Is Blockchain Technology Effective for Renewable Energy Tracking, Power Certificate Issuance and Trading?
Yasuhiko Ogushi Business Development Director (Japan), LO3 Energy Inc.
Amid expectations for the use of digital technology in the electric power and energy fields, various applications of blockchain technology have been tested around the world since 2015. One of its applications is the tracking of renewable energy (renewable energy) and the issuance and trading of power certificates.
However, it is difficult to say that it is clear how blockchain technology will be applied and how it will demonstrate its value in its application to this area. Also, even if a new system based on blockchain technology is built, it is not clear how it can be segregated and consistent with the existing power certificate system.
Here, along with the background concepts and systems, we will explain the mechanism for applying blockchain technology to renewable energy tracking and power certificate trading, and consider its value. In addition, we consider how a system based on blockchain technology could align with existing power certificate systems.
What is electricity tracking?
[1] Prove that it is derived from a specific power source
First, organize the concept of electrical tracking.
Electricity tracking is to prove that the electricity consumed by a consumer is derived from a specific power source. However, the electricity flowing through the power system (transmission and distribution network) is considered physically indistinguishable in terms of the origin of the power generation source, and the physical identification and tracking of the electricity flowing through the power system is not performed.
The basic concept of electricity tracking is that the amount of electricity generated by a power source connected to the same power system and the amount consumed by consumer facilities are equal (the same amount of power at the same time), and the electricity generated by the power source is consumed by others. Electricity from a specific power source is deemed to have been consumed by a specific consumer when it can be confirmed that it is not consumed Note 1. The period for matching the amount of power generation and the amount of consumption differs depending on each system.
In the above, "the electricity consumed by a certain consumer" was stated,
When a combination of a specific consumer and a specific generation source is defined in advance
When a certificate representing the attribute value separated from electricity is issued after power generation and is determined for the first time through the purchase of the certificate
There is
[2] Electricity Tracking and Power Certificates
"Traceability" of electricity is also used almost synonymously with tracking. "Certificate of power source", "certificate of origin", "certificate of origin of power source", "European Guarantee of Origin (GO, GoO)" is also to prove the origin of power source by implementing tracking. Electricity Certificate” and “Renewable Energy Certificate” (REC: Renewable Energy Certificate for North America, etc., described later). These certification documents include power plant attribute information such as power source type and power plant location, power generation period, power generation amount, etc., and are issued electronically or on a paper basis.
A tracking system that realizes electricity tracking needs to have a mechanism to prove the origin of the power source and prevent multiple claims that the same electricity is being used.
Electric power certificates have the function of certifying when consumers apply electricity generated by renewable energy to their electricity demand. In addition, it is also useful to distribute and sell the value of the attribute attached to electricity, which is "generated by a specific renewable energy", separately from electricity. By applying this power certificate, the use of renewable energy can be claimed regardless of the origin of the electricity actually procured and used.
In principle, any power source can be used to track electricity, but there is a high social need for tracking renewable energy. This is the case when consumers (particularly companies) who procure renewable energy through the power grid externally advocate the use of renewable energy for marketing purposes, participation in initiatives such as RE100, and other purposes. used.
[Note] This article is based on an article by the author that was published in the journal below.
The Japan Society of Energy and Resources, Journal "Energy and Resources" November 2021 Vol.42 No.6, Special Feature "Utilization of Digital Technology in the Energy Field ① (Supply Side)", "Blockchain Technology is Renewable Energy Tracking, Is it effective for power certificate issuance and trading?
Is blockchain technology effective for renewable energy tracking and energy certificate issuance/trading?)
▼ Note 1
In some cases, it is not strictly required that the power generation source and the consumer facility are connected to the same system.
▼ Note 2
RE100 stands for Renewable Energy 100%. An international business initiative to drive 100% renewable energy for companies, run by The Climate Group and CDP.
Is Blockchain Technology Effective for Renewable Energy Tracking, Power Certificate Issuance and Trading?
2022/01/09
(Day)
Yasuhiko Ogushi Business Development Director (Japan), LO3 Energy Inc.
Electricity tracking regime
Electricity tracking is institutionalized in each region of the world.
Here, we will introduce an overview of the systems in Europe, North America, other regions (International REC, International Renewable Energy Certificate), and Japan. These schemes are bundled with electricity certificates, but there are cases where it is possible to track electricity that is not subject to the scheme and is not certificated.
