Jesper Starn (Bloomberg) -- Vattenfall AB, already one of Europe’s biggest energy traders, plans to expand further and needs blockchain technology to do some of the heavy lifting in its computer systems.
The Swedish utility is feeling the strain from processing as many as 8,000 deals a day in continental Europe. That number is expected to multiply several times in the next few years as the company seeks to profit from the unprecedented shift toward a greener and more decentralized market.
By using the digital ledger for the more mundane paperwork, resources would be freed up to pave the way for more trading with everyone from large renewable producers and factories to retailers and even households, said Kilian Leykam, head of business development at Vattenfall’s trading unit in Hamburg.
“We will be able to deal with more trades with smaller volumes of each trade,” he said. “And with smaller transactions sizes you are able to target volumes that otherwise would have been neglected.”
His company is not the only energy company pursuing a technology that could disrupt industries from banking and payments to cyber security. Together with more than 20 other European utilities, Vattenfall is participating in two different blockchain trials where they share ledgers for confirmation, settlement and invoicing for power and gas.
The systems are planned to go live later this year, but the technologies still needs to prove they can handle large volumes before being fully rolled out in three to five years, Leykam said.
“Blockchain-based trading platforms could take over most functions that connects buyers and sellers of energy,” said Ingar Beck Landet, a senior consultant at Thema Consulting Group in Oslo. That includes bilateral market platforms, spot markets and energy companies that sell the electricity to the end user, he said.
Examples of smaller trades that Vattenfall will go after include power from solar or batteries at department stores or homes across Europe. These type of deals are governed to a large extent by the explosion in intermittent renewable energy, and this is where much of the growth in the same-day market for power will come. Blockchain will handle the administration directly with these type of customers, Leykam said.
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Norwegian utility Statkraft AS, one of Europe’s biggest renewable energy producers, has already adopted blockchain, and said Monday that it had used the technology to trade green electricity in Germany.
“We see the use of blockchain rising in electricity markets in the next four or five years where it will enable many fast transactions at a low cost for renewable energy,” said Torsten Amelung, managing director at the company’s German unit.
Both Vattenfall and Statkraft are participating in a project known as Enerchain, trialing blockchain to trade power and natural gas. The former is also testing a gas-trading platform run by BTL Group Ltd.
Separately, utilities from Centrica Plc to EON SE and Engie SA have joined the Swiss Energy Web Foundation that plans to set up an open-source platform for blockchain energy trading. Epex Spot SE, a Paris-based exchange, is working on the technology together with U.S. company LO3 Energy.
The European Energy Exchange AG, one of Epex’s owners, is also probing the technology. The company is in discussions with trading clients how blockchain can be applied in its services.
“We see this new technology as a real opportunity to further improve our business,” Peter Reitz, EEX’s chief executive officer, said in a statement after a strategy presentation in Essen, Germany.