Epicenter - Learn about Crypto, Blockchain, Ethereum, Bitcoin and Distributed Technologies - Carsten Stöcker: How Blockchains Will Power the Energy Grids of Tomorrow

Episode Date: March 14, 2017

In the footsteps of the finance industry, the energy sector has been caught by the blockchain fever. Conceived over a century ago, increased usage and an explosion of devices have made energy grids outdated. Smart grids offer a two-way dialogue where electricity and information are exchanged between utilities and its customers. This new grid takes advantages of connected devices and green energy production to provide more reliability, security and sustainability. Carsten Stöcker, Senior Manager Machine Economy & Blockchain at Innogy, shares his vision for how blockchains will serve as the transactional fabric for tomorrow’s smart grids. In this new paradigm, energy is locally produced and blockchains provide the rails on which local energy marketplaces can be built. The German utility has been conducting blockchain experiments for several years and is soon releasing the Mobility Transaction Platform moveX. The Ethereum-powered platform will serve an ecosystem of electric vehicles with transaction layer needed for charging, car sharing and mobility as a service. Topics covered in this episode: Carsten’s background in technology The history of RWE and creation of Innogy Business models in a decentralized economy How the energy grid system works The transition from the traditional grid to the smart grid How blockchains can be integrated in tomorrow’s smart grids Use cases for blockchain and energy Innogy’s moveX blockchain experiment for mobility Episode links: innogy Innovation Hub World Economic Forum - Decentral Blockchain Transaction Platform Share and Charge - Mobility on Blockchain Blockcharge - Electric Vehicle Charging on Ethereum Blockchain Genesis of Things - Industry 4.0 on Blockchain "Automating Machine Transactions and Building Trust in the 4th Industrial Revolution" "Free Electrons" - a new global energy start-up program This episode is hosted by Brian Fabian Crain and Sébastien Couture. Show notes and listening options: epicenter.tv/174

This is Epicenter, Episode 174 with guest, Carson Stoker. This episode of Epicenter is brought you by Jax. Jax is the user-friendly wallet that works across all your devices and handles both Bitcoin and Ether. Go to JAAWX.I.O and embrace the future of cryptocurrency wallets. Hi, welcome to Epicenter, the show which talks about the technologies, projects, and startups driving decentralization and the global blockchain revolution. My name is Sebastian Kutjua. And my name is Brian from N-Krain. We're here. today with Carson Stucker. I've known Carson for quite a long time. He's been a podcast

listener for a long time. He reached out to me. I don't know when it was, maybe a year and a half ago, two years ago or something. When he came to Berlin and we met up with him and it was amazing because he was so excited about blockchain. He had so many ideas, so many things he wanted to pursue. And so he's today, he's a senior manager and then evangelist for machine economy, innovation lighthouse at the Energy SE Innovation Hub, which is quite a job title. Is that really your job title? Oh, yes, it's my job title. So basically what's very nice about the job title is that it resonates very well with the media

because it's pretty much in contrast to the utilities we know from the past, where utilities are basically silo-oriented, very conservative, not moving at all, no innovation. And now we have this extreme job title, machine economy, a fengalist. That's quite a contrast for very old industry. Yeah, no, that definitely sounds like it. And yeah, so Carson also has a PAT in physics, and he was previously Accenture for a long time. And then he's also part of the World Economic Forum.

They have this global future council where he's a part of. And yeah, so thanks so much for coming on. Yeah, thanks for having me. So just to give some background, the company you work for is called Energy. But before you were working for RWE, do you mind sharing a bit about, you know, what is RWE, what is energy? You know, what kind of company is it so people can picture a little bit, you know, kind of where you're coming from. So RWE or the old RRWE is Walson Utility, an integrated utility, and utilities typically have upstream, basically where they do mining of coal, of oil, of gas, and of fuels that can burn in their power plants. And so RWE has lignite or coal-fired power plants and nuclear power plants.

