain applications

lab10 (Austria) www.lab10.at Thomas Zeinzinger 44 Blockchain – an opportunity for energy producers and consumers?

Appendix 2: Sources and relevant links

Below we provide a list of example links and references to companies and websites other than those cited in this study which we consider to be of particular relevance in relation to the subject of this study.

• bankymoon.co.za Authors of this study • brooklynmicrogrid.com Felix Hasse • gridsingularity.com • insights.ubuntu.com Axel von Perfall (project lead) • ir.nasdaq.com/releasedetail. Thomas Hillebrand cfm?releaseid=948326 • projectexergy.com Erwin Smole • slock.it Lena Lay • solarchange.co/ Maximilian Charlet • solarcoin.org • Solarpraxis Neue Energiewelt AG and Kirsten Hasberg, webinar on blockchain technology in the energy sector (“Blockchain für die Energiewelt 2016”) • www.artik.io • www.mpayg.com • www.oneup.company • www.powerpeers.nl • www.thesunexchange.com/ Blockchain – an opportunity for energy producers and consumers? 45

Contacts Key contacts Denmark Sweden Per Timmermann Anna Elmfeldt Norbert Schwieters Telephone: + 45 39 45 91 45 Telephone: +46 10 2124136 Global Power & Utilities Leader Email: [email protected] Email: [email protected] Telephone: +49 211 981 2153 Email: [email protected] Finland Switzerland Mauri Hätönen Marc Schmidli Jeroen van Hoof Telephone: + 358 9 2280 1946 Telephone: +41 58 792 15 64 Global Power & Utilities Assurance Leader Email: [email protected] Email: [email protected] Telephone: +31 88 792 14 07 Email: [email protected] France Turkey Pascale Jean Murat Colakoglu David Etheridge Tel: +33 1 56 57 11 59 Telephone: +90 212 326 64 34 Global Power & Utilities Advisory Leader Email: [email protected] Email: [email protected] Telephone: +1 925 519 2605 Email: [email protected] Germany United Kingdom Norbert Schwieters Steven Jennings Axel von Perfall Telephone: +49 211 981 2153 Telephone: +44 20 7212 1449 Blockchain expert Email: [email protected] Email: [email protected] Telephone: +49 30 2636 3958 Email: [email protected] Greece Vangellis Markopoulos Middle East and Africa Telephone: +30 210 6874035 Email: [email protected] Middle East Territory contacts Jonty Palmer Ireland Telephone: +971 56 683 8192 Email: [email protected] Asia-Pacific Ann O’Connell Australia Telephone: +353 1 792 8512 Email: [email protected] Anglophone & Lusophone Africa Mark Coughlin John Gibbs Telephone: +61 3 8603 0009 Israel Telephone: +27 11 797 4461 Email: [email protected] Eitan Glazer Email: [email protected] Telephone: +972 3 7954 830 China Email: [email protected] Francophone Africa Lisa B Wang Noel Albertus Telephone: +86 10 6533 2729 Italy Telephone: +33 1 5657 8507 Email: [email protected] Giovanni Poggio Email: [email protected] Telephone: +39 06 570252588 India Email: [email protected] Kameswara Rao

Telephone: +91 40 6624 6688 The Americas Netherlands Argentina/Latin America Email: [email protected] Jeroen van Hoof Jorge Bacher Telephone: +31 88 792 1328 Indonesia Telephone: +54 11 5811 6952 Email: [email protected] Sacha Winzenried Email: [email protected] Telephone: +62 21 52890968 Norway Brazil Email: [email protected] Hildegunn Naas-Bibow Roberto Correa Telephone: +47 9526 0118 Japan Telephone: +55 31 3269 1525 Email: [email protected] Yoichi Y Hazama Email: [email protected] Telephone: +81 90 5428 7743 Poland Canada Email: [email protected] Piotr Luba Brian R. Poth Telephone: +48227464679 Korea Telephone: +1 416 687 8522 Email: [email protected] Lee-Hoi Doh Email: [email protected] Telephone: + 82 2 709 0246 Portugal Mexico Email: [email protected] Joao Ramos Guillermo Pineda Telephone: +351 213 599 296 Tel: +525514736289 Email: [email protected] Europe Email: [email protected] Austria Russia United States Michael Sponring Tatiana Sirotinskaya Michael A. Herman Telephone: +43 1 501 88 2935 Telephone: +7 495 967 6318 Telephone: +1 312.298.4462 Email: [email protected] Email: [email protected] Email: [email protected] Belgium Spain Koen Hens Manuel Martin Espada Telephone: +32 2 710 7228 Telephone: +34 686 491 120 Email: [email protected] Email: [email protected] Central and eastern Europe Adam Osztovits Telephone: +36 14619585 Email: [email protected] PwC helps organisations and individuals create the value they’re looking for. We’re a network of firms in 157 countries with more than 208,000 people who are committed to delivering quality in assurance, tax and advisory services.

The Global Energy, Utilities and Mining group is the professional services leader in the international energy, utilities and mining community, advising clients through a global network of fully dedicated specialists.

For further information, please visit: www.pwc.com/utilities

This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. © 2016 PwC. All rights reserved. Not for further distribution without the permission of PwC. “PwC” refers to the network of member firms of PricewaterhouseCoopers International Limited (PwCIL), or, as the context requires, individual member firms of the PwC network. Each member firm is a separate legal entity and does not act as agent of PwCIL or any other member firm. PwCIL does not provide any services to clients. PwCIL is not responsible or liable for the acts or omissions of any of its member firms nor can it control the exercise of their professional judgment or bind them in any way. No member firm is responsible or liable for the acts or omissions of any other member firm nor can it control the exercise of another member firm’s professional judgment or bind another member firm or PwCIL in any way.