Peeter Pikk
Peeter Pikk has been an energy entrepreneur since 2006, as a founding partner of Baltic Energy Partners OÜ, working as a trader and portfolio manager in the newly liberalised electricity markets in the Baltic States; the company has been active since 2013 in the retail energy markets. He has also been a Member of the Council of Baltic Energy Services OÜ since 2010, and a Member of the Board of 220 Energia OÜ since 2012. He is currently interested in the digitalisation of the energy sector and how it can affect the way we buy, sell and use energy. He gives lectures about Electricity Markets at Tallinn University of Technology.
Source: iStock
What are the main objectives of this partnership?
220 Energia is a privately owned energy retailer based in Estonia. It helps small and medium-sized enterprises (SMEs) and private households to buy their gas and electricity from the wholesale market. This activity started in 2013 when the Estonian retail market opened up to competition, but the company has been active on the wholesale market since 2006. More than 90% of its household customers purchase their energy at hourly spot prices, allowing them to optimise their energy consumption based on wholesale market prices.
WePower, founded in 2017, is a blockchain-based green energy trading platform. It aims to drive green energy adoption globally and to promote sustainable living. In addition to 220 Energia, the company has partnered with Elering, the Estonian transmission system operator (TSO), creating a pilot project to test the large-scale tokenisation of energy data on the blockchain. This project is the first of its kind in Europe, and will pave the way for a practical test in the future to connect European green energy producers to the Estonian electricity grid.
220 Energia seeks to develop an energy retail business that is competitive in the blockchain energy trading environment. As is often the case, the devil can be in the detail. The full potential of blockchain-based energy investment and trading in Europe can only be realised if it functions across Member-State borders.
Working together, we aim to test blockchain-based retailing solutions first in Estonia, and then in other countries in which we are active. Our goal is to find a feasible solution to deliver renewable energy across EU national borders. Rules and regulations within EU Member States can be surprisingly different. For example, not all Member States allow dynamic pricing for households: that was a real surprise to us. Blockchain can add transparency to pricing and to the Guarantee of Origin (GO) process[1]: this is already a potential game changer, transforming the way retailers interact with their customers, increasing speed and reducing human error. Most GO today are created manually on Excel spreadsheets, where the data is a month old by the time it reaches the party responsible for its creation. Accounting for production and settlement takes even longer, meaning that the system typically lags up to three months behind reality. On the other hand, using blockchain, everything happens in real time, through a routine technical procedure.
Last but not least, we believe in learning by doing. You can read endless white papers and listen to a host of presentations, and still fail to understand the topic properly. Blockchain has the profound potential to reorganise the way Europe invests, owns, trades, sells and buys energy. We want to look behind the buzzword and fully understand how much of that is potential and how much is hype.
'Blockchain has the profound potential to reorganise the way Europe invests, owns, trades, sells and buys energy. We want to look behind the buzzword and fully understand how much of that is potential and how much is hype.'
How can energy consumers benefit from blockchain? What are the main advantages from their perspective?
Firstly, the digitalisation of the (retail) energy sector will inevitably lead to increased competition and lower costs. But being able to change your supplier and having your energy data at your fingertips are just first steps. Efficiency gains from digital energy and the use of blockchain-based solutions can lead directly to lower bills for consumers, as the costs of doing business go down. If you have your energy data readily available, and the purchase tariff mirrors the hourly wholesale price, then you are motivated to adapt your consumption according to the state of the energy system. As an electric car owner you might pool with your neighbours to coordinate charging times through smart contracts with the grid company, reducing both your grid bills and the need for additional investment.
Secondly, the real paradigm shift will happen only when the ownership of energy assets becomes digital, cross-border and flexible. Energy has so far been the playground of big companies and capital. That is where blockchain comes into its own. Digitalisation and the use of blockchain-based technologies democratise energy investment, providing access to anyone who wants to invest in renewables. You could own a small stake in a large solar farm, secured with a smart contract published on blockchain[2]. Your smart home system would 'know' the contract and supply details, and adjust its consumption accordingly.
'Digitalisation and the use of blockchainbased technologies democratise energy investment, providing access to anyone who wants to invest in renewables.'
The biggest barrier to green energy production today is the lack of financing to build new solar, wind and hydro facilities. WePower helps renewable energy producers to raise capital by issuing their own energy tokens, greening the smart grid a little more. WePower plans to integrate its blockchain and smart contract-powered green energy trading platform in a pilot project using the Estonian smart grid as its test lab. This will form a proof-of-concept system, demonstrating nation-state-scale tokenisation of energy consumption and production data on the blockchain.
The third advantage of blockchain is the creation of energy solutions at a personal level[3], matching the needs and opportunities of consumers with producers, more or less in real time. For example, a publisher in Amsterdam can use Spanish solar energy from the plant in which it has a stake, verified by a blockchain contract, and then use wind energy produced in Estonia or Portugal. Or a community in Bavaria with photovoltaic panels on its roofs can donate its excess energy to an animal shelter run by volunteers in Berlin. Consumers and producers can thus use smart energy contracts based on blockchain technology to create their own, bespoke solutions.
What are the main challenges in the scaling-up of this concept from a technical point of view?
The challenge is not technological, but regulatory, at least within the EU. There are many different rules and standards at national level, governing energy trading and retail. Data exchange uses a number of different message standards, for example. Smart meter roll-out is at different stages in different countries. Support schemes for renewables differ, and power scheduling rules do not always match. All this can be time-consuming.
In addition to the challenges of energy market regulation, the quest for technical solutions is complicated by rules for data privacy and protection. Every Member State can have their own rules and requirements, leaving the market significantly fragmented. The creation of data hubs, based on the same standards for gas and electricity retail markets across all Member States, would be a big enabler for the EU-wide retail market and scalable digital services. Estonian and Danish TSOs are taking first steps towards connected data hubs.
From the technical side, the accuracy and availability of the meter data is a challenge to begin with. Smart meter roll-out has not yet started in all Member States, meaning that near-real time metering data is not available for their consumers at all. The speed with which the correct metering data becomes available is really important. Usually it is made available the next day at best if smart meters are used.
Why did you decide to start testing in Estonia? It’s a small market, while blockchain has global potential.
For this kind of test, we needed a functioning retail market, advanced digital infrastructure for energy data management, an interested TSO and a legal framework for digital energy solutions. Estonia is open to new ideas; during its recent EU presidency, Estonia promoted the digital energy agenda, and 29 states signed the Tallinn e-Energy declaration. The existing TSO-led data hub and national digital-signature solution create the right development environment for advanced digital services. The Estonian TSO Elering developed the EstFeed platform, a data hub open to third parties to create new digital energy services. This is a very good place to start.
Estonia also has complete smart meter roll-out. The majority of our customers have opted for spot-priced contracts, with different prices every hour. And 220 Energia participates in the customer engagement and dynamic pricing project, PeakApp, financed by Horizon2020, which further helps to develop potential use cases for blockchain-based energy services.
Tallin Digital Summit 2017. Source: © Arno Mikkor
[1] The Guarantee of Origin (GO) is an instrument, 'green label' or 'tracker', defined in European legislation, that labels electricity from renewable sources to provide information to electricity customers on the source of their energy. A unique body (e.g. an electricity regulator or a transmission system operator) is usually granted this authority for a given domain.
[2] An established contract between a renewable energy producer and the buyer of that energy for a specific amount of energy that will be produced in the future.