Speech at the event Horizon - the Global Summit on Blockchain Technology in the energy sector; Berlin.
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Ladies and Gentlemen,
It is my great pleasure to speak to you at the "Global Summit on Blockchain Technology in the Energy Sector". I have to confess, I like the conference's motto "Flip the switch and turn on the power of tomorrow. Today!" very much.
As we all know, we are living in the midst of the 4th industrial revolution. One which is most likely going to be at least as significant as the previous ones – for our economy, for our society, for our businesses. The first wave of this Revolution was digitisation. This alone changed some of the most fundamental assumptions of our industry.
For example, in the physical world, there was a correlation between increase in industrial input and output. If we increased raw materials, machinery, or human resources we could expect to see a similar increase in the output.
Yet, with near-zero marginal costs in the digital world we were witnessing exponential growth in a wide range of fields. Developing an online platform for 10 thousand or 10 million users costs almost the same but of course the revenues are 1,000 greater. That's what allows some startups to end up as unicorns.
So we now take digitation for granted in pretty much every industry and sector. From agriculture to e-government, from aviation to energy – we live in a digitised world.
Decentralisation is the next natural step in this process. As we all know, along with its new opportunities, the digitisation of our industries has also created bottle necks and single points of failures. The new threats are transitioning from the physical world to phenomena like hacking and malfeasance.
The idea that decentralised data processing can solve these problems is quite revolutionary. That's what makes blockchain technology so fascinating and mind-blowing to me.
I guess it is not really surprising that this technology is showing its effect on more and more fields. The emergence of Bitcoins is perhaps the most famous example but blockchain has the potential to reshape practically any data-based industry.
So it comes to the field of energy right at the right time as our energy system given:
- the growing share of renewable and decentralised generation,
- the progressive increase in energy efficiency along the whole energy value chain,
- the increasing need for flexibility in the energy system,
- the emergence of the prosumers and new market roles.
We, in the European Commission, are taking an active role, encouraging these changes. We recently gave them a strong boost by our legislative package on the redesign of the electricity market. We would like to see consumers and prosumers take full ownership of the energy transition.
But the empowerment of consumers depends on technological, business and social developments. We will need to enable features like:
- collaborative energy efficiency,
- peer-to-peer energy trading and human-centric demand response,
- and transparent participation of prosumers in energy markets.
That's where blockchain comes in. Above all, blockchain technology is about trust and security. As we all know, the fact that transactions are verified by all nodes in the system makes abuse hardly possible. And with more stability and trust, we can expect more and more efficient transactions like solar panels or car batteries injecting power into the grid.
That is why I see how blockchain as a catalyst for strengthening the role of individual consumers in the market, enabling them to buy and sell energy directly without the need for intermediaries.
Thanks to such technologies, we can now envisage a fully decentralised energy system, in which energy supply contracts are made directly between energy producers and energy consumers (without involving a third-party intermediary) and carried out automatically.
Just imagine how millions of homes could become autonomous agents, contracting power automatically with the best bidder. The next step would be blockchain-enabled standardised settlement and remuneration methods. That is how technology can not only support our human needs but also encourage human behavioural change. We are on the verge of peer-to-peer energy transactions and personalised demand response optimisation through automation and remote controls.
Now, I know you are all expecting to know how our legal and regulatory framework will handle this. And I can assure you that our regulation for consumers and prosumers in the energy sector is evolving towards enabling such transactions and introducing peer-to-peer energy trading as a means for achieving self-consumption.
In our "Clean Energy for all Europeans" legislative package of November 2016, the con- and prosumer is in the heart of this proposal.
Consumers are at the centre of the Energy Union. Energy is a critical good, absolutely essential for full participation in modern society. The clean energy transition also needs to be fair for those sectors, regions or vulnerable parts of society affected by the energy transition. We want to help consumers embrace this transition.
All consumers across the EU will be entitled to generate electricity for either their own consumption, store it, share it, consume it or to sell it back to the market. These changes will make it easier for households and businesses to become more involved in the energy system, to better control their energy consumption and respond to price signals.
The Commission will accelerate the deployment of smart meters and ensure access to dynamic electricity price contracts which are essential to bridge the gap between consumers and the market.
Upon consumer consent, valuable consumer data will be available to market actors who will be able to offer consumers tailor-made solutions. Better regulated and non-discriminatory access to consumer data will benefit the consumers through increased competition among market actors.
To look ahead, I think the EU should establish blockchain standards in order to ensure interoperability, end-to-end security. This would also allow the establishment of data marketplaces and data models to analyse, exchange and share energy data across different parties.
These standards need to be cross-sectorial so that digital platforms for new energy services can combine smart mobility, integration of renewables, charging of electric cars and smart home services. These standards shouldn't be imposed agreed by multiple stakeholders will spanning across different sectors.
In order to get there we need to better understand of the energy blockchain community and its needs. That is why last month, the Commission organised a seminar on blockchain in the energy sector. It was clear that we hit the right spot as we were joined by a vibrant community of innovators who were looking at ways in which blockchain can accelerate the energy transition.
Erwin was among them, presenting GridSingularity and the EnergyWebFoundation, so I hope you'll agree with me that we have a very interesting and interested community with a great potential go move forward!
We intend to organise a follow-up meeting to discuss in more detail a few key questions that emerged, such as:
- How to create trust in blockchain applications?
- What governance is required to create such trust?
- How can we (further) support an ecosystem for blockchain innovation?
Let me say a few words on the last question. Blockchain fits into our general policy to support innovation in digitalisation of the energy sector in general: Under the Horizon 2020 Research and Innovation programme, the Commission actively promotes and supports digital platforms & pilots with 300€ million. We have in fact explicitly requested R&I projects in the energy sector to address blockchain technology.
These pilots are meant to foster the integration of digital technologies with emerging business models in order to create a thriving and vibrant ecosystem.
So we are on the right track. Is this enough? I don't think so. I would still want us to go a step further in establishing the right environment and conditions for blockchain developments. This requires us to addresses blockchain as a strategic dimension of the Digital Single Market. This is not not only in terms of regulatory challenges, but as a major enabler for the Digitisation of European Industries.
As we strive to do in other fields, we must establish a consistent and coordinated Europe-wide approach – rather than a patchwork of national initiatives and infrastructures, which would not be interoperable. Our support through Horizon2020 follows the same coordinated EU approach: as we test and develop digital solutions, we support the development of standards that make digital solutions replicable across the EU digital single market. This is particularly true in the case of blockchain solutions which also need to be replicable across the Internal Energy Market.
Ladies and Gentlemen,
Let me conclude by saying that the blockchain technology is based on the 3D model: decentralisation, digitisation, and democratisation of the system. But you know what? The new energy system also has 3D: Decarbonisation, diversification, and disruption. Together these 6Ds are what the Energy Union is all about! They reinforce each other and create new synergies which could not exist otherwise. Our role is to push them faster and further beyond!
Thank you very much.