Around 2016 the energy world was abuzz with the possibilities that blockchain could bring to the energy sector. The promise of safe, secure, traceable transactions that didn’t require a middle man to enable them… Peer-to-peer trading seemed within every man’s grasp and we were months away from a new energy dynamic.
And then blockchain seemed to fade into the background, to be replaced by a new buzzword and the promise of a new Holy Grail. Has blockchain had its moment in the sun, or is there still a bit of life left in the buzz from a few years ago?
It depends on who you ask, but we decided to explore the landscape and give some perspectives for consideration.
A recent Bloomberg article reported that at the Invest: NYC conference: “Blockchain, the underlying technology that powers cryptocurrencies including Bitcoin, is getting its last rites read.”
According to Meltem Demirors, chief investment offi cer of CoinShares Group: “Blockchain is dead. After two, three years of spending a lot of money on this and a lot of investment dollars going into this, I think the bigger question as an investor is: what’s the scalable revenue model and is there equity value that’s created in these businesses? And arguably the answer is: not yet.”
“Most of the companies that raised massive amounts of capital in 2016, 2017 to build blockchain, they don’t exist anymore or they’ve pivoted into cryptocurrency and tokenisation,” she said.
CB Insights shares that the decline of blockchain has been evident for a few years, claiming that investments into blockchain in 2020 will likely be around $1.6 billion this year, down from a record $4.1 billion in 2018.
However, not everyone agrees with the assessment that blockchain has seen its day.
Digital Assets Data’s Mike Alfred, co-founder and chief executive officer: “Enterprise blockchain, this idea that every company is going to want to have a blockchain, that idea might be temporarily on the ropes, but blockchain is the foundation of what makes the entire ecosystem work. Bitcoin’s blockchain has been running for more than 10 years without interruption. In no way is that dead,” he said.
BLOCKCHAIN, THE UNDERLYING TECHNOLOGY THAT POWERS CRYPTOCURRENCIES INCLUDING BITCOIN, IS GETTING ITS LAST RITES READ…
“… it feels like a lot of people are tired because we’ve been in this space and everybody is waiting for the space to grow up and for good things to happen. And it’s just taking longer than most people expected but in no way does that mean the space is dead.”
Hassan Bassiri, a portfolio manager at Los Angeles-based asset manager Arca shares: “In 2017 and 2018 during boom bust cycles, everyone thought that blockchain would be the answer to pretty much everything in terms of technological innovation, asset issuance, trading, supply chain, insurance, everything. And slowly what people are starting to realise is that blockchains are basically public ledgers and it’s not an efficient system. Really, there are very few things that belong on a public blockchain. Anything that needs efficiency or speed operating probably doesn’t belong on the blockchain. And it’s crypto so everything goes through a hype cycle and we sometimes put the cart before the horse.”
Don’t write blockchain off just yet
According to the Energy Web Foundation, however, blockchain has had a good year!
They recently announced a partnership with Fohat to develop a renewable energy trading platform for AES Tietê. Utilising Energy Web Origin, the platform will integrate the Fohat–AES Tietê platform with the issuance, tracking, and reporting of International Renewable Energy Certificates (I-RECs) in the Brazilian market based on its existing collaboration with The I-REC Standard.
Energy Web Origin is a portfolio of opensource software development toolkits to help companies build digital solutions for renewable energy procurement markets.
According to the Energy Web Foundation, in Brazil, there are various barriers to trading I-RECs due to a lack of liquidity and transparency. This results in various costs and complex processes for sellers and buyers to do business with each other since transaction costs are high for both power and I-RECs.
This electricity and I-REC trading platform will meet the needs of the energy sector: electricity generation companies will be able to trade certified commodities directly with buyers in a transparent, streamlined, and trusted way through this digitised, blockchain-based platform.
The platform will therefore help buyers, especially multinational corporations, meet their environmental proof of impact and related reporting needs.
This solution will have profound impacts on Brazil’s deregulated electricity market, where in 2019 around $26 billion in energy contracts and about 3 million I-RECs moved through the Free Energy Market (Ambiente de Contratação Livre or ACL) — an increase of 110% compared to 2018. Brazil is the second largest I-REC market (behind China, the largest I-REC market). In fact, Brazil’s free market currently accounts for 30% of the country’s electricity consumption and is set to grow gradually, reaching 100% in the next decade.
The integration of all the aspects of the solution and players involved, as well as the software development, is Fohat’s role in the project. AES Tietê intends to use the platform to settle both energy and I-REC contracts.
Energy Web has announced further collaborations with Foton, an energy transition startup company for the launch of a first-of-its-kind commercial pilot for renewable energy trading in Turkey; and with Mercados Eléctricos S.A de C.V (MERELEC), an electricity retailer operating across Mexico and Central America. Merelec and Energy Web announced the completion of the first stage in developing a digital renewable energy marketplace platform for Central American I-REC markets earlier this year.
Further accelerating work being done in Central and Southern America, Energy Web will be working with Uruguay’s grid operator, Administración Nacional de Usinas y Trasmisiones Eléctricas (UTE) to pursue blockchain-based solutions that will enable UTE to innovate and evolve under a variety of potential future scenarios.
The to-be-developed solutions will leverage the Energy Web Decentralized Operating System (EW-DOS), including the Energy Web Chain as well as the EW Origin and EW Flex software development toolkits. As part of the partnership, UTE will become an Energy Web member and host an EW Chain validator node.
Internationally, Energy Web and communications company Vodafone Business will give energy assets secure digital IDs and track their use and connections within energy grids. They will combine SIM-centric blockchain technology (SCB) with Internet-of-Things (IoT) technology.
Vodafone Business is Energy Web’s first telecoms partner. The project aims to improve the integration of energy assets, such as turbines and solar panels, using IoT connectivity and blockchain, specifically SCB technology. This new SIM-centric technology will provide energy assets secure digital IDs, meaning energy grid stakeholders can identify, track, validate and manage energy equipment and assets within smart grids.
The ability to identify and validate distributed generation assets in the smart grid is essential to maintain its stability.
Vodafone already provides smart metering and smart grid solutions to the energy sector.
Erik Brenneis, Vodafone Business IoT director, says: “As the number of decentralised, new-generation, low-carbon devices grows, so does the need for them to be securely connected regardless of their location.” Walter Kok, CEO of Energy Web, adds “from our perspective, the energy sector can only evolve so fast and so far without taking into account IoT connectivity.”
Kok, commenting on the ease of using SIM technology to identify and connect devices, told CoinDesk: “We can hook up through [the SIM], we don’t have to do anything, just download the software from Voda, and it’s connected to the chain and has its own identity; because that’s the beauty of it.”