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Distributed ledger technologies (DLT)

Renewable energies and small-scale power plants are shaping the future of the energy market. Decentralisation affects all electricity producers and will require a restructuring of the grids. This is a major challenge for all players in the energy system. On the one hand, more energy is generated and consumed locally; on the other, consumers increasingly want to know exactly where and how any electricity is generated that they do not produce themselves. A key solution for the energy future are energy management systems that bring together everything under one roof. Distributed ledger technologies, in particular blockchain solutions, represent innovative approaches towards achieving this transformation.

Electricity flows even without intermediaries

Distributed ledger technologies, such as blockchain, have the potential to support the entire value chain from power generation, trading and grid management right through to consumption. They facilitate the traceability of electricity. They are capable of mapping in real time which plant generated how much electricity and who drew power from the grid at any given time. Based on this data, customer payments will flow to the producers on a much more direct route. Such end-to-end communications solutions will transform the role of intermediaries, such as electricity traders, automate individual tasks, such as billing, and improve the efficiency of the electricity market.

What are distributed ledger technologies?

Generally speaking, DLTs are decentralised account books: They record transactions and the associated information. The interaction between trading partners as well as the validation of data are based on cryptographic authentication. This means that the information exchanged is tamper-proof and unalterable. Two parties who do not necessarily have to know or even trust each other can trade with each other without the need for a third party or intermediary.

What are the fields of application in the energy industry?

A number of projects and efforts are being pursued in virtually all fields of the energy sector. Although the fields of application lie along the entire value chain, we would like to focus on several areas where DLTs are currently being actively tested.

Smart contracts

Smart contracts have the potential to revolutionise accounting – also in the energy business. End-to-end communications based on DLTs transform the role of intermediaries, eliminate errors and the need for reconciliations, thereby simplifying legal issues. In addition, they reduce transaction costs and optimise financial flows.

As a proof of concept, Alpiq concluded the first completely cryptographic, entirely paper- and cash-free electricity transaction in Eastern Europe in the form of a smart contract at the end of 2018.

Grid services

The increase in the number of plants that use renewable energy sources represents a major challenge for transmission system operators. More balancing energy is required to keep the grid in balance despite the fluctuating electricity generation. Flexibility is required, which is why gas-fired and pumped storage power plants are gaining importance. With the help of DLTs, decentralised flexibility resources such as storage facilities, electric cars, battery storage systems or heat pumps can also be aggregated more dynamically and cost-effectively, facilitating the ability to offer control energy on the market. With the “Equigy” crowd balancing platform, Swissgrid, with the participation of Alpiq, has already launched a pilot project in Switzerland.

Energy management

Today, small-scale electricity producers have to generate electricity as efficiently as possible or market it directly. On the other hand, consumers want direct contact with their supplier, or at least want to be able to trace where their electricity comes from. DLTs enable direct procurement or peer-to-peer energy exchange, for example between private consumption communities.

However, research in this field is still in its infancy. The vision is a system that incorporates the activities and services of all actors along the entire value chain. Alpiq is currently working intensively on standardisation, which is the basic prerequisite for this field of application.

Electricity trading

In wholesale trading, Blockchain has the potential to reduce market frictions by automating the matching of trade orders, as well as billing, while the brokerage business will as well be transformed.

“Ultimately, blockchain should be more of a backbone, buried deep within the stack of information systems – something the user should barely notice.”

 

Alexandre Juncker
Distributed Ledger Technologies Lead

Return here to find periodic updates and other information on Alpiq’s current activities in the field of digital ledger technologies.