Upgrade to Pro — share decks privately, control downloads, hide ads and more …

Exploring the Potential for Blockchain in Renewable Energy Markets

Exploring the Potential for Blockchain in Renewable Energy Markets

Blockchain is an emerging and transformative technical standard for distributed ledgers, which has the potential to streamline transactions. Join us to learn about how blockchain can interact with new and existing renewable energy markets.

This new technology is used to create a permanent, digital ledger of transaction data. Blockchain is used in many cryptocurrency platforms, but the underlying technology has the potential to be used for many other types of applications.  One of these potential applications is renewable energy certificate (REC) transactions. What types of efficiencies can be gained by using blockchain in this context? How might this work within the current renewable energy policy landscape?

Join us in this free webinar to discuss some of the opportunities and challenges of integrating blockchain technology into existing and emerging renewable energy markets.

This content is back by popular demand from the annual Renewable Energy Markets conference. Learn more about this year’s conference at www.renewableenergymarkets.com.

Rachael Terada
Director, Technical Projects
Center for Resource Solutions

Doug Miller
Senior Associate
Rocky Mountain Institute

Alex Anich
Manager, Renewable Market Intelligence


Center for Resource Solutions

February 28, 2018

More Decks by Center for Resource Solutions

Other Decks in Technology


  1. 1

  2. 2

  3. 3 Nongovernmental Organization (NGO) creating policy and market solutions to

    advance sustainable energy since 1997. • Expert assistance • Renewable energy and climate policy • Renewable Energy Markets conference • Green-e® certification for suppliers and users of renewable energy and carbon offsets in the voluntary market About CRS 3 © 2018 Center for Resource Solutions. All rights reserved.
  4. 4 • eligibility of supply, product quality • regulatory surplus

    • exclusive delivery and ownership, no double selling or double claiming • required disclosure • marketing oversight Green-e Certification 4 © 2018 Center for Resource Solutions. All rights reserved.
  5. 5 • U.S. and Canada: WREGIS, M-RETS, NYGATS, others •

    China • Taiwan • Mexico Expert Assistance: Tracking Systems 5 © 2018 Center for Resource Solutions. All rights reserved.
  6. 6 6 © 2018 Center for Resource Solutions. All rights

    reserved. U.S. Examples of Current RE Tracking • Regional • Compliance and voluntary markets • Some state REC definitions reference existing tracking systems
  7. 7 • Distributed ledger • Encrypted digital trading • Most

    popular example: Bitcoin • Analogy: Bluetooth is a technical standard for connecting devices (e.g., cars and phones) wirelessly. Blockchain is a technical standard for distributed databases • Different permission models: public, private, consortium/permissioned/federated • Smart contracts can be a ledger item, facilitating complex or automated transactions What is Blockchain? 7 © 2018 Center for Resource Solutions. All rights reserved.
  8. 8 8 © 2018 Center for Resource Solutions. All rights

    reserved. Time Blockchain example Block 22a • Previous block: X32 • Transaction 123 Block 81z • Previous block: 22a • Transaction 987 Block 99q • Previous block: 81z • Transaction MN3
  9. 9 Example: How Blockchain could work in RE Markets 9

    © 2018 Center for Resource Solutions. All rights reserved. Each piece of information is a separate link in the blockchain, for example: • Meter data • REC ownership • Green-e certification • Signed smart contract/PPA • Bank credit approval • Bill payment confirmation
  10. 1010 © 2018 Center for Resource Solutions. All rights reserved.

    Lots of parties interact with the blockchain but only see the pieces they’re authorized to access—for example: • Project developer • Facility owner/operator • Electricity service provider • Grid operator • State/government regulator or Green-e • Bank • End use customer Example: How Blockchain could work in RE Markets
  11. 1111 © 2018 Center for Resource Solutions. All rights reserved.

    • Once approvals are given by parties involved, each step in the chain could be automatic • Allows the customer to have visibility—potentially in real time— to the full chain of custody for the RE they purchase Example: How Blockchain could work in RE Markets
  12. 1212 © 2018 Center for Resource Solutions. All rights reserved.