And of course, the old RRDLE before it split had a little bit renewable business. It has a grid business, a regulated business, which is due to the fact that utility business or the grid business is a natural monopoly. And this brings a lot of kind of questions how to set a price for a grid customer, for example. So it's natural monopoly, it's a regulated business. So it's upstream, power generation, renewable, grid commodity trading, basically buying fuels that can be burned and selling the energy that's being produced on the wholesale market. And last, but not need a retail division to sell the energy to business to business or

B2C customers. For our U.S. listeners, you know, just to sort of put in the context of W.E is sort of the historical German utility company. Yeah. And basically in Germany we have the energy transition. And part of the energy transition is that the utilities are obliged to turn off their nuclear power plants. So in addition, because in principle there's no space to burn fossil fuels anymore on this planet. And for that reason in Germany there's also pressure kind of to think about the fact that we're burning fossil fuels in our coal-fired power plants.

or gas-fired power plants. And now there's also political first discussions, yeah, to regulate. So what's the lifetime of the coal-fired power plants? Can we reduce it? Can we reduce the CO2 emissions? And that basically led to the decision in RWE to split it into two parts.

So one part is the nuclear power plant business, the coal-fired power plant business, and the commodity trading that's now in RWE. And now the new part is called energy that's basically renewable business, grid business, basically distributing energy to the customer's home and retail. So that sounds a little bit like they took all the parts that are like headaches and off the past and, you know, difficult to put it in one thing and then now energy is sort

of the company for the futures. Is that about right? Yeah, absolutely. So basically the story for the investor community is also now. investors have two portfolios and they can choose whether they would like to invest in a company that's producing energy or if they would like to invest in a company, the new energy that basically has a new portfolio, the grid, and the retail customers more future-oriented. Absolutely. So energy is also the grid operator in Germany. Yeah. So the grid business is different in different countries. And in Germany, it's very inhomogeneous. I think we have around 700 different grid operators. Most of them are very small on a municipality level.

And so energy is the biggest grid operator here in Germany, and we have 8 million customers, which is for Germany quite a bit. And we are operating a huge part of the distribution grid. That's really interesting because I'm in France, and here in France, there was sort of one grid operator, and they have this sort of de facto monopoly on the grid operator, on the grid and metering aspects of energy distribution. I wasn't aware that Germany had so many grid operators.

Yeah, that's the key difference among all the different countries. And what's also nice from a business model perspective, because the grid business is pretty much regulated, which means it's a cost plus, you can say it's a cost plus model. A regulator comes in, measures the costs, allows the utility to put a margin on top of it, and then the sum of costs plus margin that's basically the baseline to devise the prices

for the grid customers. And yeah, that's regulated business and you can kind of work around with the costs. And of course, there's a lot of pressure, a lot of different grid operators in your benchmarks. And that's what we have here in Germany, also some competitive pressure, even if the grid business is the regulated business.

RWE, I think, or maybe tell me how exactly that works, but my own understanding has about 70,000 employees. So are those now in energy mostly, or are those still mostly in the old RWE? So right now, the majority of the employees are in energy. And as I mentioned the grid. So we have a field force, for example, to maintain the grid, to operate the grid, to deploy. a new grid infrastructure and there's a huge field force there. And yeah, the rest is then in the old RLVE. I think we can say, I don't know the exact numbers.

Maybe it's around 30,000 in the old RB and a bit less than 40,000 in the energy. Okay. And so how did you hear about blockchain? How did you come into this in blockchain? And how was it, you know, working with this topic in the context? of a very old traditional company, but the company that's at the same time is going through a tremendous amount of change

and disruption of its business model and of its existence really as well. Basically, the idea was to invent the Uber for energy. Everyone wants to have the Uber for something. So one of our board members in the Netherlands said, I would like to invent Uber for Energy. he basically asked Mark Dykesman. At this time he was a freelancer working for our Dutch business

to come up with an idea how to do Uber for Energy. And Mark basically said, yes, I can do this. And he posted because he believes in open innovation and collaborative approaches to innovation. He posted on LinkedIn. So who can help me to come up with an Uber for Energy? And then there was an other guy, Joris Boncher. and he was basically part of the more kind of the extended Ethereum Go ecosystem in Amsterdam.

