Now showing 1 - 8 of 8
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A Three-Tier Framework for Understanding Disruption Trajectories for Blockchain in the Electricity Industry

2020-03-26, de Villiers, Almero, Cuffe, Paul

Ever since the invention of Bitcoin by the pseudonymous Satashi Nakamoto, cryptocurrency has provoked debate in banking and finance sectors, and is sometimes considered a potential successor to fiat currency. Blockchain, the new technology underpinning decentralised and immutable databases, has seen much discussion as a potentially game-changing development. Although many industries are exploring its value, the technology has thus far made only minor impacts. A rapidly expanding base of research has emerged on blockchain’s role as a potential disruptor in the electrical energy industry. However, it may be difficult to distinguish hype from more imminently plausible impacts. This paper attempts to serve as a guide for engineering managers wishing to make sense of blockchain’s potential in electricity. This is accomplished by formulating a novel blockchain industry disruption framework, which exists across three tiers. These tiers extend from ideas with the least effect on an industry to total revolutionary concepts that could completely transform an industry. This taxonomy is constructed by examining existing research into disruption hierarchies and blockchain classification methods. Through the lens of this taxonomy, a literature review is performed on blockchain’s role in energy to draw out themes and ideas characterising each tier. The potential likelihood of real-world application of various ideas are discussed, considering how established industries may be affected or disrupted. The authors provide some conjecture here. Finally, courses of action are suggested for those whose sector may be affected by blockchain.

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Towards A Blockchain-Based Revenue Distribution Mechanism for Electrical Generators

2023-06-29, Bird, Bryan, de Villiers, Almero, Cuffe, Paul

Renewable energy generators have increased in number in recent years to meet the demand for the green transition. However, the inconsistent nature of the output from these sources, coupled with fluctuation in demand and market spot prices produces significant financial risk for renewable generators. An inflexible market structure exacerbates these effects, and renewable generators may benefit from a remodelled revenue distribution system. A potential solution to these problems could lie in distributed ledger technology, specifically blockchain. Advances in this technology have given rise to smart contracts---autonomous, immutable and transparent computer programs that reside on the blockchain network---that can enable new business models. This paper looks to utilise advances in blockchain smart contract technology to create a novel system for managing revenue streams. The paradigm suggests tokenising the right to a generator's regular market remuneration, creating a new financial tool for stakeholders. A blockchain program consisting of a smart contract is developed, serving as an investigation into the granular workings of such a system. This smart contract manages generators and stakeholders, while directing the movement of tokens and currency. The code is deployed to the blockchain, and tested with simulated transactions to demonstrate the effectiveness of the mechanism. Further development of such a solution, specifically revenue sharing between grouped generators, could offer significant stability to financial models for renewable energy generators.

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A diversified portfolio of tokenised revenue streams can provide hedging opportunities for renewable electricity generators

2023-12, de Villiers, Almero, Byrne, Julie, Cuffe, Paul

The revenue streams of renewable energy generators are subject to both price and volumetric risks, owing to the variable nature of weather patterns. This negatively impacts viability of the generation projects. Blockchain-based decentralised finance methods may present new means for generators to hedge against such volatility. This paper proposes tokenised revenue streams (RevToks) as a novel tool for electrical generators. By holding a RevTok, a participant can directly claim a portion of that generator’s revenue. To articulate how such exotic financial arrangements may benefit renewable generators, a case study market simulation is performed. Generators can trade RevToks to diversify their cash flows, decreasing their variance and thus overall risk exposure. The simulation uses Multiportfolio Theory — an extension of Modern Portfolio Theory — to optimise the RevTok holdings of all generators simultaneously. Examining the results show that RevTok trades occur between generators of varying technology and remuneration schema. By trading RevToks amongst themselves, all generators achieve far less volatile revenue streams, while maintaining constant expected revenues. Thus, the RevTok paradigm potentially offers improved revenue hedging when compared to established methods for energy firms. Results show that implementing such a blockchain-based arrangement for existing central pool operators unlocks downstream opportunities for renewable generators.

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Towards Imposing Load Shedding Hierarchies based on Tokenised Self Assessed Licenses

2021-07-02, Cuffe, Paul, de Villiers, Almero

This piece serves as an exploratory study into the combination of blockchain-aware smart meters and radical economic paradigms. Load shedding is examined through this novel lens. Load shedding is an established means of preventing system collapse under emergency conditions. An auctioned load shedding hierarchy method is proposed whereby participating parties bid on tokens (SALtoks) guaranteeing access to supply during load shedding. This method is based on the recently developed Self Assessed Licenses Sold via Auction paradigm developed. Under this paradigm, SALtoks are subject to taxes based on valuations, while also being subject to continuous auction. A case study is performed on a hypothetical island power system. Higher ranking SALtoks are held by larger consumers. The method is found to mitigate economic impacts by allowing industry to maintain supply during load shedding. Smaller consumers, while subject to more frequent interruptions, gain the public benefit of increased income from taxation.