    • Data quality and integrity is key • Use the same instrument and system for compliance and voluntary markets • Consider legal definitions for energy attribute certificates • Privacy considerations, depending on region • Work with existing certification programs • Green-e acts as a regulator for the voluntary RE market, sets the standard for high-quality RE transactions and programs across different policy landscapes, lowers risk for market participants, verifies valid RE claims and prevents double claims, reviews facilities and marketing for compliance • Additional benefit: potentially lower audit costs for Participants Best Practices – Looking Forward
  13. Contact Rachael Terada Director, Technical Projects rachael.terada@resource-solutions.org 415-561-2135

  14. Origin: a new open-source, customizable tool for renewable energy and

    carbon markets Doug Miller Green-e Webinar • 28 Feb 2018
  15. 15 Agenda 1. About EWF 2. About EWF’s Origin application

    layer 3. Origin market demos 4. Regulator engagement with Origin
  16. About Energy Web Foundation (EWF)

  17. 17 Developing the global open source blockchain for energy To

    tackle pain points and drive investments in renewable energy markets EWF’s mission is to foster value creation in the energy sector by promoting an open, decentralized software infrastructure built around blockchain technology 1. Identify, assess, and help bring to market blockchain applications in the energy sector 2. Build an open source IT infrastructure using “Ethereum based” protocol upon which these applications can be implemented 3. Develop an ecosystem of users, application developers, and infrastructure providers 4. Educate regulators and other stakeholders and provide input to standardization bodies EWF’s Objectives à +
  18. 18 Delivering a scalable, secure, and feature-rich blockchain To drive

    innovation and supportive regulation Ethereum-based (taps large developer base) Open-source (promotes innovation) Public (promotes access and excitement) Permissioned validators (enables high transaction speed/volume) EWF’s blockchain platform has distinctive characteristics
  19. 19 Assembling the largest energy sector players To poise EWF’s

    blockchain for widespread use immediately after launch More utilities and energy market participants beyond this group continue to join as EWF Affiliates
  20. 20 Pursuing an aggressive timeline To make a secure blockchain

    with wide-ranging capabilities available as soon as possible Alpha Release Sept 2017 Round B Funding Affiliate Meeting Deploy global Network Beta Release Event Horizon April 2018 Updates Hackathon Token Sale Event Horizon Spring 2019 Go “Live” Updates Infrastructure Advancements Start building Minimum Viable Products Test Phase MVP Proof of Concept Software updates in 3 month cycles—with constant community feedback
  21. 21 Launching EWF’s “Tobalaba” test network to the public To

    begin cultivating app development and promote ongoing iteration Learn more at http://energyweb.org/network/, and see the live network at http://netstats.energyweb.org/
  22. About EWF’s Origin application layer

  23. 23 Prioritizing the most valuable energy sector applications To inform

    and demonstrate EWF’s blockchain technology development EWF is leading four taskforces with EWF affiliates focused on the most promising energy sector application domains to provide insights and bring commercial applications to market during core technology development Certificate of Origin Markets Utility Billing Systems Demand Response Programs Transactive Energy Systems Certificate of Origin Markets Others…
  24. 24 Clarifying why certificate of origin markets matter To indicate

    the importance of this application domain For renewable energy generators: an additional source of revenues to help grow these markets For renewable energy buyers: how to get proof of renewables purchases for meeting goals and indicating demand Certificate of Origin Markets For policymakers: a way to track progress toward renewable energy and carbon policy targets For NGOs/nonprofits: a way to hold organizations accountable for sustainability goals
  25. 25 Deciphering today’s certificate of origin market jungle To understand

    existing challenges so renewables markets can be improved Pain Points Renewable Generator Qualified Reporting Entity Certification Entity Certificate Tracking System Annual Audit Broker/Aggrega tor OTC Markets Certificate Exchange Certificate Buyer Renewable Generator Certification system required to verify generator is compliant Audit to ensure against double counting of certificates Tracking system to ensure compliance with policy mandates Opaque, shallow markets require brokerage to find counterpart Exchange cost and post trade paperwork and overhead 6 5 4 3 2 1 3 2 2a 1 1 2 3 5 4 6 4 5 5 Onboarding & Issuance Trading & Ownership Tracking Claims, Retirement, & Reporting Schematic of a typical current certificates of origin system Retail certificates too small to be transacted cost-effectively; need aggregation for block transactions Current State Generator produces electricity and passes data to certificate-creating entities Certificate-creating entities verify validity of renewable generation and issue certificate Brokers aggregate small certificates into larger blocks and source buyers. Note: many certificates are sold to purchasers by PPAs Certificates are sold either on exchanges (ICE) or directly to purchaser in over-the- counter (OTC) deals 5 Load serving entity purchases and retires certificates Certification entity conducts annual audit on all certificate issuers 4 3 2a 2 1
  26. 26 Crafting a global blockchain-based standard for traceability To offer

    a simpler, lower-cost, more granular system in order to grow the market Renewable Generator Reporting Entity Certificate Buyer Origin EWF Blockchain
  27. 27 Creating a new app layer running on EWF’s blockchain:

