From Gridlock to Gridflex: Using Blockchain to Unlock Energy Flexibility / Nicolas Manea

Transcript

hi hello guys so my name is Nicholas PhD Canada Cardiff University and I'm also an energy consultant a company called dnv So today we're talking about how blockchain can be used to unlock energy flexibility so I will spend a few minutes trying to introduce the energy sector and the flexibility market then we'll talk about how flexibility can address those challenges and then we'll end up with some use cases for ethereum in flexibility markets so the traditional power grid normally can be characterized by a new unilateral flow of electricity which means that electricity flows from the big generation factories down towards the network down in the consumer's houses uh

so normally it's dependent on fossil fuels so we have the luxury in the past to generate most of our electricity from burning coal or burning natural gas and it's also a centralized generation and distribution kind of system where all the generation of electricity comes from conglomeration of those big power plants so nowadays we are going through what we call a Renewables adoption so this renewable adoption is characterized by the transition to renewable energy which means that we have a much higher adoption of uh competitive renewable energy sources secondly there's a need to solve the intercimity change so

basically how can we integrate the fluctuation of those renewable energy assets into the power Network and finally it's uh we have an increasing role of flexibility services so as you can see on the side flexibility is the ability of an energy system to shift this generation and consumption in reaction to external signals so how can we actually make the power grid more smart and more flexible to make it able to reach Net Zero it's a big challenge so one big driver for that is digitalization and in all sectors and in particular in the energy sector we can see a very big push towards digitalization so we can see technology adoption so we have more smart meters

that are empowering the users to have much more more informed decision about their consumption patterns of energy we have distributed energy sources and low carbon technologies that allow users to actually generate at their own site more electricity to be able to financially uh to have more financially optimized decision when it comes again to the energy spendings uh secondly we have the transformation towards a smart grid so in here we have Smart Energy Systems we have distributed architecture of those Smart Energy Systems which is how all those independent energy islands are communicating and we also have things like data management because of the smart meters we have much more data flowing in the system and because of

that there's also a risk for cyber security uh lately there's the blockchain technology so all the Innovative Technologies in particular blockchain Ai and machine learning could be another good candidate so they are enabling this energy decentralization through transparency and public verifiability um so when it comes to the flexibility Market in particularly in Europe there are a few challenges that are really important that we should be able to fix before we can jump into those kind of systems uh blockchain and ethereum offers a really good opportunities to address those challenges so firstly we have coordination and communication so

Network operators and flexibility prosumers which are the guys that can generate and consume electricity need to be able to interact in one environment so blockchain can offer that environment for them secondly we have technical integration so we need to understand how all those flexibility assets or things like solar panels EVS or batteries can take part into contain park into the big power grid so for that actually being able to see the data but not integrating with them in a distributed manner is a is a very important characteristic then we are looking at Market mechanisms So currently we don't really have any very good flexibility Market mechanisms or market clearing mechanism there's quite

a there has been quite a lot of trial projects but we don't have anything in place yet so decentralized market clearing could be a very good opportunity to solve this data management and standardization So currently you have a lot of Market facilitators of centralized softwares that you can use to monetize your flexibility services but they are not standard so they have different nomenclatures they have different way of actually defining the market so again having everything in one distributed place makes a lot of sense Regulatory and policy Frameworks so in here the blockchain offers automatic compliance reinforcing with regulatory and policy requirements so the ability of the

regular regulatory bodies to be able to oversee the whole process in a transparent Manner and to be able to step in wherever they feel that they need to step in this is that are important and this is a very uh big governmental characteristic and finally availability reliability and settlement so uh we need to increase the data security protections and we can do that in a blockchain space to tokenization we can use zero knowledge proofs and automatic cryptocurrency Pages again to add on top of the of the solution so this is the big scene and now we'll talk about the three uh what I will consider to be the most important use cases so generally if you want to

develop a decentralized flexibility Marketplace firstly you need to be able to decentralize the marketplace itself secondly you need to be able to decentralize and digitize the electricity or flexibility transactions and lately you need to be able to settle those transactions so there are three use cases with three problems each so if you look at the first one uh basically the problem is to have a reliable and efficient method for Contracting flexibility services so again in the blockchain world we have decentralized flexibility service solution with an efficient transparent and secure approach secondly is a token based technique for digitalizing and

