Distributed Energy Resources (DERs) can disrupt traditional electricity markets. So it should come as no surprise that innovative countries are looking for new technologies that can transform DER’s entire energy economy.
Germany in particular is interested in using DERs to promote its digital energy industry while at the same time complying with the European Green Deal. For this reason, the German Energy Agency, also known as DENA – the most important government group for energy innovations in Germany – announced plans to test a blockchain-based solution for building a digital register for DERs.
Sara Mamel, Senior Export in Digitization at DENA, told Cointelegprah that DENA presented a pilot project called “Blockchain Machine Identity Ledger” (BMIL) six weeks ago. According to Mamel, BMIL will be implemented alongside Energy Web, a blockchain-focused nonprofit, along with 20 other partners in the energy and blockchain sectors:
“This is a very ambitious project with the aim of testing an infrastructure layer for the German digital energy system of the future. We want this project to have the greatest possible impact on the entire energy sector. That is why we are very innovative. “
Blockchain for DER automation
Jesse Morris, Energy Web’s chief customer officer, told Cointelegraph that BMIL will create a digital registry for DERs in Germany. Examples of DERs are photovoltaic power plants on the roof, battery storage systems such as the Tesla Powerwall, intelligent thermostats and charging stations for electric cars. Morris added:
“For power grids around the world, this means a massive shift in investments and infrastructure. From a centralized system with a relatively small number of very large power plants to a decentralized system with hundreds of millions of small assets that operate as part of a larger whole. “
According to Morris, a blockchain-based digital registration for DERs uses decentralized identifiers with which assets can register themselves in the directory. In this way, third parties such as DER installers can easily review claims on specific DERs. This solution should also help network operators to bring DERs into various market applications to provide network services that would serve as the basis for optimized settlements after the provision of energy services.
This is extremely important, especially for a country like Germany, which is considered the fourth largest economy in the world. It is also interesting to note that a European Parliament document on DERs suggests that global use of DERs will have overcome centralized power generation by 2024. The document goes on to say that renewable energies produced from DERs hold a significant market share in Germany, paving the way for more decentralized energy generation.
Pushing blockchain interoperability to its limits
If successful, Morris stated that BMIL could serve as the basis for a wide range of DERs supporting both the German wholesale and retail electricity markets: “This will make it easy, efficient and inexpensive for any DER in Germany to enter the energy market. Network operators and suppliers also get access to an untapped decarbonised German energy system. “
However, technical challenges remain. DENA’s Mamel stated that BMIL is a project based on the premise of interoperability – one of the blockchain’s greatest challenges to date. While DENA is technology-independent, Mamel explained that DENA wants to test a solution that can be applied to the German energy sector, which already consists of a decentralized framework in which many players in the industry apply different standards.
For this reason, DENA decided to take an interoperability approach to advance the German energy industry and tested two blockchain development environments in BMIL. Both Ethereum and Substrate, the blockchain framework for Polkadot, are applied along with various concepts for decentralized identity protocols. “The results of this experiment remain to be seen, but we are very confident that we will set a new standard for the entire energy industry,” said Mamel.
If interoperability issues are resolved, the BMIL project could benefit the entire blockchain sector. For example, Jonathan Waldenfels, a blockchain engineer at Energy Web, told Cointelegraph that one problem with the blockchain space is that many use cases run on different chains. According to Waldenfels, BMIL is trying to reflect exactly this in the pilot project:
“Energy Web would like to develop innovations in the blockchain area and would like to see how our tech stack EW-DOS can be integrated into new technologies. For EW, this pilot is a great opportunity to explore how EW-DOS can be used in basic use cases running in different chains in a shared identity registry. Second, it shows how EW-DOS can be integrated into new blockchain technologies such as substrates and polkadot. “
Waldenfels believes this use case will be a likely business architecture for the future, and hopes that the energy sector can help the entire crypto industry see the possibilities by combining multiple chains and ecosystems under one roof with this project.
What about regulations?
Aside from the technical challenges, regulatory standards could also prove to be a problem for such solutions. Mamel explained that the German energy sector is one of the most complex and regulated in the world. BMIL therefore claims to fully comply with all regulations of the German energy sector. “It was very important for DENA to work hand in hand with the existing regulatory guidelines and try to improve the existing regulation and take it to the next level by providing interesting use cases to bridge theory and practice “said Mamel.
However, Mamel noted that important questions remain, such as ensuring that the BMIL blockchain solution is compliant with the General Data Protection Regulation, and understanding the regulatory challenges that may arise if DENA were to “fully roll out” the blockchain tries Machine Identity Ledger in the German energy system.
While concerns remain, using a blockchain solution holds great promise for DERs. Paul Brody, global blockchain innovation leader at Ernst & Young, told Cointelegraph that this is an area of significant opportunity for blockchain technology as the nature of the power grid changes in a way that elegantly matches the nature of blockchain software : It will be decentralized. Brody further noted that every industrial revolution was closely related to major developments in information technology:
“If we see an industrial revolution that decentralizes power generation and production using solar panels, batteries and 3D printers, it will likely come with an information technology revolution that is also decentralized.”