And he proposed to do it via smart contracts and have a look in, yeah, a proposition doing peer-to-peer energy trading on the blockchain. And, yeah, this is basically how we came to the topic of blockchain a little bit by coincidence. So one guy at RDAW in Holland was kind of given the task, created Uber for energy. he found some yours who yeah i know a little bit as well and then and then how did that did you become interested in that point as well when they kind of that this idea come up or that we is going to create the uber of energy using blockchain and he said like okay what what is that or what's your personal story with this now basically i engaged with the team um i was curious to learn about

energy blockchain and these kind of propositions and at the beginning I worked with with Joris to put some ideas into place so how can it work? So what does it mean if I have a smart meter and connected to the blockchain?

So what does it mean in terms of transactions in terms of putting a peer-to-peer trading engine in place on the blockchain and we basically worked from a technical perspective how can such an architecture work So in addition, of course, we also looked at the kind of business model implications because in the end, so peer-to-pe energy trading is not new.

So in a couple of countries, and even in the US, we have co-ops, energy cooperatives, or we have smaller energy kind of entities. And I think it's very natural if we have a co-op, a cooperative where people kind of trade energy among each other or they're buying energy on the energy. bulk for themselves or selling energy to a wholesale market. Basically, it's pretty much straightforward to think about putting this on the blockchain. And that was basically our project, what we've done together, coming up with a tank solution and some process and business model solutions, how to do peer-to-peer energy trading on the blockchain. And what's very interesting to understand, because in the end, I can do my peer-to-pe energy

trading, yeah, among a couple of people, yeah, that's a very interesting. are close to each other. On the other hand, I need to aggregate what the people are doing. That's called building a balance group. And the balance group is basically a simple sum over time saying that's the energy being produced by a peer community. That's energy being consumed. And there's a delta.

I have even a time series for a delta. That's called a schedule. And of course, there's either excess energy. I can sell on a wholesale market or there's a gap in energy. that I need to buy from the wholesale market and especially this aggregation is where a peer-to-peer community doing trading on the blockchain

needs to intersect with the real world because suddenly they have to send schedules to a grid operator or to buy or sell energy to a wholesale market and that's pretty interesting because then you can think about what's the role of utility in this type of world is basically world in transition

where I have decentralized kind of peer communities doing energy trading and the world we have existing players in the energy business such as wholesale and grid and basically in this world there needs to be an aggregator that's aggregating the energy consumed and produced and basically acting as the interface to wholesale markets into the grid and this is basically a role of a utility that's coming on top of the P.2 energy trading. It's a very slim, lean role because it's basically making sure we have a legal entity around the P2P energy trading community. And in addition, so we can serve and fulfill existing processes to interact with wholesale market participants.

Cool. Well, that's, there's a lot there. And we already kind of went into one of the topics we wanted to dive into, which is the energy trading. But maybe before we go a little bit deeper, there, let's kind of stay on that on a high level first. You know, blockchain and some of those new ideas in the context of, you know, old company changing rapidly. So first of all, innovation is a term that, you know, people are always so interested in, right? They're trying to figure out how to do it. I was, you know, here in Berlin, I would get contacted quite often from this kind of business. thing, I mean, it's kind of bizarre kind of interesting where you have like some old school

company that's sending like 15 of their executive to go to like Berlin on an innovation trip, right, where they meet like five different companies and like it's almost like a school trip, you know? So I think the term innovation, right, and this concept is such a big topic. But how do you actually do it? Like how does one actually change and get innovation into establish company. So there is a little bit of a story to explain before because our CEO, Peter Therio, he made a decision first to do cost cutting, second to run a huge change program across the whole group.

And in this change program, it was basically bottom, bottom up and top down, the top 300 managers, the middle management, and even ordinary employees. A lot of them participate in the change program. because many corporates have a couple of systemic issues. The systemic issues are silo thinking, power distance control hierarchy. And if you have the systemic issues, there is no chance at all to come up with innovation from inside a company. So that's the reason why Peter Therium first did the cost cutting, the change program. And after this was done, he launched an innovation program.

And in innovation, we have a couple of operating principles, and one is, so we are looking for business models, business model innovation. So we are working with external partners, external networks. We would like to do it fast by applying a lot of innovation methodologies, such as lean startup, design thinking, and we put our teams in scarcity to come up with solutions, rapid prototyping very fast to test it with customers. That's the other principle that we're always testing stuff with customers. It's customer-centric.

