Digital power. Why is this the future of energy markets.

The rapid development of renewable energy leads to a significant increase in their share in the generation of electricity, so the issue of integration of unstable energy sources into the network without weakening the reliability of the system is on the agenda in many developed countries. In addition to increasing the share of RES in the national energy balance, the instability of demand and supply of energy is aggravated by the development of distributed generation, electrification of passenger transport, as well as heat and cooling supply sectors. Ukraine can not ignore the fact that the world changes in the technological model in the power industry and the related challenges and developments in the industry. Otherwise, the country will face a number of risks. The first is the risk of getting more expensive and less flexible power generation than other industrialized countries, getting rid of a number of new markets (for example, the energy storage market) and significantly restraining the development of the new (digital) industry.

Basic concepts

An integrated approach to energy transformation is developed in the trend concept "3D" (Decarbonization, Decentralization, Digitalization). Decarbonization is the transition to an environmentally friendly "carbon-free" economy and energy, which combines to increase the share of RES in the energy balance, increase the share of electric transport and high taxes on the use of fossil fuels. Decentralization ("decentralization") is a transition to a territorially distributed electricity industry with a large number of multi-level producers and consumers, which is reflected in the growth of the share of connected power distribution networks, low-power and diverse in nature energy sources; the appearance of prosumers - a new type of power industry, which are simultaneously both producers and consumers of electricity; the emergence of active consumers that use electricity flexibly, including remote teams that are able to change their consumption profile from the network. Digitalization - the transition to a large-scale application in the electric power of digital controlled devices connected to the Internet information network, at all levels of the power grid from production and electrical networks to end-user devices. Consumers of electric power, which provide the possibility of realization of intellectual management of power systems, based on the basis of machine (M2M, IoT) interaction. In this article, we will apply several more terms that describe the functioning of the 3D energy system, so let's give them a definition to avoid divergences of interpretation and will be free to use modern definitions.

Blokchain is a distributed database that stores information about all transactions of participants in the system in the form of "block chains". Access to the registry is available to all block users who act as collective notaries, which confirms the truth of the information in the database.

Smart contract - a computer algorithm designed for the conclusion and maintenance of commercial contracts in the technology blockade. For the first time, the idea of a smart contract was proposed in 1994 by Nick Sabo (USA) - a scientist in the field of computer science, cryptography and law. He described the smart contract as a "digital representation of a set of obligations between the parties, which includes a protocol for the fulfillment of these obligations."

A modern example of the idea of a smart contract can be called the format of the Uber company. Aggregators play the role of mediator and arbitrator, which ensures the implementation of the agreement between the taxi driver and the client: the client agrees to pay the trip at a price predefined by the intermediary system (aggregator), and the driver, in turn, undertakes to perform a service for the transportation of the client to predefined place.

Peer-to-peer, P2P - an option architecture of the system, which is based on a network of equal nodes. Peer-to-peer (or P2P) computer networks are based on the principle of equality of participants and are characterized by the fact that their elements can communicate with each other, unlike traditional architecture, when only a specific category of participants, called servers, can to provide certain services to others.

One of the possible ways of using such an approach is "Internet Energy" - a type of decentralized electricity system, which implements intelligent distributed management, carried out through energy transactions between its users.

"Internet of Energy" - according to the Navigant research study "Transactive Energy Markets", published in 2018, is a peer-to-peer power system, in which the interaction between electricity producers and consumers, electricity trading and various services, as well as regime management of the grid carried out at the expense of direct transactions between users. Simply put, the power system becomes multi-vector, all energy market participants will have many functions, such as power supply, participation in regime management and maintenance of frequency and voltage level, provision of power equipment in a "virtual" lease, provision of power reserve and any other types services that can be provided in the power industry.

Achievements of world leaders

Many international energy companies are currently developing projects that will unite all consumers into a single network in the future, a decentralized system. It is believed that in 2050, all world power would work. Closer to the consumer. Distributed evenly between all the participants in the decision-making center. Let's do a little research. What are the benefits of such a system? Smart contracts will simplify the existing multi-level system, consisting of electricity producers, distribution network operators, account operators, payment service providers, traders and consumers themselves. All transactions for the receipt and payment of energy will be executed directly in a network that brings together equal participants - energy producers and consumers. This will make electricity cheap. But we are not simple readers, we understand, cheap energy will never be more.

