How the next set of energy incentives will rely on the blockchain

e2m and Swytch team up to help with the elimination of feed-in tariffs and the flaws of Guarantees of Origin (GoO)

Two issues that are crucial to the renewable market in Europe: 1) Feed-in tariffs and 2) Guarantees of Origin (GoO). We spoke with Felix Buchholz, Head of Portfolio Management at e2m (an independent power trading company based in Germany that creates and manages virtual power plants), about these pressing issues and how Swytch can help.

Some background: Buchholz and his team analyze the signals from markets and optimize generation and consumption portfolios. The aim is to generate the highest possible revenues for e2m’s customers. Swytch and e2m have partnered up for a Proof of Concept test that began in late 2017. Together, the test spans over 100 assets producing ~1.5 Gw of renewable energy.

Buchholz knows the dynamics of the German renewable market inside out and has high hopes for leveraging e2m’s relationship with Swytch. Two major issues where he sees great potential are the elimination of feed-in tariffs and Guarantees of Origin (GoO) flaws…

1) Feed-in tariffs are going away.

Feed-in tariffs are a policy mechanism designed to accelerate investment in renewable energy technologies by providing remuneration (a “tariff”) above the retail or wholesale rates of electricity. These tariffs have been successful in making Germany a leader in renewable energy production. In the first half of 2014, 28.5% of gross electricity production in Germany came from renewable sources.

But starting in 2020, feed-in tariffs will start to go away. Thus, e2m wants to prepare for a future, not just in Germany but in other countries, that it expects to be dominated by a tokenized approach to incentives. Part of why e2m is backing Swytch is Swytch’s approach to tokenized incentives in the energy market, an approach that is especially attractive to the larger energy producers and energy traders e2m serves.

Buchholz says, “We’re recognizing that the next set of energy incentives won’t come from government necessarily, but will be more decentralized in nature and will rely upon the blockchain. We want to experiment now to be ready for that future.”

2) Guarantees of Origin (GoO) have many flaws.

Since 2001, all energy sold in the EU must come with a Guarantee of Origin (GoO) that specifies where and how that energy was produced (similar to the origin label on a bottle of beer). The GoO program is bureaucratic, cumbersome to administer across country borders, and has been criticized for double counting and for having a negligible impact on the amount of truly additive renewable energy produced. More about the criticism of the program can be found in the CEPS analysis published in 2017 (CEPS is a think tank based in Brussels.)

e2m is interested in learning more about how blockchain-based solutions could help with GoO problems. This is another place Swytch can help since it provides the equivalent of a guarantee of origin by registering transactions on the blockchain. This solution is lightweight, distributed, and means energy production can be verified in real time, making double counting all but impossible.

Due to its expanding footprint in Europe, e2m is in a position to influence policy. But first, it needs to learn more about the technology first hand. The team at e2m is especially enthusiastic about Swytch’s “Open Oracle”, which uses a combination of artificial intelligence and machine learning to allocate tokens in real time.

Through the use of the Open Oracle, tokens will at first be allocated based on the relative carbon impact of renewable energy production. As a result, producers of renewable energy create Swytch tokens by generating solar, wind, and other forms of renewable energy. Holders of the token have rights to claim carbon offsets, access the platform that houses “oracle” data, and the ability to engage in continuous development of the platform itself.

Buchholz refers to Swytch as a “really skilled partner” that can help e2m understand how to leverage the blockchain, AI, and machine learning into new sources of innovation. “By being at the forefront of innovation with Swytch, we can see how energy producers running on our platform capture more economic value due to their relationship with e2m,” he says.

More about e2m: Energy2Market GmbH (https://energy2market.de), or e2m, is an independent power trading company based in Germany that creates and manages virtual power plants, aggregating similar types of energy-producing assets and making them available through a cloud-based trading platform. With a bundled generation capacity of more than 3.4 Gw, e2m is one of the biggest direct marketers of energy in Germany (solar), Austria (wind), with a footprint expanding into Italy, Norway, and Poland.