Truly green energy trades with blockchain-based certificates: A proof of concept to embed a certification system in Elia Group’s consumer centric market design

We have reached a tipping point in the energy transition. The policy-driven phase of the transition is being increasingly complemented by market-driven competition for green electricity. More and more big tech companies are committing themselves to carbon neutrality. However, existing standards such as guarantees of origin or renewable energy certificates have not been refined and so do not satisfy evolving needs, such as:

• using the green attribute of electricity in other sectors, for instance in the production of green hydrogen
• 24/7 transparency in green energy consumption. Hence, load optimization which depends on the availability of granular information about renewable energy is not rewarded

At Elia Group, we are developing new solutions to improve the traceability of renewable energy. Our goal is to offer a solution that fulfills the future requirements of granularity and locality and is aligned with Elia Group’s vision of a consumer-centric electricity system.

This article questions the adequacy of the current certification scheme with regard to future consumer needs and presents Elia Group’s latest proof of concept (POC) which tests the use of blockchain-based tokens in granular certificates of origin. The potential of this technology is highlighted, alongside the reason why transparency can lead to privacy concerns.

The current green energy certification process is outdated

Guarantees of Origin (GOs) were introduced in the European Union as the principal instrument for tracking how much of a consumer’s energy consumption was produced from renewable sources. GOs are issued electronically by issuing bodies for each MWh of renewable energy generated; moreover, they can be traded and are “cancelled” by suppliers on behalf of consumers as evidence that the green electricity has been used by them. In a nutshell, this means that the green attribute of the electricity is:

• detached from the physical (and temporal) electricity at the point of production;
• traded separately from the electricity (as a separate commodity); and
• offset with total electricity consumption at the end of the year.

Suppliers are able to offer ‘green’ electricity contracts to their consumers through the use of GOs. In essence, these contracts outline that the energy supplier has bought sufficient GOs that match the consumer’s yearly offtake. However, this already exposes some of the weaknesses of the current system: GOs do not guarantee that the green production occurred at the time of consumption; moreover, GOs don’t include any guarantee that the green energy is actually transported to — and so used by — the client.

Industry is seeking GOs with a higher level of granularity

The shortcomings of the current system highlight that a new and effective tracking system for renewable energy, which increases the granularity of GOs, is needed. While companies driven by Corporate Social Responsibility (CSR) constitute a key source of the demand for this, the requirements associated with the production of e-fuels and other sector coupling purposes make a new real-time tracking system necessary. These factors only constitute the initial demand for this new concept, however. In future, it will play a major role in ensuring that the energy transition is a success, since it will enable market-driven competition for green electricity. A significant number of market players are already involved in this today. Big companies, such as Google, are pushing for a system that allows for 24/7 matching. Suppliers are teaming up with specialized start-ups in order to provide blockchain-based 24/7 solutions. Global initiatives, such as EnergyTag, are developing a 24/7 granular certificate standard.

Attaching blockchain-based certificates of origin to physical transactions under Elia Group’s consumer-centric market design

Earlier this year, Elia Group developed and published our new vision for a consumer-centric market design (CCMD). This places consumers (private households or larger industrial customers) at its heart, giving them the full freedom to carry out energy transactions with peers or to choose from other service providers at appliance level to benefit from energy market participation. The CCMD responds to the needs companies have in terms of creating visibility about their energy consumption.

A key element of the CCMD is the so-called ‘Exchange of Energy Blocks’ (EoEB) hub. The hub allows transactions (which involve the exchange of energy blocks) to occur between consumers and any other market parties on a fifteen-minute basis. The EoEB hub allows consumers to directly source their energy from a specific asset; however, proving the origin of such energy will mean the hub will need to be implemented alongside a certification system. Indeed, a peer-to-peer (P2P) trade is not enough on its own to guarantee the source of the electricity involved in the transaction, as the energy can be bought on the market and sold on again. Since the EoEB hub does not have a certification system embedded within it, we conducted a proof of concept (POC) to test how to merge blockchain-based granular certificates of origin with transactions on the EoEB hub. The goal is to put a color on the exchanged block of energy.

The proof of concept allowed us to test and verify how to:

• enrich EoEB transactions with granular certificates of origin in order to simultaneously match energy consumption with energy generation in an inherently coupled system;
• enable transactions and certificates at a watt-hour level to reflect even the smallest transactions;
• integrate the system with the hub and implement it on a 15-minute basis to reflect the energy market time interval;
• implement a battery which stores and releases certified green energy;
• allow users to set preferences and enter into P2P transactions using a user-friendly dashboard.

To create granular certificates of origin, we relied on the Energy Web Origin (EW Origin) technology stack. EW Origin not only provides a blockchain-based certification system, but has also taken on the role of a P2P market platform, just as our POC required. The market platform offers registration and device onboarding as well as the possibility of selecting and entering into P2P power purchase agreements. The market platform is located in the non-regulated service layer, whereas the EoEB hub and the certification system are regulated services (see Figure 1 below).

The process logic starts with consumers and producers registering their generation and consumption devices on the EW Origin platform. Once all of the participants and devices have been registered and verified, Elia Group’s data hub provides the 15-minute generation and consumption time series to complete the onboarding process.

Figure 1: Conceptual achitecture of the proof of concept

This entitles the EW Origin platform to create (or ‘mint’) granular certificates of origin in the form tokens for every Wh of electricity produced.

These ERC-1888 tokens combine distinctive, non-fungible characteristics (i.e. the source of electricity generation as well as the according 15-minute period in which the electricity has been generated) with a fungible energy token. This implementation allows the certificate to be transferred and split into arbitrarily small units and being forever anchored to origin (the generation device) and generation period. For more information, please see Energy Webs documentation on the Certificate structure.

