Paving the way for future energy trading
Last month, EDF Energy and UK Power Reserve successfully executed a trade of capacity market obligations using a platform underpinned by blockchain. This was the first time a trade had been carried out in this way and could pave the way for more efficient trading in the future.
Commercial Development Manager Fergus McAllister gives some background to the breakthrough.
I work within PowerShift, a platform developed by EDF Energy’s innovation accelerator Blue Lab, acting as a one-stop-shop to optimise value from energy flexibility. Part of my role covers Demand Side Response, which aims to help our business customers maximise opportunities from the Capacity Market.
The Capacity Market
In the Capacity Market, participants are paid for their availability to respond to situations where the national electricity demand is too high for supply. They do this by either increasing their generation output or reducing demand, this is known as Demand Side Response.
Capacity Market Obligations (CMOs) are held by participants like EDF Energy and can be traded between parties involved in the Capacity Market. I’m very proud to have led the first ever trade of this nature on behalf of EDF Energy using Electron’s trading platform, underpinned by blockchain technology.
We successfully transferred a trade of 2MW obligation for 24 hours to UK Power Reserve. The trade was logged instantaneously which demonstrates that the technology is ready for the energy market and is much more efficient than the current system where CMO trades can take up to five days to process.
This five day delay can create a barrier to participation in the Government’s incentive scheme, particularly for distributed energy resources like batteries, Electric Vehicles (EVs) and DSR providers.
However, challenging established systems can’t be undertaken in isolation. We worked diligently with Electron and UK Power Reserve, building a strong channel of communication enabling the development of a bilateral agreement between the two trading parties, both with access to the Electron platform.
Earlier in the year EDF Energy participated in Electron’s consortium to redefine how distributed flexibility might be traded. Members included aggregators, energy suppliers, generators and network operators. We want to use blockchain technology, Smart contracts and market rules to change the traditional top down approach of our national electricity system. This trade was the perfect proof of concept for the consortium.
The Electron platform demonstrates that participation in the scheme is possible and could provide support for short-term capacity needs, ensuring long-term security of supply.
With current systems inhibiting the emergence of a flexible liquid market, we’ve now seen that smart contracts can be used to pre-validate trades, which enables trading to happen much faster.
This trade is just the beginning and I foresee many benefits of blockchain in the future of the energy industry. As the energy landscape continues to evolve, blockchain’s ability to drive efficiency and transparency of information will complement the emergence of intermittent, renewable technologies alongside flexible technologies, both behind and in front of the meter.