The combination of such micro-networks will minimize the amount of energy lost through long-distance transmission. The World Bank website has statistics on losses in transmission and distribution networks. Interestingly, Ukraine loses 11% of the energy produced. They say this is mainly due to losses in low voltage networks. This is not much and not enough. Leave these assessments to "experts." This is a figure. And where else so much? Bangladesh Botswana Colombia. Costa Rica Egypt. El Salvador Jordan Oman. Peru. Romania. Sri Lanka The lowest figures are 2-3%. Trinidad and Tobago - due to distributed generation. the place of generation and consumption are the same. Or Korea - at the expense of state of art technology. The maximum is 73% in Togo and 70% in Libya. And it's not there in the worn-out equipment. They steal electricity. There is no money to pay. Micro-networks provide alternative both technological chains and business models.

And if you focus on the technology, such a power system will add flexibility to all participants.
Flexibility of the grid is a new term that comes from the Western Energy Business Environment. There are two sources of flexibility: distributed energy sources and demand management for electricity. The English network operator Ofgem defines flexibility as the ability to change patterns (modes) of production and consumption of energy in response to external, usually price signals for the provision of system services. The economic benefits of increasing flexibility in the English energy grid are estimated at 17-40 billion pounds sterling in 2020-2050 biennium.

Clean, reliable, local energy. Pilot project.

The first case of energy transfer with the help of blockchain was recorded in 2016, when one Brooklyn resident sold the surpluf of renewable energy to his neighbor through a smart contract on the Ethereum platform. After that, many Western energy companies are interested in this technology. Over a year, more than $ 300 million was invested in power projects based on blockchain.

Projects like those that were first implemented in Brooklyn allow the community to choose a green energy alternative. That is, your coffee shop can buy electricity from a local solar power plant, instead of the coal non-ecology ecology friendly holding. Another motive is the reliability of localized power sources. For example, Sandy hurricanes caused a series of power outages in the United States in 2012 and the reliability of the network was questioned by experts. Long power lines are not needed for the Energy Brooklyn Cooperative, so they can not be damaged by more and more regular extreme weather conditions. Thanks to the Brooklyn LO3 Energy partnership with Siemens, the project already includes a network management system that allows you to generate electricity when needed and deliver to hospitals, shelters and community centers.

Direct speech: "This whole concept is very beneficial for the region in which you live. When buying energy at the local level, and not from a national body, money goes back to the pockets of people living in the community. We have installed a transactional network platform that works pretty much for itself, and as a result, energy is evaluated automatically and consumers care about it. We believe that in this way we can better satisfy the needs of consumers. In the future, we plan to give people the opportunity to set the benefits for maximum savings, do good in the community, and potentially sell energy cheaper to lower-income people. "- Joseph Lubin, a co-founder of the network, is currently considering the issue of distributing such micro-networks to other New York communities , to reduce electricity costs to consumers and promote environmentally friendly energy.

World Trend

On the eve of Blockchain2Energy Asia forum, which will take place on November 27, 2018 in Singapore, a fresh "hit parade" of Asian blockade projects in the energy sector was released. These projects claim to become the "main caliber" of future trends.

Many of the projects are led by technological consortia, which, in addition to technological startups, include banks, large industry companies, retailers and universities.

In the ranking - sales services surplus RES-microgrid, P2P, electricity markets, accounting for reducing emissions and "carbon credits", "green" certificates and ratings of consumer market "flexibility" as well as the usual retail energy.

From the beginning, when the Japanese government allowed retailers to sell surplus "green" energy in a free market, the number of customers of the power company Tokyo Electric Power fell by 15%. Japan launched the world's largest cluster of distributed energy-accumulation systems run by artificial intelligence. It is created by the British MOIXA, one of the portfolio companies First Imagine! The system brings together more than 3500 households and 35 MWh of battery capacity and provides consistent optimal control of the charge and discharge of batteries connected to the network.

The business model looks like this:

The project is implemented by an international consortium of technology, trading house ITOCHU has production and sales drives Smart Star, TRENDE sales company, selling electricity to households at a special rate Idenki, stimulating the use of storages for power discharge, NF Corp. Provides the IoT platform for remote access to storages, finally, MOIXA acts as a provider of AI-service for coordinated network management of Grid Share

Striking consortium plans to further expand on the basis of the same infrastructure P2P-market households, EV charges, electric networks, services of demand response, including possible participation in the maintenance frequency network operation mode and a virtual power plant (VPP).

Great prospects are seen in the development of decentralized digital energy technologies in the desert states of the Persian Gulf - Bahrain, OAU, Qatar. Well, first, because of the colossal potential of solar power, which few people paid attention to because of the rich, almost inexhaustible, reserves of oil and gas.
Well, imagine, in Bahrain, the power of solar power plants is some 10 MW. This is 100 times less than in Ukraine. In the United Arab Emirates, the installed solar photovoltaic power capacity is only 160 MW. Somewhere similar to OAU indicators for solar power in Qatar. But, today, these countries are preparing for the implementation of grand plans for the deployment of solar power and smart systems for managing these assets based on digital technologies. And this is not surprising, because solar insolation is one of the highest in the world, and this is their new oil.

