Power Transition's First Webinar
Power Transition has screened its first webinar. It was hosted by Karl Walker and featured Jiro Olcott, Anthony Morgan and Aditi Tulpule.
Jiro: The way we approach all our participants, including Flexr, is with our dApps or decentralized applications, that we develop and customize. These dApps can be added straight into the portal, that in this case Flexr is developing, to disseminate information to participants and take back their inputs. So we provide this sort of “one-stop shop” of information exchange. It is also important to highlight that this exchange is completely secure and of course respects the privacy to and from Flexr to all of the participants in the market, whoever they may be.
Aditi: The platforms like Flexr are adding a lot of value to market participants, and I think the key thing that is needed is a system that will enable automated control of each of those assets, in addition to cataloging your data (e.g., your metering data per asset). Flexr could provide the information stream that advises you on where and what is happening in your local DNO network (or the DNO network which is local to your asset, as you could have multiple assets and multiple DNO networks) and you could potentially use Flexr to manage all of them. So this is about knowing what's happening in your local grid and where you can add value and use that information to make your commercial or modeling decisions on which market and which revenue stack you'd like to participate in a particular half an hour period. As in industry the settlement occurs on a half hourly basis and now the DERs will have a choice each half hour of how they actually want to use their electricity (i.e., if they want to generate or consume) and Flexr in the nutshell can be one of the information sources based on which they can take that decision.
Just to clarify Power Transition does not use blockchain technology. Our digital energy platform is built on a 3rd generation Distributed Ledger Technology (DLT) called Hedera Hashgraph. We have partnered with Hedera as it uses Hashgraph technology as the basis of its consensus protocol. This is critical for a couple of reasons; we are many thousands of times faster than other cryptocurrency networks and use a fraction of the amount of energy for each transaction (Hedera 0.001kWh vs Ethereum 55kWh). Additional benefits out-of-the-box from Hedera Hashgraph include: global decentralised governance as well as guaranteed fairness and finality for all transactions. Security is also proven through COQ mathematical models to be 100% asynchronous Byzantine Fault Tolerance (aBFT), which makes us the most cyber secure DLT-Blockchain in the world.
Power Transition is technology agnostic and we do not see ourselves in competition with Ethereum based platforms or others like them. We can collaborate by creating dApp interfaces that allow them to plug into our platform, effectively turbo-charging their solution and allowing them to overcome any limitations and scale without the need for re-inventing the wheel. This makes our digital energy platform highly suited for the challenges of the energy sector and the need for integrated collaborative approaches as we have discussed in the webinar.
Karl: As a prosumer of energy in your own home, due to regulatory and compliance limitations energy generated can only be shared P2P where these generating assets are behind the boundary point meter or where there is a regulatory sandbox agreed by Ofgem where each home has its own MPAN meter. In each instance a homeowner would need to consent to the use of the digital energy platform in place of a conventional supply arrangement. We offer two options via our dashboard:
- Interactive control for users to optimise generation assets.
- Light touch with dashboard managed at the community level via Power Transition.
With regards to a business on a Half Hourly meter with generation and storage assets behind the meter there is an opportunity, under the existing regulatory framework, to trade energy. Control over the dispatch of these assets is required to either sell energy into the flex market where either capacity or surplus generation is available.
Jiro: We are always looking for talent in the software business and taking on what Karl mentioned about the Bloomberg green analysis, there is an opportunity to create really great jobs with this technology. From the traditional to the new business frameworks, there’re amazing opportunities in every area. Also, the lockdown we've experienced in the last several months made us realize how vulnerable we are and how dependent we are on electricity, from charging up the iPhone or the Android in the morning and making your cup of tea to being able to exchange value and information in a completely trusted way across the whole nation. It really has highlighted our vulnerability and our dependence on that and how we need to change and adapt.
Aditi: There's room for everybody and quite honestly this is an emerging field. Obviously software development is going to form the core of the digitalization movement, but there's plenty of room for physical engineers, sustainability-focused people, behavioural change analysts, etc. This is as much a social/psychological movement as it is a physical/ commercial movement, so there's room for everybody. The first step towards getting involved would be to try and find what your interest area is within this context and then just try to find out more about it. People are available to answer your questions or narrate their own experiences, so don't be afraid to reach out.