We always have the customer in mind. And the last principle is that we have focused topics. We don't do everything because the innovation world is very like Alice in Wonderland. You can do a lot of interesting stuff. And in the focus topics, we have smart connected. So smart connected home, smart connected cars. Then the next focus topic is digital disruption. that's the idea of all kinds of digital business models that change the energy landscape.

Then we have big data, of course, to have data-driven insights on the retail side for new business models, but also to improve the effectiveness of operations, for example, in fields such as predictive maintenance. And then we have something very interesting. It's called Urban Solutions, because utilities are the center of cities, and the center of the cities, let's say they operate the grid, they have infrastructure connecting every household. They even know every household customer. They know the bottlenecks, they know the decision makers,

the government bodies, they know the local infrastructure. And that puts utilities in a very nice sweet spot to understand local needs of the community and to come up with solutions and innovative business models to address the needs, especially when all the technology around us is changing with drones, drones, drones taxis and fleet of autonomous cars and sensors everywhere and Laura. So a lot of opportunities for business model innovation in the city.

Last but at least, we established a lighthouse called machine economy. And this is where I'm working. And in the machine economy, we are looking into propositions that are taking to construct. that we see machines as future customers, that we see that there are transactions among machines, that there are machine-to-machine transactions. It's a lot about IoT. It's a lot about physical deliveries. The utility business is a very physical business, which means we deliver energy, we deliver logistics,

we produce stuff. And, yeah, so that's our main focus in the machine economy. Now you can say, okay, it's just, let's say, IoT, machines, IT. We are not looking into any central solution because we know there are a lot of people and big corporates pushing central solutions forward, such as GE with Predix and systems from Bosch from BMW. Everyone comes up with central solutions. And our thinking is that we only combine IoT machines with decentralized platforms because there's a lot of space to come up with new solutions, business models. And that's our main thinking there. And we are looking at a couple of industries.

It's of course energy, its mobility, and its manufacturing supply chain. That's interesting to see that and sort of encouraging to see that within your organization. There has been really that organizational shift from the top down and from the bottom up, as you said. because, you know, when I talk to large corporates, it could be in the energy space or, you know, like any type of industry, a lot of times what we see is innovation departments really interested in, you know, CIO is really interested in this type of new technology and the prospects that, and the sort of new use cases and disruption that they can bring. but then what happens is, what sometimes happens is you're then stuck after doing some sort of experimentation with that innovation department trying to sell that innovation or trying to sell that project to an industry line within that company. If the, I think that, you know, if the company itself is sort of organizationally set up

So the innovation and the sort of lean startup and that you mentioned approach is really integral to the organization, then we can really start getting innovation at all levels. So yeah, I think that's really interesting and encouraging to see that a historical player like RWE can rethink itself, you know, 120 odd years after its creation. You know, companies in the past were built on this idea of accumulating power and accumulating monopolies, and that was certainly the case and certainly is sort of the case still for a lot of traditional utility companies in European countries. You know, if we start building decentralized platforms and really taking away their central monopolistic power, that really goes against their business models.

and the interests of their shareholders. What do you think that this evolution towards decentralized platforms means for a company like RWE and Energy? Yeah, first of all, of course, the decentralization is disrupting our existing business models, for example, especially in the retail business. On the other hand, so we can come up with new business models that can extend our current retail business portfolio. So if we look into kind of the business economics of decentralized platforms, so our thinking is that it will be zero marginal. So we don't believe that I personally don't believe that you can make a decent margin from base transactions. I mean people are

using a decentralized platform for energy, mobility or other industries. So if there are transactions and let's say a corporate or consortium are operating the platform, I don't believe that a consortium can take huge margins to grow a decent big business. And that's a kind of challenge. Just on that, I think that's an extremely interesting point. I would love to say a bit on that. Can you explain why you think that's the case? So I personally think because decentralized platforms are built upon distributed ownership,