[1] Tracking system in Europe Note 3
In Europe, the "2001/77/EC: European Union Directive for promoting renewable energy use in electricity generationNote 4" which came into effect in 2001 started the institutionalization of the "Guarantee of Origin" (GoO). It was decided to establish one GoO operation and management agency in each country. In addition, the 2009 Directive 2009/28/EC specified the detailed operating procedures of the GoO and the information contained in the certification.
Under the above directive, an organization called AIB (Association of Issuing Bodies), an association of operation and management institutions in each country, issuance and management (including transfer and retirement) of GoO called EECS (European Energy Certificate System) We maintain and manage the operational rules for the system related to this.
The operation and management agencies of each country manage registers that contain information on registered power plants and certificates. As of August 2021, the 27 countries of the European Union plus Switzerland, Norway and Iceland are members of the AIB5.
[2] Tracking system in North America Note 6
In North America (United States, Canada, Puerto Rico), 10 tracking systems that issue "Renewable Energy Certificates" (RECs) to power generation companies are operated in each region. Although the division of the region is the same as the jurisdiction of the power transmission agency (Independent System Operator, Regional Transmission Operator) such as PJM in the eastern part of the United States, tracking beyond the jurisdiction of the power transmission agency such as provinces in the western part of the United States and Canada Some regions have set limits for the system.
Some of these tracking systems track power sources other than renewable energy. Also, some states do not have tracking systems in place.
The tracking system is an electronic database that issues RECs to power producers for every 1 MWh of electricity generated. The issued REC contains information such as the power generation site, type of power source, owner of the power generation facility, and rated power generation capacity. REC rights can also be transferred on the tracking system. This REC trades at the wholesale power level and sales to end users are made through brokers.
[3] Tracking in other regions Note 7
Outside of Europe and North America, as of August 2021, 41 countries in Central and South America, Africa, the Middle East, and Asia, including China, India, and Russia, have established the International REC Standard Foundation, a non-profit organization headquartered in the Netherlands. REC Standards Foundation) uses "attribute tracking" (basically manages attribute information such as power generation method and location in the same way as in Europe and the United States).
International REC (hereinafter referred to as I-REC) stipulates one certificate-issuing organization in each country. The I-REC Standard Foundation maintains a management book containing power plant information and functions as a certificate operation and management organization. Japan is included among the participating countries, but it can be said that Japan is a special case because other tracking systems coexist. The details will be described later.
[4] Tracking system in Japan
In Japan, as of August 2021, multiple tracking systems coexist. Each is outlined below.
(1) Certificate of Green Power Note 8
The Green Power Certificate is a private power certificate system that started operation in 2001.
A certificate-issuing business partnering with a power generation business or using its own power supply applies to a certification body (Japan Quality Assurance Organization) for equipment certification. After receiving equipment certification, the certificate issuer applies to the certification body for power generation amount certification together with power generation amount data, and after obtaining certification, can issue power certificates.
The eligible electricity is limited to electricity generated by power plants that do not use the feed-in tariff (FIT) system. A certification body maintains a registry and also functions as a certificate administration and administration body.
(2) Non-fossil value certificate with tracking Note 9
A non-fossil value certificate is a certificate of electricity derived from non-fossil power sources (renewable energy and nuclear power) as a tool to support the achievement of the goals of the Act on Advancement of Energy Supply Structures*10 by electricity retailers. be.
The "non-fossil value trading market", which is the trading market for this certificate, began operation in 2018. The non-fossil value certificate itself does not include the attribute information of the power plant, but from FY 2019, the tracking demonstration experiment that attaches the attribute information of the power plant to the certificate will target certificates of electricity generated by FIT power sources. (Fig. 1).
Fig. 1 Image of a tracking demonstration experiment that attaches attribute information of a power plant to a non-fossil value certificate
Fig. 1 Image of a tracking demonstration experiment that attaches attribute information of a power plant to a non-fossil value certificate
Source: https://www.unisys.co.jp/solution/lob/energy/fit_tracking/pdf/20211026_non_fit_tracking.pdf
In 2021, the system review working group Note 11 of the Ministry of Economy, Trade and Industry's Advisory Committee for Natural Resources and Energy is reviewing the non-fossil value trading market. With the aim of making it easier for consumers to procure renewable energy, this review will include a "renewable energy value trading market" that trades FIT non-fossil certificates and a "sophistication law obligation achievement market" that trades non-FIT non-fossil certificates. It is proposed to divide the market into “markets” (Figure 2). In this, the FIT non-fossil certificate will track the total amount, but the target for the non-FIT non-fossil certificate is "steady increase".