    Origin To simplify, enhance, and unlock investments in renewable energy markets Purpose Solution Deploy an open-source, customizable tool for any renewable energy market that unlocks transparency, access, added functionality, and new services Track the green attributes of certified renewable energy at the kWh level— including their associated carbon offsets—on one platform across geographies Main users Value Proposition (why we are different) Greater buyer choice (e.g. purchase by carbon impact and demand match) Certificate market integration Lower cost transactions Renewable energy buyers to facilitate purchases Renewable energy generators to onboard their assets Regulators and registries to integrate with existing regulation More granularity More innovation
  28. 28 Addressing pain points in current system with Origin To

    improve and grow renewable energy markets worldwide Challenges in current system Origin’s blockchain solution Buying and selling certificates of origin is complicated and costly—including multiple process steps, transaction costs, and time lags. Origin can radically simplify and lower the cost for certificates of origin by enabling renewable energy generators and certificate buyers to interact directly and using smart contracts—or strings of code that execute an action when a set of predetermined conditions are met (“if this happens, then do that”)—to streamline the overall process through automated certificate issuance, tracking, and retirement. Market actors have concerns about system integrity, namely that a single certificate might be claimed by more than one entity or counted more than once by a single entity—undermining the market’s faith in these tools. Data on Origin would be extremely difficult to tamper with due to a combination of strong cryptography, the interdependent relationship between each block of data, and distributed consensus. Also, smart contracts can eliminate the risk of double-counting by automating certificate retirement. There are too many markets, each with unique characteristics, which presents challenges for customers buying certificates in multiple markets. Origin will provide an open-source, “white label” application layer that aligns user experiences across markets while also allowing for local-level modifications. Existing national and international certificates registries will be able to transfer to Origin, enabling frictionless buying and selling of certificates of origin across international boundaries. Real-time carbon impact data isn’t directly incorporated into certificates or project decision- making—reducing the quality of carbon reporting and limiting investments in highest carbon mitigation projects. Origin will, in partnership with WattTime, incorporate real-time carbon impact data based on electric grid carbon intensity (along with the data already collected for each unit of renewable generation) to promote projects with highest carbon impacts and simplify carbon reporting.
  29. 29 Depicting the Origin application layer To illustrate how Origin

    will work A schematic of Origin’s technical architecture Tobalaba EWF Device Tag Registry Certified Assets (production & consumption) SCADA / Data Logger EWF Light Client kWh tracker Regulators Onboarded buyers and sellers Admins kWh Tag created CO2 data Onboarded agreements
  30. 30 Preparing for the April 2019 global rollout To ready

    the market as EWF releases different iterations of Origin code Release A April 2018 First-time carbon integration, auto agreement execution, and real-time transparency for users • Increasing decentralization of onboarding for assets, users, and agreements • Increasing granularity of kWh tracking • Increasing market integration Release B November 2018 Release C (“Launch”) April 2019 Market demos of Origin will occur from April 2018 to April 2019 in multiple markets with EWF Affiliates and corporate buyers in advance of the April 2019 global launch
  31. Origin market demos

  32. 32 Demonstrating Origin before the full launch of EWF’s platform

    To showcase a minimum viable product of Origin starting in April 2018 EWF will showcase the following use cases in upcoming market demos Asset Owner Asset ID Asset Type Capacity Location (GPS) Certified By kWh Tags Generated kWh Tags Available x x x x x x Total Logged Tags Total Logged Tags - Transferred Tags x x x x x x Total Logged Tags Total Logged Tags - Transferred Tags 1 2 Assets onboarded (through SCADA or otherwise Generator and buyers onboarded 3 Purchase agreement onboarded (e.g. buy by demand, buy by asset type) 4 5 kWh information collected and listed 6 Automated transfer to buyer Make green claims and generate report (optional) Owner A (generator) Owner B (corporate buyer) Consider video clip showing transfer Buyer claims tags Buyer gets “green claims” report Consider video clip showing transfer
  33. 33 Partnering with EWF for Origin market demos To ensure