Another interesting aspect of the development of decentralized digital energy structures are the life support systems of known skyscrapers in the Persian Gulf. Perspective is implementing complex solutions using renewable energy approach, building-to-grid: solar panels or wind turbines as an architectural design element embedded storage devices, smart meters, demand management systems aimed at optimizing the total consumption and control tower. An example of such a system is the Burj Khalifa Tower - the "vertical city". Imagine - 35 thousand visitors, inhabitans --workers, 57 high-speed elevators, 30 thousand thermal plates, which equalize the surface temperature of the building, the only conditioning and fragrance (unique fragrance - an essential component of the design of the tower - created Armani) Water and Water cooling with a flow of 946 thousand liters of water per day and hundreds of other unique engineering systems. All this, in spite of the very strict LEED energy efficiency standard, makes the skyscraper a very large consumer with a peak power of 50 megawatts. But 828 meters - no limit, but in neighboring countries are underway two more ambitious project: The Tower in the vicinity of Dubai Creek Harbor altitude 928 meters and Jeddah in Saudi Arabia Tower 1007 meters high by 80 thousand people. And their effective and reliable life support system is impossible without digital technology. Imagine a country that is a combination of volatile cities, islands-cities with skyscrapers that are formed, which independently provide themselves with energy or buying surplus of neighboring skyscrapers smart contracts operating in blokchain platforms. This is very different from how the system works now and what we are taught by professors at universities.

Prospects and Challenges.

Let's recall what we started with - the 3D energy system of the future is three components - decarbonization, deregulation, digitalization. The first step in the evolution of energy systems should be the transition to integrated planning of energy systems development based on the system value of variable energy sources -
value of VRE. This indicator estimates the reduction of fuel consumption and greenhouse gas emissions, the optimization of capital costs of generation, and the transport and distribution of energy instead of the existing simplified approach - the estimated normal value of electricity (LCOE). This is in relation to the balanced distribution of low-emission power generation and the need to ensure the reliability of the system.

With regard to the extension of the mechanism of smart contracts in unregulated markets, they are guaranteed to develop, but for their effective use it is necessary:
First, to overcome the lack of technological base in the form of solar panels, wind turbines, energy storages on a countrywide scale. When new technologies become widespread or will be implemented in local communities, then people will be able to use blocks for their own purposes, unite into conglomerates, implement mutually beneficial technological strategies and financial mechanisms. Secondly, due to the uncertain legal status of the entire crypt industry, public and private energy companies  can not fully implement smart-based projects due to growing reputational risks, system crashes, work guarantees, and other aspects that may affect the functioning of the electricity grid. That is, the system will work when a banner appears on the window of your usual restaurant. "In order to cook your favorite dishes, we only buy environmentally friendly energy from local roof solar power plants for bitcoins."

Domestic prospects
In Ukraine, there are 6.5 million private households. As of the end of the 2nd quarter of 2018, the total number of privately-owned solar power plants with a green tariff is 4660 stations, of which 1650 stations were installed in the first half of 2018. Thus, even less than one percent of private households are equipped with roof solar power plants. During the six months of 2018, the total installed capacity of private households' s solar cells increased by 38 MW and amounted to 89 MW. Since 2015, more than EUR 88 million has been invested by private households in the installation of solar power plants. The estimated cost per kilowatt of installed capacity for an average household was US $ 1,000, although we understand that it has changed over the past years. The leaders among the regions of Ukraine from the total number of private households that have installed solar power stations are:
- Kiev region - 602 households;
- Dnipropetrovsk region - 541 households;
- Ternopil region - 365 households.

These are players who can become the first pool of participants in smart contracts based on blockchain technology. In addition, the business community and large enterprises may be interested in own participation in distributed generation, regulation and system optimization of financial settlements. Why so? First of all, because the cost of electricity for large consumers in Ukraine is already nowhere higher than prices for industrialists in the United States and Europe. And its quality often leaves much to be desired. This has a negative impact on the export potential of Ukrainian enterprises, because the high cost of electricity reduces competitiveness, especially taking into account the high energy intensity of domestic production. In many countries of the world, such a situation motivates the development of new methods of energy production, localization of networks to avoid losses during transportation, and the creation of independent financial settlement tools that will provide access to clean and reliable energy for associations of like-minded people, such climatic pragmatists. People who want to use clean energy are able to implement the latest technology and are accustomed to appreciate their own investments.


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