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Towards A Blockchain-Based Revenue Distribution Mechanism for Electrical Generators

2023-06-29, Bird, Bryan, de Villiers, Almero, Cuffe, Paul

Renewable energy generators have increased in number in recent years to meet the demand for the green transition. However, the inconsistent nature of the output from these sources, coupled with fluctuation in demand and market spot prices produces significant financial risk for renewable generators. An inflexible market structure exacerbates these effects, and renewable generators may benefit from a remodelled revenue distribution system. A potential solution to these problems could lie in distributed ledger technology, specifically blockchain. Advances in this technology have given rise to smart contracts---autonomous, immutable and transparent computer programs that reside on the blockchain network---that can enable new business models. This paper looks to utilise advances in blockchain smart contract technology to create a novel system for managing revenue streams. The paradigm suggests tokenising the right to a generator's regular market remuneration, creating a new financial tool for stakeholders. A blockchain program consisting of a smart contract is developed, serving as an investigation into the granular workings of such a system. This smart contract manages generators and stakeholders, while directing the movement of tokens and currency. The code is deployed to the blockchain, and tested with simulated transactions to demonstrate the effectiveness of the mechanism. Further development of such a solution, specifically revenue sharing between grouped generators, could offer significant stability to financial models for renewable energy generators.

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Dissolving Metaphors in Peer-To-Peer Energy Trading: Towards a More Concrete Understanding of Metering, Legitimacy and Revenue Flows

2022-11-11, de Villiers, Almero, Cuffe, Paul

Peer-to-peer (P2P) tokenised energy trading has seen much research interest in recent years. Despite this, the concrete physical workings of such marketplaces are rarely explained in the extant literature. This paper discusses notional P2P marketplaces with regard to their real-world implementation. The analysis of the physical/electrical layer and metaphorical token layer are kept distinct. Tokenised energy is conceptualised here as a dynamic license to consume, which serves as a flow of legitimacy for energy consumption in P2P schemes as typically proposed. Ledger structures, including centralised and decentralised/blockchain examples are examined. With the above points in mind, the workings of a notional blockchain-aware smart meter are described. The authors argue that while P2P energy trading may be a useful tool for regulators and for integration into smart token ecosystems, the drawbacks associated with decentralised tokenised energy markets may outweigh the apparent benefits at present.

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Towards Imposing Dayparted Restrictions on Tokenised Energy within Peer-to-Peer Markets

2021-03-02, de Villiers, Almero, Cuffe, Paul

This piece proposes a novel mechanism for peer-to-peer electricity trading whereby energy tokens can only be redeemed in the same part of the day as when they were generated. The aim of this regulatory mechanism is to reduce token hoarding by consumers to better align the physical production and consumption of electricity, which in turn could decrease electrical system losses and minimise the chance of grid imbalances. To establish the effectiveness of this dayparting mechanism a market simulation is performed. This simulation is made up of 24 consumers’ and five producers’ profiles over a seven-day week. An optimisation is performed to most effectively allocate energy tokens from producers to consumers, aiming to minimise the total energy imported from the larger grid i.e. to make most effective use of local generation. Consumers are permitted to perform a measure of demand response by modulating their demand at certain points while keeping their total energy consumption constant. Allocated energy tokens can be consumed immediately, or during any subsequent daypart to the same type. A series of power flow analyses are performed using the market simulation out-turns to establish the electrical system effects. Consumers are found to move some demand to weekend days when demand is lower but generation is equally abundant. Electrical results reveal a decrease in system losses, as well as less fluctuation from the larger grid supply

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Towards Embedding Network Usage Charges Within a Peer-to-Peer Electricity Marketplace

2020-10-01, de Villiers, Almero, Cuffe, Paul

This paper proposes a novel tariff regime for peer-to-peer energy trading, with an aim to increase transmission efficiency and grid stability by penalising long distance power transactions. In this scheme a portion of the transacted energy is withheld based on the electrical distance between buying and selling parties, calculated here according to the Klein Resistance Distance. This tariff regime is simulated using a dataset of producers and consumers over a 24-hour period. First, a notional marketplace equilibrium simulation is performed, in which consumers can optimally activate demand response resources to exploit local availability of energy. Consumers are observed to move some demand away from peak times to make use of local generation availability. These simulated market out-turns are then used as inputs to a time series power flow analysis, in order to evaluate the network’s electrical performance. The regime is found to decrease grid losses and the magnitude of global voltage angle separation. However, the metric whereby taxes are calculated is found to be too skewed in the utility’s favour and may discourage adoption of the peer-to-peer system. The method also attempts to encourage regulatory adoption by existing grid operators and utilities. Some counter-intuitive allocations of tokenised energy occur, owing to specific consumers’ demand profiles and proximity to generators.