which means everyone can join a platform, everyone can contribute. to it. And if then let's say a small consortium is trying to dominate an industry, a principle it can be possible, but I personally think if someone was trying to dominate an industry, then the consortium will replace by someone else who's much more open. I think my view would be whether you are right or not is going to depend a lot on kind of the network effects and how, you know, how stable are these consortium? Because if you have one and it's in place and well, you have to use that one, well, they should probably be able to use, you know, charge a decent amount of transaction fees. And, you know, if then RWE owns 20% of the consortium or something, right, then, well, they can maybe make a big margin. But if it's easy for them to say, well, we're just going to spin up another chain and that one's going to charge a third as much. And so now people switch to that. then you might have this drive towards a zero transaction fee environment.

And what I think is especially interesting is that kind of translates over to the public blockchain space as well, right? When you have something like, let's say, Ethereum, you know, there's a question if Ethereum keeps improving with the technology at the rapid rate and you can handle way, way, way more transactions and then the transaction fees collapse, right? At a faster rate, maybe that then even demand increases, maybe there's not so much of a case that you say the ether price is going to increase a lot because Ethereum is a success, right?

You could have the case that Ethereum is a big success. A lot of applications run on top of Ethereum. People use Ethereum. But that doesn't mean that Ethereum looked at as a sort of a business actually was a success. Would you agree with that kind of direction of thinking? So I first agree that blockchain is software. So if someone would like to introduce transaction fees, I think there will be someone else doing a different version of a software,

reducing the transaction fees. And that's what we say, it's a race to zero. So we are pretty sure there will be other players who reduce transaction fees, transaction margins. And it's probably similar to Google Search. Google Search is for free. And that's the reason why I personally expect that transactions on the blockchain will be almost for free in the long term.

In terms of the consortia, I think today a couple of consortiums are considering, let's say, an ICO, consortium, ICO. It's maybe just a thought experiment. No one has done it. A couple of consortia thinking about gas, making revenues and margins via gas. And a couple of them are also looking into putting. transaction margins into smart contracts. But if we just reconsider that blockchain is software, it can be easily copied,

someone else can be able to reduce the transaction margins, and that's the reason why we think it's a race to zero. And our, at least my conclusion is if it's a race to zero, then there will be almost no monetization at the core of a decentralized platform. So that's what we call. We have monetization at the edges of the decentralized platform. for example, system integration revenues to integrate existing infrastructure into a blockchain or value-added services to basically aggregate assets to drive a value out of this,

or even personalization services. If someone has a personal need, I probably have to understand the need on an algorithmic level. I need to connect it with transactions on the blockchain, with assets, with offers. and basically I can monetize this personalized service. And that's kind of an extreme in terms of the blockchain that people can expect there will be zero monetization potential at the core, but there will be monetization potential at the edge of the platform. Okay, so if I summarize then what you're saying is that no longer do these monopolistic

historical actors will they be able to monetize the networks themselves? The networks become sort of a public commodity that anybody can use, that anyone can use for basically free. And then you open up those networks to competition for creating value-added services at the edges and something like a blockchain enables for that ecosystem to build those applications on top of that existing network there. That's a very nice summary of the hypotheses I have. And just to kind of reemphasize that point, which I think is a very interesting point. And I think it's a very good perspective that's under explored.

I mean, I don't think we really explored that perspective. I think the same thing, if it's true for consortium blockchains, I think the same thing is going to be true for public blockchains too. Yes, absolutely because I think consortium blockchain for me, it's a little bit of a transition. So today we have public blockchains. If we would like to put scaled transactions on them, they're too slow. They don't scale right now. There are also some privacy issues.