recording flexibility so instead of actually loading the decentralized blockchain with so much energy data we can use tokenization to actually minimize the amount of data that has to be stored by adding the same level of functionality and thirdly that's about settlement so zero knowledge proof proofs are a very good driver to energy settlement as you can use techniques to prove that you've delivered the flexibility without uh revealing very sensitive informations about your flexibility or energy assets so let's take the first one so this is a framework for flexibility Services Contracting in electricity distribution networks so what have we

done here so it's a comprehensive platform that's scattering to all the stakeholders uh in the sphere of the industrial flexibility trading so it's secure transparent and it Fosters trustless settlements or flexibility transactions that on top of that we have a market clearing algorithm that allows uh the contracts to be clear via something that we called a closed auction framework uh all of them are reaching towards a robust systems with tamper resistant capacities that are generally designed for the Secure Storage of historical flexibility and Contracting data uh there's the token based technique for

digitalizing and recording flexibility so it's facilitating this really big trend of digitalizing uh flexibility assets and it's just for you know representing the transformation of the analog system within the digital ecosystem so in reality what we have done there instead of you having to record the flexibility transactions on the green we are minting and burning what we call the debt tokens in order to sustain that so if you need to give me 10 kilowatts of electricity I'm going to Mint 10 tokens and then you're going to burn them step by step while you keep generating that you keep sending that flexibility to me in this manner we'll be able to record

all the flexibility transactions with this mechanism without actually recording any flexibility data uh so that allows us to ensure the traceability of flexibility transaction uh as I said driven by the mint and burn mechanism on top of that uh you do need to have an escrow system that uh is designed to interact with the token Mega mechanism so the extra system involves both parting locking in a financial escrow after the contract has been completed the financial escrow is being unlocked um the third part is the zero knowledge part uh which is the proof of flexibility delivery settlement So currently if you want to take part in the flexibility Marketplace you as an uh

energy asset owner need to build an API from your energy data and the network operator or the buyer needs to connect with the API he needs to see your energy profile and that's how they are calculating how much electricity or flexibility you are delivering to them I personally think that this is quite challenging when adopted at scale because there's a lot of sensitive information being stored on those centralized Solutions and that's a very high incentives for cyber uh uh for cyber attacks so what we thought that we could do we can give them the same amount of information with a much smaller amount of data so we have developed this uh journalist proof mechanisms where I can prove to you how much flexibility I have

delivered without you seeing anything on my energy profile so the only thing that you can see is again the amount of flexibility you have delivered at a certain time uh and that's it and then the payment for that flexibility uh so I think we had a it was the talk yesterday when we talked over the fact that okay so we have all those uh we have all those mechanisms and all those uh protocols and they don't communicate with each other and we need to work together so this is what I did so the three use cases I've just presented to you they all work together so in reality you have the network operator actor that is releasing what we call uh conglomerations of energy

contracts that are called competitions and each competition has service Windows which are actually the contracts on the other side the flexibility prosumer is really see it's logging in the flexibility assets on the platform uh the first smart contract is basically allowing the flexibility procimer to deploy the flexibility bits and it also allows through the clause-based auction mechanism the network operator to select the winner as I said both of them are locking in the financial s crowd that to increase the incentives to take part in this market we are sending that into a yield farming algorithm on the other side when you look at the flexibility procimer address each

flexibility asset has a smart meter associated with it that is in charge of responding to the data delivery so that's plus meter that's it commits the flexibility data location that is being stored in a decentralized data storage from the decentralized storage you can issue a proof that the data has been uploaded there correctly and the amount of flexibility that you had to deliver is actually the flexibility that you have delivered and we can send that proof to the network operator what does that mean is that the network operator can prove that the correct data has been uploaded and that the flexibility that he was required to deliver has or has not been delivered so he can accept the proof while he accept the proof then we

are going into deal farming algorithm and then we are releasing the uh we are releasing the financial escrows and the yield Farm So based on the adjustments on the market but everybody if they accepted if the contract weren't successful then all the money goes to the flexibility procimer if not all the money goes to the uh to the network operator and I think the uh the key the key takeaway of this conversation is that uh blockchain and essentialized solutions are a beautiful family of Technologies and we need to try to find Solutions or problems in other sectors where DLT or blockchain is a very good candidate I think based on my experience with the

energy sector I do really think that we need more energy people talk to more blockchain people and try to solve the solution in the energy sector uh thank you thank you very much and I'll leave the floor for questions thank you hey thank you for your representation what role do microgrids have in the energy transition and is there any way to repurpose pyramids in order to help us reach the carbon goals thank you that is a very interesting question I think uh has a chat about microgrids before so in reality microgrids are a very very complex phenomena the microgate is the ability to have basically agreed that at the