    Origin can deliver a robust and quality solution for users Neither renewable energy generators nor buyers have to do much to participate in Origin market demos EWF Generators Develop the Origin code, and oversee implementation of each demo Select and work with EWF to connect certified renewable energy asset, and collaborate with a buyer to test “agreement” implementation Buyers Determine the basic terms of the kWh green attribute “agreement” (over a short timeframe with a limited kWh volume) to test in a simulated setting Actor Main role in demo
  34. Regulator engagement with Origin

  35. 38 EWF wants to emphasize the following characteristics of Origin

    to regulators and other industry stakeholders Aligning Origin with regulatory frameworks To help stakeholder meet policy goals and grow global market access Data transparency (offers global kWh data for market transparency) State-of-the-art, customizable tool (supports and tracks progress for policy goals) Greater market access (unlocks markets for new users and geographies) Open-source innovation (provides data input and template for new apps)
  36. 39 Mapping the key regulators to engage To determine where

    EWF should focus engagement efforts United States European Union International Key Regulators • FERC • DSOs/TSOs • US EPA • State/regional energy agencies • Council of European Energy Regulators (CEER) • ENTSO-E • DSOs/TSOs • UNFCCC Registries • 10 regional registries (such as WREGIS, PJM-GATS, and M-RETS) • Association of Issuing Bodies (AIB) • AIB-overseen registries like Powernext, CertiQ, Grexel, UBA • Ofgem (in the UK) • RECS International (for I- RECs) • APX (for TIGRs) Other key groups • Green-e • CDP • APX • CDP • CDP • Greenhouse Gas Protocol • Climate Chain Coalition Examples of the regulators and other stakeholders EWF is already engaging (or plans to engage)
  37. 40 Engaging regulators to support global deployment To secure needed

    input and support from key regulators in each target market EWF seeks input and partnership from regulators and other industry stakeholders to ensure Origin aligns with regulation and promotes investments in quality renewable energy assets Lighter engagement 1. Provide early input directly to EWF about key regulatory considerations for Origin 2. Observe 2018 market demos and provide input Deeper engagement 3. Participate in market demos in 2018 as a certification and/or reporting entity 4. Ultimately, upgrade to Origin after Spring 2019 for renewable energy and carbon market tracking systems, and serve as local certification/reporting entity
  38. Thank you! Please contact Doug Miller (dmiller@rmi.org) about getting involved

    with Origin market demos taking place over the course of 2018.
  39. NRG Energy, Inc Blockchain & Renewable Energy Certificates 2018

  40. 2 Roadmap for Today § Some basic concepts § The

    technology § Blockchain for RECs
  41. 3 Centralized vs. Distributed Ledgers § Centralized databases: predominant form

    of technology since 1970s. A central third party records official transactions on behalf of market participants, while each participant maintains a separate, internal database. Databases regularly conflict and require costly reconciliation efforts. § Distributed ledgers: Started in 2009 with bitcoin and blockchain. Market participants synchronize to and share a single database with each other in real-time. Peer-to-peer network where transactions are encrypted and authenticated. http://fintechnews.ch/blockchain_bitcoin/central-banks-face-bitcoin-pressure/3819/
  42. 4 Some Basic Concepts Copies, Systems of Record to Manage

    Copies, and Reconciliation § Computers, and particularly the internet, enable virtually costless replication of digital content through file copying § Very useful for lots of content (e.g., contracts and similar business documents) § Problematic for copyrighted materials (e.g., Napster) or other singular content (e.g., title to a car, or a vote in an election) § Is it possible to create unique and secure digital ‘value’ that can be transferred from one party to another, but not copied? § Blockchain technology accomplishes this by: § Preventing copying through encryption § Maintaining anonymity of confidential information through encryption § Preventing competing claims of ownership through shared access to a common set of records
  43. 5 More Basic Concepts Essential Components: § Distributed ledger –

    in a fully open blockchain application, any party has access to the full ledger containing all transactions and balances § Transfer, not copy – unlike standard computer files, the blockchain’s digital records of value are unique § ‘Trust’ – because of the distributed ledger, the system does not rely on parties like banks or governments to keep accurate records; the resulting system is sometimes referred to as ‘trustless’ § Chain of custody/provenance – the current state of the ledger effectively contains the full history of ownership of each record; any attempt to change earlier records would not reconcile
  44. 6 Blocks, in a Chain § Periodically, miners collect transactions