That's the reason I expect, of course, there will be consortium change for industry-specific use cases and domains. And on the other hand, so this consultium chains needs to open to get all the network effects and the innovation on top of it. And in the end, they will be transformed in a kind of public blockchain again. Let's take a short break to talk about Jax. Jax is your wallet, your complete user interface to cover all your blockchain needs. I've been using it and I've been loving it. And Jax supports a lot of different cryptocurrencies. I suppose Bitcoin, Ether, Lycorn, Ethereum Classic, Zcash,

and they're adding many more keep responding to users needs. Now with Jacks, a nice thing is that you can manage all of those coins within a single wallet and you are in control of your own private keys, they're not on their server, and there's a single 12-word seed that you can use to backup your wallet, all your coins and sync them across different devices. Talking about devices, they're on pretty much any device that you can think of. You can get it on PC, Mac, Linux, you can get it on Smart. like Android and Apple and iPhone, you can get it on tablets or even browser extensions for Chrome

and Firefox. And on top of that, in JAX, you can actually exchange different cryptocurrencies for each other because they've integrated a shape shift. And more partnerships and integrations are coming down the line in 2017 that are going to make JAX even better. So JAX is really making blockchain and cryptocurrency accessible for the masses, easy to use for the masses. Make sure to get you own Jack's wallet at Jacks. You can get it from any of the app stores you are using. We'd like to thank Jacks for their support of Epicenter. So looking at this business model thing from another angle,

you mentioned before you were also part of the World Economic Forum, and you put it that a big topic there is ethics and governance. And all the change that's coming with the disruption, with blockchain, AI, etc. you know, that's going to destroy tons of jobs. How do you think about this problematic? Is it a topic at energy? And what are your personal views?

Yeah, first of all, it's a topic at energy because you would like to be responsible leaders to take also the disadvantages of new technologies into consideration. And, yeah, to make sure we are good corporate citizens, So in addition, we are pretty much engaged in the World Economic Forum. And that's also worth to mention the Global Future Council of the World Economic Forum. When I was their last time in Dubai last year, 700 people attended the Global Future Council. And there are a couple of, let's say, technology councils.

It's blockchain, AI, 3D printing, drones, future of computing, quantum computing, Kaspakas, space technology, biotechnology, You name it. In addition, there are a couple of people looking into more the kind of the bigger society problems, such as human migration or development in Africa in Asia. And in the end, I think it was a shared belief of all the people in Dubai when we met last time is that all the technologies at the tipping point right now, there's a huge tsunami approaching us, approaching our societies. And there are a lot of benefits, but of course a lot of risks and for the risks no one has an answer. And regardless of blockchain, it was a consistent theme that everyone was asking for and even crying for governance, for ethics, for standards to make sure that the technology is not harming our societies. So it's providing or helping for the good of society.

And on the other hand, you can even say some of the initiatives, of World Economic Forum to establish responsible leadership, to take care about the impact of jobs, society, the digital divide and human migration, all this kind of stuff. But I think the reality is that we have Trump,

Erdogan, May, Putin and a couple of other leaders and with those leaders in charge, it's impossible to solve the governance and ethics issues today, which means in the end, everyone then does the conclusion, okay, it's America first, it's my home country first, it's my company first, which means people start kind of looking for their own to monetize stuff

and to benefit from all the big technology changes that are coming soon. And I don't see any kind of huge group pushing forward real solutions to sort out all the risks for our societies. And that's a little bit to chat. And we could have a whole discussion, a whole show about that, that whole bag of worms. So let's then move on to some more interesting topics. So yeah, so let's take the conversation then to blockchain and energy. There's a lot of hype around this. I was telling Brian earlier, it seems like,

Every couple of weeks, there's another conference. There's another event talking about blockchain and energy and people describing all the use cases that are possible with the joining of these two types of technologies. And there's a lot of discussion around use cases. We're talking about smart grids. We're talking about mobility. We're talking about traceability and energy credits. this sort of thing. But, you know, not a lot of experimentations yet.

There have been some. And, you know, you'll talk to us about one of those. But so far, you know, about a handful of pox and sort of pilot programs that have any, you know, sort of any value at a scale. So could you first, let's, before we go into that, perhaps, you know, describe what an energy grid looks like. traditional energy grid and then contrast that with sort of where we're going and this idea of smart grids. So traditional energy grid is consisting of huge power plants, coal-fired, nucleified, hydroelectric power plants. And then we have a transmission system operator that's basically a high-voltage grid to transport energy over long.

distances. So in addition, they have a distribution system operator that's basically distributing the energy in a city to the different households. And then we have the consumers consuming energy. And there's one element missing from a technical perspective. There's also a grid control center. And that has a very important task because the grid control center is making sure that the energy that's consumed by the household. or by the businesses is exactly the same amount of energy that's fed into the energy system so that there is a real-time balance of energy being fed into the system and energy being consumed. And the grid control center is basically controlling frequency, which means, for example, in Europe, with a frequency of 50 hertz, and they are making sure that the frequency is stable in the grid.

