Increasing decentralisation & digitalisation of European power markets changes energy industry
What are the advantages of the blockchain technology and do you think that blockchain could eventually replace traditional trading venues such as brokers and exchanges?
We do not see blockchain and traditional trading venues as being in conflict with each other. There are various projects at the moment — with the Ponton Enerchain platform one of them — that cover different aspects of energy trading. Generally, it is about the over-the-counter (OTC) process and for blockchain to simplify the entire deals process at every step of the way.
It is possible that in the future, blockchain could be connected to trading venues such as brokers' screens to make what is a complex or high volume transaction process more efficient. And blockchain solutions could be connected to grid operators to replace what is now a manual process of nominating bilateral deals.
Are these advantages particularly important at a time when profit margins for energy trading are under pressure?
Falling margins do play a role here. But it is also about new business models and smaller deals sizes in an increasingly decentralised energy world that require more efficient processes for trading.
Would you expect blockchain to lower the barrier to entry for new energy market participants?
Yes, absolutely, for smaller market participants in particular. I could imagine for the blockchain technology to facilitate the market entry for prosumers through complete peer-to-peer trading. If and when this will happen and to what extent we will have to wait and see but I think this is the direction we are heading in.
The first blockchain live-trades in the power market have taken place. Has Vattenfall already participated in live trades?
We are participating in the Ponton Enerchain project and are awaiting for all technical and regulatory arrangements to be completed. We are now in the proof-of-concept state of the Enerchain project. At the moment we conclude around 8,000 trades in Europe a day and we are testing the potential scope of blockchain in that regard. But once we have completed the proof-of-concept stage, I can imagine us concluding live trades.
Which applications in general is Vattenfall pursuing when it comes to blockchain?
We are looking into all variations of using blockchain when it comes to peer-to-peer trading on all levels. This can be, for instance, facilitating transactions between retail customers on our Powerpeers platform in the Netherlands. There are ideal use cases for blockchain when it comes to transactions with electric car charging stations but also when it comes to B2B industrial clients.
Are there new business models for Vattenfall Trading that emerge from the increasing digitalisation and decentralisation of the energy world?
The increasing decentralisation of energy markets is a key topic for Vattenfall as a group, not just for us in trading. It is a challenge to optimise decentralised assets such as those owned by prosumers. Another of your key competencies that I see are corporate power purchase agreements (PPAs) for renewable energy facilities and our industry customers. We are already one of the biggest direct marketers of renewable energy in Europe. And, with a spotlight on Germany, subsidies for onshore wind and solar are declining in every auction and both are on their way to market price level. This is opening up new opportunities for the market. And we see the first offshore wind projects which will come on line without subsidies. Moreover, the 20-year subsidy period granted by the German renewable energy act (EEG) will end for the first onshore wind assets from 2020-21. To recoup investments, you will have to hedge the price risk in future. This is an area where we already have the know-how and we offer this to third parties.
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