Fig. 2 Two non-fossil value trading markets: the "renewable energy value trading market" and the "sophistication law obligation fulfillment market"
Fig. 2 Two non-fossil value trading markets: the "renewable energy value trading market" and the "sophistication law obligation fulfillment market"
*In order to use it for RE100, it is necessary to track the location information of the power plant.
Source: Created by the editorial department based on the following site
https://www.meti.go.jp/shingikai/ene
cho/denryoku_gas/saisei_kano/pdf/036_s01_00.pdf
In February 2021, the General Incorporated Association Local Good Creation Support Organization became the issuer of I-REC in Japan Note 12. The organization will only provide tracking of non-FIT power sources within the institutional framework of non-fossil certificates, and will not intervene in existing systems regarding the issuance and trading of non-fossil values.
(3) J-Credit Note 13
The J-credit system is a system in which the government certifies the amount of greenhouse gas emission reductions and absorption as "credits". Although it is not an electricity tracking system, credits derived from renewable energy generation are recognized as green power certificates. Since they may be handled in parallel, they are mentioned here for reference.
J-credits are certified and credited for each project, and can be purchased by specifying the attributes of the project (e.g. energy conservation, fuel conversion, forest management, renewable energy generation). Among them, a representative example of a project to create credits derived from renewable energy is the project “Introduction of photovoltaic power generation equipment in houses” Note 15, which is operated and managed by the Low Carbon Investment Promotion Organization Note 14. Self-consumption of solar power is credited. On a t-CO2 Note 16 basis, about 75% of program type projects (projects that bundle multiple credit generating sources) are solar power projects. In this project, unlike other tracking systems, the amount of power generation is quantified through sample surveys and statistical methods.
▼ Note 3
Center for Low Carbon Society Strategy, Japan Science and Technology Agency, "For Reliable Renewable Energy Procurement by Global Companies", March 2018, pp.14-16
▼ Note 4
European Union Directive to promote the use of renewable energy in electricity generation: 2001/77/EC.
▼ Note 5
Association of Issuing Bodies; AIB member countries/regions (accessed 2021.08.28)
▼ Note 6
https://19january2021snapshot.epa.gov/greenpower/renewable-energy-tracking-systems_.html
▼ Note 7
The International REC Standard (accessed 2021.08.28)
▼ Note 8
Japan Quality Assurance Organization, Green Energy Certification (accessed 2021.08.28)
▼ Note 9
Ministry of Economy, Trade and Industry, System Review Working Group (accessed 2021.09.04)
▼ Note 10
Energy Supply Structure Sophistication Act: A law to promote the use of non-fossil energy, including renewable energy, and the effective use of fossil energy by energy supply companies such as electricity, gas, and oil companies. Not for all energy providers, but for electricity, gas, and oil companies that meet certain conditions. In the case of electric power companies, retail electric power companies with annual power sales of 500 million kWh or more are eligible.
▼ Note 11
System review working group
▼ Note 12
General Incorporated Association Local Good Creation Support Organization, News (accessed 2021.08.28)
▼ Note 13
J-credit system (access date: 2021.08.28)
▼ Note 14
Green Investment Promotion Organization (GIO)
▼ Note 15
https://japancredit.go.jp/project/index.php#result
→ Program type See P43
▼ Note 16
t-CO2: A unit that expresses the amount of greenhouse gases generated (weight t). Six types of greenhouse gases with different global warming potentials (or emission factors) are converted to the CO2 standard and expressed in weight.
Yasuhiko Ogushi Business Development Director (Japan), LO3 Energy Inc.
Application examples of blockchain technology for renewable energy tracking, certificate issuance and transactions
Since 2017, cases of blockchain technology being applied to renewable energy tracking, power certificate issuance and trading have been confirmed. Table 1 shows the main cases confirmed by August 2021, including demonstration experiments. Of these, four overseas cases use the software toolkit "EW Origin" provided by the global industry group "Energy Web Foundation" Note 17. These cases fall into two categories:
A. Those that only provide renewable energy tracking for power consumption of pre-designated consumer facilities
B. Issue a power certificate separated from electricity without linking consumers or power consumption equipment in advance, and then trade
The main implementing organizations for cases corresponding to "A." are Minna Denryoku (now UPDATER) and Digital Grid, and the main implementing organizations for cases corresponding to "B." are PTT (Thailand), SP Group (Singapore), PJM-EIS (USA). Engie (France) is not clear, but I guess it is classified as "A."