Anthony: The transformation in the energy sector is going to touch every aspect of everybody's life, from energy and automotive industries to sustainability and social movement. This area really is so broad that the key is to identify where the right opportunities are for you. From a purely software perspective as Jiro said, understanding the details about blockchain and what works and what doesn't work is essential, but so there's plenty of opportunity for everybody.
Jiro: The Hedera Hashgraph DLT network is an ideal platform for trading and auctioning. It is fair, final, with guaranteed timestamping. The carbon trading capability focuses on the prosumer-DER’s ability to calculate CO2e production using the formula: kgCO2e = Demand meter – supply meter x carbon factor. Each energy token generated carries with it the kgCO2e value along with a green certification (e.g., REGO). At this point it is available to be traded or auctioned without any further due diligence or intervention by a third party.
Anthony: There are significant opening opportunities now for large demand sites and the opportunities increase every day. The first thing we need to understand is exactly what demand assets there are on site. This isn't like a standard PPA where you’re providing a revenue model based upon the amount of generation from a photovoltaic array or a wind turbine. Here we have to understand exactly what the potential of the site is and look into incorporating energy storage for instance, so it is a more complicated investigative work which is needed in order to be able to come up with a right business model. However, the reward for that is the fact that you're able to generate potentially significant income and reduce your operational costs.
So if anybody with a large demand site that is interested in speaking to us then please get in touch by email to email@example.com. The basic information that we need is the site's geographic location and the site's demand.
Aditi: Power Transition is absolutely VPP ready. Our DLT platform which is based on the 3rd generation Hedera Hashgraph network and it is able to swiftly integrate with any system or interface being used by stakeholders in the energy supply chain. It is also able to provide immutable records of a large volume of transactions tracing the journey of each kWh of electricity from the point of generation to the point of consumption at an incredible speed.
Jiro: It’s an enterprise grade DLT platform running mission critical applications which is scalable from the household, community, city, region, nation, continent, and that is absolutely key. We have to have the stability for all the participants to minimize their risk in terms of governance.
It’s important to understand what we’re dealing with here; first of all there was a lot of knee-jerk reaction of what blockchain is and what bitcoin is from governments, organisations and individuals, which have kind of tainted things a bit in the beginning. However, now we’re into a third-generation technology and we’ve invested heavily into the Hedera Hashgraph network, which is the real enterprise grade focus. The technology is not about the value of a bitcoin and things like that, but it’s actually about providing that layer out of the box of immutable cyber secure transactions and exchanges of information, where the participants are trusted and anonymous at the same time. Coming back to the question about Electron, there are a number of participants out there and that is really good. I think there is a possibility of endless collaboration and it's important for everybody to focus on the big picture and how we can collaborate and integrate this service so it becomes a mainstream flex market product.
Karl: The main take from that is that there's evidently an integration opportunity with other platform providers including Electron.
Jiro: The centralised model is a sort of hub-and-spoke architecture and that is a traditional model and we’ve evolved from that. We are going to a distributed/decentralized energy model and a decentralized supporting mechanism is required. If you try to apply a hub-and-spoke model to this big decentralised model, you’re going to be confronted with huge scalability issues and being able to manage that securely is going to be a serious headache. Also you’re opening yourself up to a single point of cyber attacks and that increases the level of risk. I don't think that’s the way energy business should be going down. Millions and millions of pounds/dollars are lost by the energy sector every year through cyber security attacks, and having a centralized model is definitely exposing ourselves to this vulnerability.
Aditi: From a regulatory perspective, you can see that we're having real trouble with the current centralized system. It does work, but it does not work in real-time anymore, which is the demand of the day. Unfortunately, because of the centralisation it makes the system robust, but at the cost of speed, so it’s heavy-footed and it also adds cost. Network costs are growing and they form a large portion (about 40%) of consumer bills. So you have to look at other options on a long term basis to reduce those costs to consumers and actually make the system more accessible, robust and agile.
Aditi: The flex market has already impacted the PPAs in the sense that long term PPAs such as 25 years are no longer attractive to clients. There is also a growing need for fixed price PPA's to give way to flexible PPA's that work on maximising revenue/savings per half hour rather than on an annual basis.
