Digital Data “Tokenization” and the Drive to Develop Decentralized Solar, Renewable and Hybrid Energy Transaction Networks

There has been lots going on at nexus where distributed solar, other renewable and conventional power and energy intersects and overlaps with blockchain-based, distributed ledger technology.

Distributed Solar and Other Energy Intersects and Overlaps With Blockchain-Based Distributed Ledger Technology

Nothing in the way of “real world,” industrial-strength platforms has evolved yet, but a wide range of players – from multinational power and energy industry leaders to ambitious, industry-shaking blockchain systems developers – are bringing new methodologies and tools to bear in efforts to address weaknesses and faults inherent in blockchains based on “proof of work,” such as Bitcoin and Ethereum, and build the foundation of open, equitable, peer-to-peer, “decarbonized” power and energy networks.

The list of new projects and development partnerships announced in the past month or so spans the globe and ranges from blockchain-distributed energy systems development partnerships among market-leading private industry participants and public power industry institutions – EPEX Spot, GE, Singapore’s SP Group and US regional Independent Systems Operator PJM Interconnection, for example – to leading, as well as not so well known, blockchain-distributed energy systems developers, including the Energy Web Foundation (EWF), LO3 Energy, Power Ledger and WePower.

Solar Magazine carried out a brief round-up of recent news and developments, zooming in on several that for one reason or another appear to be particularly noteworthy. We also zoomed in on “tokenization” – two distinct methods of parsing and enhancing the security of digital data contained in databases and records. Originally applied and now used widely in the electronic payments and healthcare sectors to meet more stringent data privacy laws and regulations, as well as streamline and enhance the processing efficiency and scalability of transaction processing and administration, both tokenization methodologies have rapidly been gaining currency among blockchain-distributed energy systems developers.

Comparison Between the Sharing Economy Today and Tomorrow
Click here to view the full-size image. Source: Hacker Noon

LO3 Energy and EPEX Spot

Blockchain and distributed, peer-to-peer computing purists have strong iconoclastic tendencies – they would like to remove centralized public institutions – be they central banks, private banks or electric utilities – from the associated markets and economic systems in which they have played, and continue to play, fundamental, as well as privileged, roles. The underlying, informing and guiding ideal is to make markets and socioeconomic systems genuinely open, inclusive, equitable and completely secure by eliminating the need to place your trust in any centralized institution – public or private – when engaging in any type of transaction that involves an exchange of something of value.

Essentially, blockchain purists assert this can be done by crafting open, equitable rules of peer-to-peer market governance and participant behavior, transcribing them into software code and embedding them in blockchain-based, digital ledger systems that are constantly updated and exact copies of which are instantly distributed to all market participants. Realizing the “purist” ideal is proving to be a step beyond what’s viable from a variety of perspectives – technologically in terms of scalability and transaction processing speed, in terms of the amount of energy required to process transactions as systems scale, and in terms of achieving economies of scale that can drive transaction costs down to an ideal cost of zero.

Blockchain-distributed energy systems developers have been turning to tokenization – actually two distinct methods of digital data cryptography – to resolve these issues, as well as use combinations of tokenization and encryption to develop secure, “tamper-proof” blockchain-based, transaction network platforms. We briefly discussed how and why tokenization, in both senses of the term, is being used by blockchain-distributed energy systems developers in running down some of the recent, seemingly noteworthy news and developments that took place in the past month or so.

Secure, “Tamper-Proof” Blockchain-Based, Transaction Network Platforms

EPEX Spot, the European power exchange and LO3 Energy on Oct. 12 announced they would work together to further develop LO3’s Exergy, a global, energy data standardization initiative and blockchain data exchange and warehouse. Using standardized data related to electricity production, use and transmission, Exergy will enable energy producers and consumers – from utilities to individuals – to take ownership of their digital energy data and create digital assets that can be monetized, i.e. traded on digital markets, such as EPEX Spot.

Our current Exergy design use concepts are similar to data tokenization for representing available data and tracking who has access to that data. Blockchain is a powerful tool for establishing trust in a current state or truth between distrusting entities. In these cases we are interested in solving two issues: the provenance of the data and who has permission to access the data.

– LO3’s Chief Blockchain Architect Cian Montgomery told Solar Magazine.

“Blockchain is not a good storage or transmission medium for data. So in order to deal with data on an industrial level, a multi-part system must be employed. One to transmit, store, and provide access to the system. The other a Digital Ledger (Blockchain) to track the available data, the provenance of the data, and keep records of who is permitted to access the data. This representation in the DLT (Digital Ledger Transaction) is often called data tokenization as there is an identifier (often a hash) that represents the data in question.”

Working with EPEX Spot provides an opportunity for LO3 to use its TransActive Grid platform to connect local energy marketplaces to wholesale markets, Montgomery explained. “In order for this to happen, the usage data from all the TransActive Grid participants needs to be aggregated to drive forecasting and settlement information. This information has to be permissioned for use in the market and the authenticity of the data must be established to prevent bad actors or cheating in the integration.”

LO3 Energy’s TransActive Grid Platform

Energy Web Foundation partners with PJM Environmental Information Services (PJM-EIS)

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On Oct. 25, the Energy Web Foundation (EWF) and PJM Environmental Information Services (PJM-EIS) announced a strategic initiative that calls for EWF to develop and test a reference implementation of its EWF Origin open-source, blockchain-based renewable energy and carbon markets development toolkit that PJM-EIS can implement market-wide as part of the Generation Attribute Tracking System (GATS) it administers for its parent organization, PJM Connext LLC, itself a subsidiary of US regional grid ISO PJM Interconnection.

