Accelerating decarbonization with digital IDs for distributed energy assets
How decentralized technologies can help eliminate 10 gigatons of carbon emissions from the electricity sector by 2030.
TL/DR:
In 2019 we launched the Energy Web Decentralized Operating System (EW-DOS), a full stack of decentralized technologies that enable utilities and grid operators to integrate billions of low-carbon energy assets into the grid.
EW-DOS helps decarbonize the global energy sector in two primary ways: 1) increasing the value (and consequently, the supply) of renewable energy, and 2) streamlining the process for integrating and managing fleets of emissions-free distributed energy resources (DERs).
To enable these use cases at scale, EW-DOS allows every asset and stakeholder in the energy sector to establish a decentralized identifier (DID) and provides a universal digital protocol for establishing identity, permissions, and relationships across the energy value chain.
Our goal is to reduce 10 gigatons of global greenhouse gas (GHG) emissions from the energy sector over the next decade by onboarding over 225 million low-carbon energy assets into applications supported by EW-DOS. This will result in 870 GW of additional renewable generation capacity and 515 GW of low-carbon demand-side flexibility. Together, these equal more than the entire installed electricity generating capacity of the United States.
At Energy Web, we’re on a mission to unleash the power of blockchain and decentralized technologies to accelerate the decarbonization of the energy sector in a timeframe relevant to mitigating the worst impacts of climate change.
The bad news: collectively we only have 10 years.
The good news: here at Energy Web, we’re ramping up our work with some of the world’s largest energy market participants along with innovative startups, telecommunications companies, and hardware manufacturers to develop digital solutions that make it easy to securely integrate vast quantities of renewable and distributed energy resources (DERs) at extremely low cost.
Our theory of change is simple: by deploying open-source technologies that support the growth of renewables and DERs, we help 1) avoid the construction of new fossil-fueled generation and 2) accelerate the retirement of existing fossil-fueled assets. Both of these serve the ultimate goal of faster decarbonization of the electricity sector.
Our goal is to reduce the sector’s carbon emissions by approximately 10 gigatons cumulatively by the end of the decade, with annual reductions of at least 2.5 gigatons in 2030. For perspective, the global electricity sector accounted for approximately 13.5 gigatons of carbon emissions in 2018; achieving our goal would be equivalent to “erasing” roughly 6 years of emissions from the European power grid (based on 2019 levels). These are incremental GHG emissions reductions above and beyond what would have been achieved in the absence of decentralized digital technologies, and in particular, the Energy Web Decentralized Operating System (EW-DOS).
So how do we achieve this?
Digital solutions increase utilization of low-carbon grid assets
EW-DOS is a stack of open-source software and standards designed to support applications that help decarbonize the electricity sector in two primary ways:
- Increasing the value of renewable energy:
Renewable generation—wind and solar in particular—will continue to expand exponentially in the coming years, not just because of its cost advantages over thermal generation, but also because of the growing demand from energy buyers and governments with ambitious targets for decarbonization and/or renewable energy procurement. The Origin toolkit simplifies the process of issuing and trading energy attribute certificates (EACs) from all types of renewable resources — not just wind and solar, but also biomass, geothermal, or hydro. EACs take many forms, from renewable energy certificates (RECs), to guarantees of origin (GOs), to certified “green” electricity tariffs. Depending on the specific market conditions, EACs can increase revenue for renewable generators by a few cents to dozens of dollars per MWh. Empirical evidence shows that as the value of renewables increases (namely, increased revenue potential), overall supply increases, displacing more-expensive infrastructure with higher operating costs (coal generation in particular). To summarize Origin’s impact: A) Origin expands the market for EACs. B) Expanded EAC markets increase the demand for, and subsequently supply of, low-cost renewables. This results in C) Renewables displace fossil fuel generation at a faster rate than status quo, resulting in deeper emissions reductions. - Unlocking the potential of distributed energy resources and electric vehicles:
Today, customers around the world spend roughly ~$140B (USD) on DERs (including rooftop solar, storage, building controls, smart appliances, and electric vehicles). By 2030 that number is expected to increase tenfold to over $2 trillion (nearly three times greater than global utility investment in generation, transmission, and distribution assets). These naturally distributed and variable resources have the technical potential to provide a significant range of grid services, but to date they are chronically underutilized (existing demand response and storage assets have about a 0.8% capacity factor) largely due to the complexities associated with registering, managing, and settling with millions of small-scale assets. The EW Flex toolkit makes it possible for grid operators to securely, efficiently, and automatically integrate qualified customer-owned DERs into electricity markets or demand response programs. More specifically, Flex streamlines DER pre-qualification, registration, and settlement processes. By reducing or eliminating administrative and operational barriers, Flex enables grid operators to cost-effectively tap into a vast pool of currently inaccessible or underutilized DER assets, which can provide low- or zero-carbon grid services at low or no marginal cost.
Why decentralized technologies are needed
In order to scale the two use cases described above to a level that makes a material impact on carbon emissions, the energy sector needs a universal digital protocol for establishing identity, permissions, and relationships across the energy value chain, ranging from customers and their assets to market participants and regulators.
This is where EW-DOS comes in. At its core, EW-DOS enables every asset and stakeholder in the energy sector to establish a decentralized identifier (DID). DIDs effectively act as a digital “passport,” containing intrinsic information (e.g., make/model, serial number, location), relational information (e.g., ownership), and operational information (e.g., price/schedule preferences) about an asset or customer. DIDs are enriched via claims about attributes and capabilities to inform which programs a given customer / asset can participate in. Claims are verified by bilateral transactions with third parties. The EW-DOS DID implementation is inherently open to all, hardware-agnostic, and compatible with a wide variety of information and operational technology systems without sacrificing security, data quality, and regulatory compliance (with the DID architecture, we can guarantee data privacy while making sure only pre-approved participants can read or update data).