    into a ‘block’ and compete to ‘solve’ a hash that meets the pre-defined criteria for the header § Once solved and confirmed by a majority of the nodes, the block is added to the chain of all previous blocks Graphic source: Dataconomy, http://dataconomy.com/2015/10/wtf-is-the-blockchain-a-guide-for-total-beginners/ Proof of work: the hash problem-solving that shows that the miner nodes are legitimate, and not bad actors injecting bad information
  45. 7 Smart Contracts § Computer protocols recorded on the distributed

    ledger that validate and enforce some type of contract § Protocols are actually part of the ledger just like actual transactions and are likewise authenticated and tamper-proof § Enable full or partial self-execution and/or self-enforcement of a contractual clause § Simple example: If today’s date is equal to 2/28/18, then transfer asset from Party A to Party B. Otherwise, do nothing. https://bitsonblocks.net/2016/02/01/a-gentle-introduction-to-smart-contracts/
  46. Blockchain for RECs

  47. 9 REC Market Challenges Overview National Market Snapshot Illiquid, Volatile

    and Convoluted Market Fragmented Marketplace: Inconsistent regional and local market practices and regulations = High Transaction Costs Large Units of Measurement: 1 MWh units incongruent with mass market or end-use customer Opaque Tracking: Monofunctional certification and tracking measures Protracted Timing: RECs transacted on monthly or quarterly cycles Disparate Market Systems: Multiple IT platforms and complex reconciliation processes Current construct restricts market participants, increases transaction costs, and impacts working capital. Blockchain can alleviate market constraints and add value to commercial operations
  48. 10 Lifecycle of a Renewable Energy Credit (REC Process Chain)

    Audit Invoicing & Cashflow Execution & Transfer REC Sales & Contracting REC Generation Forecasting Renewable Energy Asset (Owner/Seller) Audit Payment & Retirement Receipt & Settlement REC Purchases & Contracting REC Obligation Forecasting Power Marketer (Compliance Entity/Buyer) REC Retirement REC Settlement REC Transfer REC Minting Asset Verification & Registration ISO/RTO (Tracking System) Trading Platforms Accounting Software Organizations Tracking System Applications Reporting Tools Portfolio Management Systems of Record
  49. NRG Blockchain RECs Current Status Proof of Concept: • Simple

    Minimum Viable Product complete • Issuance-Transfer-Retirement of RECs • Blockchain technology focused Establishing Partnerships: • Voluntary Markets – current use case discussions with: • Nasdaq Market Technology (Technology Partner) • Center for Resource Solutions (Green-e REC) • Compliance Markets • Regulatory Partnerships Challenges: • Intellectual Property Rights • Leadership Buy-In • Cost-Benefit • In- vs Out-sourcing
  50. Key Components: • Proof of Concept • Bottom Up Approach

    to Solve Market Issues • Technology focus on efficiency improvements and cost savings • Regulators remain component of governance • Consensus mechanism reflecting market governance requirements What our project is not: • Not a commercial product • Not a new cryptocurrency • Not an Initial Coin Offering (ICO) • Not avoiding regulations – developing blockchain to improve functioning of regulatory processes NRG Blockchain RECs Key Components
  51. NRG Blockchain RECs Market Growth Voluntary market use case presents

    an opportunity as the market is primed for growth through increased corporate demand. Key areas discussed: 1. Limitations of Scalability 1. Current chain-of-custody audit is not scalable 2. Blockchain REC platform is scalable 2. Corporate US demand is growing 1. Current volume is ~50m RECs per year 2. Increasing in near-term by 50% to 100%
  52. Thank You – Contact: alex.anich@nrg.com

  53. 42

  54. 43

  55. 44 2018 Green Power Leadership Awards: A Review of 2018

    Categories, Eligibility, Criteria, and the Application Process Wednesday, March 7, 2018 | 11AM PT / 2PM ET Upcoming Webinars 44 © 2018 Center for Resource Solutions. All rights reserved. How Carbon Policy Affects Renewable Energy Markets: Solutions to Maximize Benefits • Western Region: Wednesday, March 21, 2018 at 11:00 AM PT • Eastern Region: Thursday, April 5, 2018 at 12:00 PM PT Sign up: resource-solutions.org/events