Table 1 Application example of blockchain technology to renewable energy tracking and power certificate trading
Table 1 Application example of blockchain technology to renewable energy tracking and power certificate trading
*1 Minna Denryoku Co., Ltd. (currently UPDATER); (accessed: 2021.09.04)
*2 Digital Grid Co., Ltd.; (Access date: 2021.09.04)
*3 PTT Public Company Limited; News; (accessed 2021.09.04)
*4 SP Group; Renewable Energy Certificate Marketplace; (accessed 2021.09.04)
*5 The Energy Origin; (Access date: 2021.09.04)
*6 Energy Web Foundation; Articles; (accessed: 2021.09.04)
Source: The Japan Society of Energy and Resources, Journal "Energy and Resources" November 2021 Vol.42 No.6,
From the Special Feature “Utilization of Digital Technology in the Energy Sector ① (Supply Side)”
Areas where blockchain technology is applied
Here, we will consider the areas where blockchain technology is applied and how it can be consistent with existing systems when applying blockchain technology.
[1] Renewable energy tracking, process for certificate issuance and transaction, and application of blockchain technology
Fig. 3 shows the general process of renewable energy tracking and the issuance and trading of electricity certificates. It should be noted that the applications of blockchain technology included here are hypothetical by the author unless otherwise specified.
Fig. 3 Renewable energy tracking, power certificate issuance/transaction process
Fig. 3 Renewable energy tracking, power certificate issuance/transaction process
Source: The Japan Society of Energy and Resources, Bulletin "Energy and Resources" November 2021 issue Vol.42 No.6, special feature "Utilization of digital technology in the energy field ① (supply side)"
(1) Equipment certification/power generation certification (common process for A and B in Fig. 3)
First, it is necessary to register the power generation facility (❶ in Figure 3).
The purpose of this registration is for the certificate operation and management organization to confirm that the power plant exists as requested, and to confirm the power generation capacity that will be the basis for the power generation data that will be obtained thereafter. This confirmation is performed by examination of technical documents such as various permission documents and specifications, confirmation of on-site facilities, and the like, and is achieved by human judgment. The application of blockchain technology cannot be expected to improve the efficiency of examination and confirmation work.
The merits of applying blockchain technology, including the handling of power generation data, are the examiner (certificate operation and management organization), the audited party (certificate issuer and power generation operator), and the certification authority (certificate operation and (if it exists separately from the management authority) independently and mutually checks the provided data, so that those who verify it (stakeholders, certificate users, etc.) can gain a high degree of trust.
Next, authenticate the power generation amount measured by the registered equipment's meter (❷ in Figure 3).
"Authentication" here means proving that the power plant has generated power. Here, we assume that power generation data are collected automatically through pre-registered meters and communication/IT systems.
Blockchain technology makes it possible to claim that power generation data is derived from the power plant where the power was generated (proof of the origin of the power generation source). In addition, by utilizing blockchain technology based on correctly measured power data, it will be possible to verify that the power generation data is correct.
(2) When only renewable energy tracking is provided for power consumption of specified consumer facilities in advance (A in Fig. 3)
In this case, the power generation amount data and the power consumption data of the customer facility specified in advance are collated (Fig. 3 ❸).
For example, in the case of the system of Minna Denryoku (now UPDATER), the amount of power generated and the amount of power consumed on the demand side are collated every 30 minutes, which is the power data measurement interval.
In this case, it is not necessary to use blockchain technology for matching work, and it is common to use a matching algorithm (combinatorial optimization procedure) that does not use blockchain technology.
Based on the collation results here, it can be claimed that a specific consumer facility procured electricity from a specific renewable energy power plant for a certain period of time.
Businesses that provide tracking, such as electricity retailers, may issue verification results as certificates and provide them to consumers (❹ in Figure 3). When recording the verification results, a third party can use blockchain technology to verify that the verification results are the data of the consumer facility claiming renewable energy procurement and the power plant linked to it in advance. .
(3) When issuing and trading power certificates separated from electricity without applying customer facilities and power consumption data in advance (B in Fig. 3)
In this case, the certificate issuer issues a certificate based on the certified power generation amount information for a certain period (Fig. 3 ❸'). Unlike the case of (A in Fig. 3), the "authenticated certain period" is generally not a short period of time such as 30 minutes, but a unit of months or years. Certificates issued here are registered in a register maintained by the Certificate Administration and Management Authority. At this point, the certificate has not yet been sold (issued) and has not been applied to a specific customer or customer facility.
The issued power certificates are purchased by electricity retailers and consumers (❹' in Figure 3). By applying the certificate purchased by the customer to the electricity consumption for a certain period, the customer can claim that renewable energy was used during that period. Information on the status of issued certificates is included in the registry maintained by the certificate operation and management organization, but certificates used by consumers are treated as redeemed and cannot be used thereafter.