In this architecture, blockchain-based DIDs become the common reference point for all participants and systems within a given market. Just as real-world passports form the basis for establishing identity and permissions (e.g., the ability to travel or work) in any region, they are the basis for registering and monitoring the actions of assets and customers in electricity markets.
How we estimate our potential impact
We developed a simple model to estimate the emissions reduction potential that can be achieved through widespread deployment of EW-DOS.
Keep in mind, all models are wrong… but some are useful. This analysis is intended to provide a framework for quantifying the impact of our work rather than a definitive forecast of what will happen. As with all models, the outcomes vary widely based on the fundamental assumptions. We invite you to experiment with the assumptions and methodology and provide feedback here.
For Origin, our model estimates potential expansion of wind, solar, and biomass generation by improving the economics of those assets by $2–$5/MWh (note: we exclude hydro and geothermal generation due to their unique physical characteristics and requirements). We start with a baseline forecast for cumulative installed capacity based on data from Bloomberg New Energy Finance and assumptions about the baseline value of renewable energy (either via power purchase agreement or wholesale market prices) and the long-term price elasticity of supply for renewables. We cite a study that shows for every 1% in the increase in the value of renewables via EACs, there is a 2.7% increase in renewable generating capacity. Then, we project one-third of total wind, solar, and biomass resources (in terms of installed capacity) to issue EACs via platforms built on Origin by 2030, increasing from 0% today.
This results in a weighted average for the increase in value for wind, solar, and biomass, which in turn produces an estimated increase in overall supply of these resources. This “surplus” renewable capacity is assumed to directly outcompete and displace coal generation (after normalizing for the discrepancies in capacity factor between the generation types). We project an additional 870 GW of renewables (a 22% increase above baseline) by 2030, corresponding to 375 GW of early coal retirements over the same period.
Flex’s emissions-reduction potential is based on the estimated quantity of global technical potential of residential demand response (space heating, water heating, and large appliances), small- to medium-size commercial demand response (HVAC, lighting, large appliances/motors), and electric vehicles (both as a demand response asset via dynamic charging and as a storage asset via emerging vehicle-to-grid solutions) that can be turned into achievable potential. The estimated technical potential for these DER assets is derived from data from Bloomberg New Energy Finance, IHS Markit, Navigant, and Rocky Mountain Institute.
From the US DOE: Technical potential is the total capacity / energy that could be provided by any DER, without consideration of cost or willingness of DER owners to participate in relevant programs or markets. Economic potential is the subset of technical potential that is considered cost-effective compared to a conventional supply-side energy resource alternative (i.e., energy generation). Achievable potential, a subset of technical potential, is the capacity / energy that could be realistically achieved given real-world constraints, including market and programmatic barriers.
We estimate the total impact of Flex in terms of percentage of currently-inaccessible technical potential (GW of capacity) that can be converted into achievable potential. We project Flex to unlock 10% of total DER technical potential in 2030, increasing in an s-curve from 0% today, resulting in an increase of 515 GW of demand response and storage resources. This increased supply of zero-carbon flexibility resources directly competes against and displaces higher-cost peaker gas and oil generation, resulting in 550 GW of early retirements.
We also project Flex to increase overall utilization of demand response and storage, improving their capacity factors from approximately 0.8% today to 6% in 2030 (equivalent to an average of 1.5 hours of utilization for those assets per day).
Once the estimated supply increases for renewables (via Origin) and demand response and storage (via Flex) are calculated, we then calculate estimated total generation for each asset type using forecast capacity factors for each resource type and derive CO2 emissions based on the carbon intensity of reach resource (MtCO2 per GWh).
How we will measure our impact
Obviously, we’re optimistic about the potential of EW-DOS to drive a material reduction in global GHG emissions. Fortunately, we’re not alone: our community of Members collectively account for approximately 12% of global electricity consumption and approximately 300 million customers. They all share our mission to decarbonize their operations and customer offerings.
Already EW-DOS is supporting applications from renewable trading platforms in Southeast Asia and France, to DER integration solutions in Austria, to virtual power plants in Germany. The list will only grow in the coming years.
Yet while decarbonization is the end, EW-DOS is really a means to improve the visibility and utilization of renewables and DERs. Establishing self-sovereign DIDs for every generation, storage, or consumption asset and linking those identities to other operational systems — from metering databases to billing platforms — makes it possible to measure the scale and scope of EW-DOS applications. As shown below, achieving our goals (at least 870 GW of additional renewable generation and 515 GW of DER / DR capacity) will require onboarding roughly 225 million assets into EW-DOS.
In this architecture, energy sector assets (via their DIDs) use EW-DOS for a variety of services (such as transaction validation, decentralized messaging, data storage, and identity verification). Our vision is to leverage the native token of the Energy Web Chain, Energy Web Token (EWT) to allow DIDs and/or DID owners to pay for these services provided by the EW-DOS stack.
With DIDs on EW-DOS, we can quantify the number of DERs registered in grid flexibility platforms; the volume of EACs transacted (as well as their marginal emission abatement); the GWh of certified green electric vehicle charging events — all in a way that preserves the privacy of end users and empowers them with greater agency over how their data is managed and shared. As we continue to support the development of enterprise-scale applications on EW-DOS, we plan to release some of these metrics to better understand how we are tracking against our goals. We look forward to revisiting this post in the coming months and years — be sure to check back in, because the results may surprise you.