Aditi: When we talk about trading it's important to understand who the trading parties in reality will be. You could actually access the international market through your route to market supplier and increasingly that’s going to become an option. There is a project launched a couple of years ago which is currently being implemented, as we’re waiting for France to come online, so the trades in balancing mechanism equivalent at the European level will become possible. There is also a project MARI which is going to look at replacement reserves. This is the equivalent of the FFR at our end, allowing participation at the European level as well. You can already trade electricity through interconnectors if you are big enough.
Jiro: From a technical perspective, we want to emphasise that the DLT network is a global thing. We’ve talked about dApps before and how they plug into the various participants. Each of the dApps that we have are completely customizable and we can localize each one, so VAT in England is GST somewhere else, TVA somewhere else, etc. We can automate all those transfers and there are things that are immediately tradable, like a carbon trading platform that we’re developing and trying to find the market for it. These are available for international trading immediately from a technical perspective, of course regulation permitting is as Aditi talked about.
We assume that the question means: ‘...achieve real-time energy demand management and orchestration at any scale...’. The Hedera Hashgraph DLT can process more than 10,000 transactions per second. The energy tokens generated are passed on through the supply chain: generation-storage-distribution-consumption using the Hedera Consensus Services (HCS) in the form of real-time feeds. Other participants in the supply chain can subscribe to the feeds and retrieve the information at once as soon consensus is achieved. The management of these producer-subscriber feeds is performed by our decentralised applications (Dapps). Each Dapp can be applied anytime-anyplace throughout the global DLT network virtually without limit.
At the moment, there is no concept of "local electricity" where the electricity has crossed the MPAN (it becomes grid standard) and forms part of the relevant suppliers BM Unit. This is the reason why peer-to peer trading is not yet possible, in the strictest sense, over public wires. Although sleeving PPAs are possible they tend not to be viable where domestic customers are involved.
Anthony: In short, it is absolutely possible. From a regulatory point of view that there are certain barriers to that occurring at the moment, but certainly in terms of understanding exactly what’s being generated and consumed, we can attribute generation to one site and consumption to another over the platform. In fact we can go further and attribute the cost of the transmission of that energy from one site to another. So there is in place the mechanism and all of the needed platform features to allow these private wire operators to exist. It is also absolutely possible to aggregate the production from various locations and there's nothing technically stopping a large organization with a single point of billing from doing it to a degree as we speak. Taking the NHS as an example, as they've got a central billing mechanism for all of their energy, that process would be perfectly feasible. From a regulatory point of view there are certain barriers in the way now in 2020, however, it is all moving very very fast, and where we are today and where we'll be in five years time are two very separate things.
Aditi: Being a lawyer I’m going to have to say they're not barriers, they are challenges. And the reason I say that is because the electricity industry is heavily regulated, and it is so for a good reason. Security of supply and balancing responsibility is paramount, all of these things are there for a very good reason. So in defense of the system, it has evolved over a period of time to provide security supply to consumers, ensure the fair charging methodology through price control mechanism, so overall it has evolved organically over a period of time, and it's doing a good job for what it was designed to do.
The problem is that the technology and the markets moved sideways to somewhere else, and we now see this lag in regulation trying to catch up. But we must not forget that the controls that we have in place are there for a good reason, and they will only be lowered once we are confident that what we're replacing those with is good enough or better. We are now in that space where that assessment is currently being undertaken, the whole digitalization approach and the thrust from Ofgem-BEIS is an extremely good sign and they're willing to engage with the market. They obviously want to make things happen, but we have to be patient for that analysis to be conducted. To answer the original question, the aggregation and netting of volumes is a settlement question. At the moment VLPs (Virtual Lead Parties) are now able to aggregate at the GSP Group level for those on trading aspects. For the individual assets being able to aggregate within the GSP level or wider, that's going to be more difficult because as soon as your electricity crosses your meter, which is your MPAN and goes on to the public wire or the distribution grid, it's considered grid standard, so the settlement happens at the MPAN level and at the boundary point level, anything beyond that is considered to be homogenized, so there's no “local flavor” to it. We are working on that within the regulatory industry to try and recognize the geographical identity of electricity, that is the power or heat generated and consumed at a local level.
Anthony: Even this week, there was an announcement made by Ofgem with regards to changes to the sandbox, which would allow under a special license some of these investigative type projects to take place. This is absolutely a real-time moving feast, and we're very much aware of how things are unfolding and how we can optimize that.