agent Theory that's right the agenda dhntr power grid that self-sustain so we call that behind the meter power grid the problem with that is that you mess up the balance of generation and consumption uh so generally microgrids are interesting maybe a good candidate for peer-to-peer blockchain based Solutions but we definitely need more work into that space to validate that thanks for the talk um can you comment please on one blockchain which is already running on Cosmos called chain for energy because I think

they actually strive to deliver the very similar thing that we just described so uh yes so I just heard of them actually two days ago I already set them up uh in the process of setting up a few uh a few conversations with them but yes so they are definitely there and then if you look back to I think it was 2018 uh it was a big push of blockchain work in the energy sector I think overall based on my research really to identify around 190 companies that they were doing work in the energy sector uh but maybe back in those days the blockchain sector where was a bit too initial than how it is today so we definitely need more

projects on the same level of maturity thank you hey uh thanks for the talk um I think we all know the energy sector is a very heavily regulated sector and um the way that it is now or what we've seen with blockchain adoption is that there has been a lot of pocs but these have all been within individual companies basically and I think the conclusion of these pocs was is well we can basically do this in a centralized system as well um and so adopting blockchain technology would require a lot of these existing companies to give up a lot of the power and control that they currently have over the grid and so how could you how how could that work how could you get

these companies to actually do that thank you that's an amazing question and that's something that definitely keeps me up at night so absolutely so uh in terms of the uh the the the big power companies in the energy sector they do uh they do like centralized Solutions it's like centralized solution because we tested them and they work and they have a lot of control over their system so the drive the driving factor to move from centralized to decentralized that's much more transparent much more fair uh reliable cyber secure it's the government because the government dictates the registration and the the government legislation dictates the future Trends and the future strategies

that all those power companies are adoption so we need to make we need to make the government understand that this is the way to go if you have this system that's transparent you can look at the system you can look at whatever all the transactions are happening it's much easier for you to check it and some other Solutions but in reality I do think that the drive should start from the government down to the legislation bodies and then down to the energy sector thank you thanks for the talk just a question you say that uh may help smart meter to be not attacked by Cyber attack I would ask to to to know which kind of Cyber attack do

you think that smart meters of prosumer may be involved in and and how does a is it a path proof really solve this problem so I am not the person who worked on the development of the zkp but I can definitely put you in contact with him as far as I understand it the problem is not necessary with the smart the cyber security problem is not necessarily associated with a smart meter is associated with the fact that you are sending your energy everybody sending the energy profile to a centralized solution and the I think it's more about the risk of someone breaking into the centralized solution and stealing your energy data as if I was having access to your energy data I

can tell you a lot about the patterns of your life when you are at work when you uh yeah when you're holiday when you're sleeping and you really I think that's too much of a high risk to to to I think the risk is big enough that it's worth to try to make a change and this is where we this is why we're talking about introducing zero knowledge proofs hey I missed the beginning but um I used to listen to this Tyler guy on YouTube and he was always talking about energy web is this anything similar or not I don't think that I know the guy who was it against it it was a token energy web

and they were doing it sounds like they're doing a similar kind of thing oh no no I.E I I'm not very up to date with that one I'm sorry thanks thank you my question is not very technical but I'm just curious about your personal opinion you mentioned that like to to have all this possible you need more conversation between the blockchain people and the energy people so from your opinion which country or which region of the people of the government or of the country that you think have greatest potential to push this forward or like what kind of factor that needed to push all this forward to push the energy sector more decentralized and more like blockchain integrated so I think there are two things here so

I think generally the opinion of the government over digitalization and decentralization is that are important so for that again our code Estonia because that's how everybody that's what everybody does they're very open-minded there uh so for that's the first thing you need that kind of mentality in the government that we want to digitalize and we want to use those Technologies because they are useful secondly when it comes to how can you actually display the information to them I think you you just we just need more projects we need more research we need more startups and we just literally need more plcs that use blockchain Technologies or Innovative Technologies to address problems in the energy sector uh and because we are all reaching towards net zero I think everybody has

a person must make you know a minimum personal contribution so at least we need to keep informed over it much thank you that that is all the questions and normal question online thank you very much for the interesting talk thank you thank you very much cheers thank you [Music]