Figure 2: EW Origin offers a market place for peer-to-peer transactions

Buyers and sellers can use the platform to enter into any P2P transaction agreements they choose (see Figure 2). The EW Origin platform translates these agreements into transactions ( “exchange of energy blocks”) and sends them to the EoEB hub every 15 minutes. The EoEB hub verifies the participants involved in the transaction alongside the attached tokens and approves the transaction, triggering two different events:

1. Energy market: Elia reflects the energy trade by adapting the positions in the balancing groups of the involved suppliers (i.e. the balancing responsible party)

2. Granular Certificates: EW Origin transfers the tokens from the seller’s account to the buyer’s account.

The trade is therefore fully embedded into the energy system and all participants are given blockchain-based proof of the energy transaction with an indication of the greenness of their current energy consumption (see Figure 3). Once the tokens are transferred to the buyer, they can then decide to retire the certificates in exchange for consumption, which has occurred in the same 15-minute period. The platform allows buyers to retire tokens in accordance with their preferences (e.g. they can prioritize PV tokens over wind tokens). In the future, a secondary market for the further trading of certificates (alone or in combination with energy transactions) could be made possible as well.

Figure 3: The consumption overview updates every 15 minutes

Storing and releasing verified green electricity in energy storage systems

As energy storage systems become increasingly important, the question of how to store and release certified green energy arises. Since storage is explicitly excluded from current GOs, providing “green flexibility” is impossible. As part of our proof of concept, we considered an energy storage system on the consumption side. With full data availability as a prerequisite, the platform retires tokens during battery charging and mints new tokens during discharging. The battery is seen as an energy generation device and creates tokens following a first in, first out approach in accordance with previous charging sessions. A fixed efficiency factor of 85% accounts for storage losses. Our POC demonstrated the complexity of using a battery alongside granular certificates, as outlined below:

• losses (storage, transformation, etc.) are complex events which are hard to measure or calculate since they depend on external factors (e.g. ambient temperature, time between charging and discharging, etc.);
• metering devices are required to measure charging and discharging processes as well as to differentiate between internal (behind the main meter) and external consumption.

Whilst implementation is possible in theory, it is clear that the accurate recording of stored certificates is complex and only possible with precise data and measurements. We reduced this complexity by allowing charging to occur from renewable sources only.

Technological evaluation: transparency and trust in exchange for traceability

The use of blockchain-based certificates was central to this POC . The results demonstrate that the technology is application ready and compatible with the EoEB hub. It fulfills all success criteria; however, the implications of the technology for this use case needs to be considered carefully, as outlined below.

Blockchain provides trust in data; disintermediation by replacing central authorities; and transparency in the form of an open ledger. In a granular certification system, this theoretically means:

• the double counting of certificates can be prevented, since data is immutably stored;
• the decentralized validation of transactions can occur because of a transparent trading history, and this in turn results in
• the potential to disintermediate certificate issuing bodies, leading to the decentralized management of certificates without a central authority.

So much for the theory, but how does this apply to the current structure of the German power system?

Certificates are usually managed by public issuing bodies, such as the Federal Environment Agency in Germany, or regulated companies, such as transmission system operators. Questioning the trustworthiness of these institutions might be legitimate, but questioning the trustworthiness of the input data is even more important. To disintermediate these institutions, the flow of information from the metering device (or even from devices behind the meter) to the blockchain has to be tamper-proof. Otherwise, there is no trust in the system since the input data can be fraudulent. From a technological point of view, this is feasible when the appropriate hardware is available (starting with smart meter gateways and secure device identification). However, the technical infrastructure needed to replace institutions, which could guarantee that the data is correct, is not yet available. Projects like dena’s Blockchain Machine Identity Ledger are demonstrating an end-to-end connection to behind-the-meter devices that identify themselves with self-sovereign identities and could present a solution to this.

Another difficulty lies in the physical reality of energy grids. Congestions can prevent the physical delivery of electricity, leading to the decoupling of certificates and energy trade. In such cases, a central authority, which decides on the validity of a transaction, is therefore still required.

Even if these technical requirements were met and congestions are not considered, the use of blockchain technology for granular certificates of origin entails transparency in terms of transactions; and the trade-off for transparency is the traceability of commercial or private activities. If generation or consumption devices create or retire energy certificates on a 15-minute basis on a public ledger, this will mean the disclosure of sensitive information about individuals and companies. Even with anonymized accounts, only small amounts of market information and data analysis are needed to identify participants along with their load, consumption and trading profiles.

Exploration of the proof of concept continues and why blockchain remains relevant

This transparency acts as an argument against the use of a public blockchain for a global granular certificate system. We think that the rate of acceptance of such a system will be low for companies that consider their energy consumption to be sensitive information.

Elia Group is in the process of further developing the concept in the form of a demonstrator. In doing so, we are using the learnings from this proof of concept, feedback from stakeholder interviews and exchanges with international peers. Apart from increasing our understanding of blockchain technology, we are further developing the idea of combining EoEB with green certificates on a 15-minute basis. Some software developments are being used to come up with a solution that combines the benefits of a decentralized system (i.e. availability and reliability) with the avoidance of traceability. We are exploring other cryptographic methods in order to address the aforementioned issues to fulfil the requirements of granularity, locality and compatibility with the consumer-centric energy market design.

Blockchain is still at an early stage in its development and advancements such as zero-knowledge proofs (see FfE’s InDEED project) continue to try and solve the traceability issue. However, we still see potential of a blockchain-based certificate solutions for less critical processes like green electric charging or private use cases (e.g. energy communities), where the need for transparency and disintermediation is high. Some examples include the ODYSSEE service developed in the framework of the Internet of Energy 2.0 and green charging initiatives with our automotive partner network.

I would like to thank Malte Scharf who actively contributed to this article.