The pilot, according to project partners, “will allow PJM-EIS to investigate the potential benefits of blockchain technology to improve the security, transparency and transaction costs of GATS.” A pay-for-use subscription service, GATS creates and tracks digital certificates for every megawatt-hour of electrical energy a generator produces. The data tracked includes environmental and emissions attributes of the generation source, along with ownership of credits as they are traded or used to meet government renewable energy standards, the partners explained.

“EWF’s goal with the collaboration is to demonstrate how large numbers of distributed energy assets — in the tens or hundreds of thousands — can participate in renewable energy certificate markets, operating at a price point where it is economically feasible to bring even small rooftop solar installations to these markets. EW Origin can do this by standardizing and automating processes such as physical asset registration, asset authentication through digital signatures, secure data logging, REC creation and validation, REC ownership registration, and REC retirement,” EWF explained. Tokenization, in both senses of the term, plays a key part in EWF’s open-source, blockchain-distributed energy data standardization and transaction systems development plans. In the first, most prominent use of tokenization, the Energy Web Token performs two main functions: to secure the network (as a deterrent to and safeguard against cyberattacks), and as a means of validator-node compensation, EWF’s Peter Bronski explained.

When it comes to the other type of digital data tokenization, it can be helpful to distinguish between what Bronski called “literal tokenization” as opposed to “conceptual tokenization.” In the former, a digital token corresponds directly to some “real-world unit of measurement, such as a kilowatt-hour of electricity or a renewable energy credit (REC),” Bronski explained. With “conceptual tokenization, blockchain tokens and real-world parameters have implications for one another, but they aren’t connected 1:1.”

Bronski cited fractional ownership of a community solar energy system “as a great use case” of tokenization in its literal sense. “Allocating subscribers or owners of specific panels or a percentage of generation, assigning solar generation and associated RECs to those owners, or subscribers, etc. in theory becomes an easier, more streamlined process,” he said.

More broadly speaking, tokenization “ultimately comes down to data,” Bronski added. “What data do we have? How secure and verifiable is that data? What are the ways in which we can parse, automate and leverage that data to bolster renewables and DERs (Distributed Energy Resources)?”

EWF recently released a white paper – The Energy Web Chain: Accelerating the energy transition with an open-source, decentralized blockchain platform – that goes into this topic in much more detail.

The Energy Web Chain

Following is a brief rundown of several other recent news announcements and reports of significance.

- WePower “tokenizes” a year’s worth of Estonian grid data, “a world first for energy blockchain technology.”

In partnership with Elering, Estonia’s transmission grid operator, WePower recently announced the successful completion of a pilot project that put all Estonian transmission grid consumption and production data on to its Ethereum-based blockchain. Hourly data from 700,000 households was aggregated by zip code, per hour, to reduce it to a manageable size, according to a technical report of the project.

- Singapore Power unveils blockchain market for renewable energy trading

Singapore’s energy utilities provider launched a blockchain-based marketplace for trading RECs. Designed and built in-house, the blockchain platform provides “security, integrity and traceability of each REC transaction,” according to a news report. City Developments Limited (CDL) and DBS Bank are the first REC buyers to sign up to use the platform. Solar power developers Cleantech Solar Asia, LYS Energy Solutions joined previously as sellers, while Katoen Natie Singapore, which expects to launch a solar facility in Singapore country soon, has as well.

- Australia’s Power Ledger launches blockchain energy asset generation drive

Power Ledger founder and CEO Jemma Green has a grand vision of the role the company’s POWR tokens can play in the global drive to deploy solar and other renewable energy resources, reduce greenhouse gas emissions and realize the goals of the UN Paris Climate Agreement. “Just as the US dollar is the denomination of the oil industry, we see the potential for the POWR token to become the denomination for the photovoltaic and renewable energy industry,” Green stated in a blog post.

Power Ledger’s upcoming Asset Generation Events (AGEs) illustrate how tokenization can be used to digitally “fractionalize” shares in a solar or renewable energy project, opening them up to masses of people globally who might invest as little as USD1, or even less. “The aim for AGE is to fund new, large-scale renewable energy assets that go on to become customers of the applications that Power Ledger develops,” Green explained.

“The aim is to prioritize long-term POWR token holders who wish to participate in AGE...POWR holders benefit because they can use AGE to escape crypto volatility and earn income distributions.”

The underlying value of the AGE token isn’t linked to blockchain utilization, as is the case with Ethereum, or utilization of the platform, as is the case with most ERC20 tokens, Green pointed out. “The value of the AGE token is related to the value of distributions generated by a renewable energy asset. It’s a legal fraction of an economic benefit, the token nature of AGE is secondary. We believe in the future it will be a requirement for most financial products to be tokenized due to the additional benefits to investors, such as liquidity and the record-keeping accuracy of the blockchain. Accuracy is important and this point is clear when you look at recent issues with share registries; these situations have shown how vulnerable ordinary investors are to the back office foibles of legacy registry systems.”

- GE explores using blockchain to build Virtual Power Plants

Looking to play a leading role in the energy decentralization, “decarbonization” and digitization trends, GE is exploring ways of using blockchain technology to help build virtual power plants, which network and aggregate sets of distributed energy resources so that they can be run as though they were a single, centralized power plant, according to a news report. GE Power Digital in October joined a group of industry peers to carry out a research project launched by Deutsche Energie-Agentur (DENA) that will evaluate the use of blockchain applications in the energy industry. Due to be published in Spring 2019, subjects reportedly include asset management, data management, market communication, energy trading, and financing and tokenization use cases. GE already has integrated IBM’s Hyperledger blockchain systems framework into its Predix industrial Internet platform, the news report notes. comment↓


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