The certificate operation and management business records the owner of the certificate, the change of owner and status accompanying transactions and redemption, etc., and by utilizing blockchain technology, the consumer's claim that renewable energy has been used is correct. It is possible to verify that. However, at this time, if there is an existing certificate system such as a registry, it must be consistent with the existing system. This point will be considered later.
[2] Consistency with the existing power certificate system (system)
(1) When only renewable energy tracking is provided for power consumption of pre-designated consumer facilities (A in Fig. 3)
In this case, it is effective to conduct tracking independently, and it is necessary to confirm whether it is consistent with the existing system. For example, in the case of the non-fossil energy certificate system proposed in Japan, the policy is to track the total amount of FIT power sources covered by the FIT non-fossil energy certificate through a system led by the government (see the figure above). 2 and note 9). Therefore, we believe that the possibility of creating value through original tracking using blockchain technology is limited.
However, this is not the case for tracking non-FIT power sources, and there is a possibility of value creation opportunities.
(2) When issuing and trading power certificates separated from electricity without applying customer facilities and power consumption data in advance (B in Fig. 3)
In this case, the trading rules will comply with the existing system. For example, if secondary distribution (resale) and subdivision of certificates (for example, dividing a 100MWh certificate into 50MWh and 50MWh and selling them to separate consumers) are permitted, a distribution system using blockchain technology will be established. can be built.
In addition, the registries maintained by existing certificate administration and management bodies are usually centralized, and maintaining records in a separate system that is not synchronized with this may lead to discrepancies. Undesirable. If a registry can be built using blockchain technology, it will be useful for efficiency in certification and information sharing, but if there is an existing system, I think it will be necessary to redesign the entire system, including the existing system.
[1] Blockchain technology as a proof infrastructure between two parties or multiple organizations
When applying blockchain technology to renewable energy tracking and power certificate trading, what the technology provides is a proof base between two parties or multiple organizations.
The former involves linking the claim on the origin of power generation with the originator of the claim (power generator, certificate issuer, etc.) and providing it to consumers as a certificate. It is conceivable that multiple stakeholders share information provided by their respective authorities on an information infrastructure that cannot be falsified.
In addition, as a combined model of these, it is also possible to safely conduct transactions between two parties on an information sharing platform between multiple organizations, using stable tokens (crypto assets designed to stabilize prices). It is also possible to buy and sell renewable energy certificates.
However, as mentioned above, the opportunity to build a new system based on blockchain technology alone is thought to be limited, and in many cases it will be necessary to modify existing systems.
Along with the introduction of blockchain technology, it is desirable to improve the existing system and improve the reliability of renewable energy certificates and the benefits for users while maintaining the consistency of the system as a whole.
[2] Blockchain technology has the potential to demonstrate its value in new renewable energy procurement trends
It can be said that the application of blockchain technology to renewable energy tracking and power certificate trading is still in its early stages, and data on its development and introduction costs are scarce. One of the future points of attention is whether there will be cases where the benefits clearly exceed the development and introduction costs.
Until now, power certificate transactions in Europe and the United States have accumulated power over a long period of time, such as one year, and issued and traded power certificates in units of 1 MWh.
However, in the future, the direction of how to procure renewable energy in real time is indicated, mainly by global IT companiesNote 19, 20.
Also, in order to respond to this trend in renewable energy procurement, the time unit for power certificates has been shortened to one hour, and certificates for power generation of 1 MWh or less are being issued Note 21.
Amid these trends, the management and transactions of electricity data and certificates tend to become more complex. In the future, we believe that there will be more opportunities for blockchain technology, which provides proof and distribution infrastructure, to demonstrate its value.
[Acknowledgments] Akimitsu Shiseki, Kazuhiro Oiso, and Kyoko Tamachi of Cowra Co., Ltd. provided us with valuable opinions regarding the application of blockchain technology. I would like to thank you.
Author Profile
Yasuhiko Ohgushi
Business Development Director (Japan), LO3 Energy Inc., Advisor, Cowra Corporation
Graduated from the University of British Columbia in Canada with a master's degree in science (resource management/environmental studies). Since 2017, he explores the application of blockchain technology in the power and energy sector. He has served as an IEEE P2418.5 standardization working group member on blockchain in the energy field, and as an observer of the Ministry of Economy, Trade and Industry's "New Power Platform Utilizing Next-Generation Technology Study Group".