And on the distribution system operator side, the distribution system operator, they have some leverages to control the voltage level to make sure that we're in a specific range of the voltage level. And that's very interesting because in the end, what we need in the energy market is what we call flexibility or balancing services. So if, for example, the consumption changes, then the grid control center has to react to the changes and either reduce energy is fed in the system or increases the energy. So it's being all done in real time. And now when it comes to, first of all, to more renewables in the energy grid, we have to understand that renewables are extremely volatile because if there are clouds that are hiding the sun or shielding the sun a bit from the solar cells,

this has an immediate impact on the energy that's fed in by the solar cells. Or if the wind flow, wind energy, is changing, then our wind turbines are feeding less energy in the grid. And there's huge volatility. And the extreme is what we call in Germany. And that's even a term that's used elsewhere as well. Dunkel flautte, which means if it's at night and there's no wind, then the renewables, at least solar and wind, they don't produce any energy for the grid.

And to make sure that we still have enough energy to power the consumption, we need flexibility or balancing services. So we are kind of controlling real time the big power plants or, and that's what the grid operators are looking into. They're looking to find flexibilities in local grids, which means basically are there any batteries, are there any cold storages? Because in a cold storage,

I can introduce a lot of energy to cool to deeper temperature. Or I can, let's say, feed in less energy and then the temperature is going up a little bit, but at least I have some flexibility to play around and to take care about fluctuations of volatility in the grid. And then, of course, we have more renewables solar cell on the rooftops, some biomass and combined heat and power, a lot of decentralized assets that are not controlled by a central control center. And this is very difficult for the grid operator. And for that reason, grid operators are really, really looking to get hold of flexibilities and to use them to stabilize the grid.

And of course, when we think about a more decentralized grid, there's immediate connection to what the blockchain is. It's a decentralized technology. And that's the reason why people like to connect the decentralized blockchain technology with decentralized energy assets. and to think about all kinds of business models such as peer-to-peer trading, such as local flexibility markets, you know, to take benefit or to take advantage of the blockchain and use it for these types of business models. When I think of the blockchain in a smart energy grid,

I look at, if I were to contrast it to, like on the traditional grid side, it's very top-down. So you know, you have coal-fire, power plants, you have nuclear power plants who, you know, have different, maybe hydro, and those different energy sources are feeding energy down into, into the grid in a very sort of hierarchical, you know, top-down approach. With a smart grid, it's the configuration of the grid itself, forget the blockchain, but the configuration of the grid itself is much more decentralized. So, you know, you have these, you know, massive sort of traditional, you know,

energy production means like the coal fire fire plants, the nuclear, the hydro, whatever. But then you also have some solar arrays that are being operated by smaller companies, or you may have some solar arrays or some wind turbines being operated by a local community. And those are feeding energy into the grid as well. And if you take the two, one thing that's definitely missing there, because we have all this IoT and all these devices being connected into the grid is a means for data to be flowing in real time. And the traditional grid doesn't have any of that. I mean, the proof is that when you go, when you about every month or every three months,

someone has to come to your house and like look at the meter. Whereas with the smart grid, we have an opportunity there to implement blockchain technologies that would allow for, for real-time data to flow between all of these different devices and energy providers. Do you agree with this idea that the blockchain sort of provides the data and transaction layer that is needed for this new type of grid to exist? That's exactly how we phrase it at well. we call the blockchain as a transaction layer for the future energy system, which means we can do physical transactions to send energy from A to B,

but at the same point in time, we can do the financial transaction. And of course, if the transactions are getting smaller, smaller and smaller, we need a technology that can do all the settlement and billing. And that's a big hope and the big dream of many people when they look into energy and blockchain, that this can be delivered. by decentralized platform. So earlier, I sort of talked about all this hype around blockchain and energy,

and there seems to be a lot of interest, especially from traditional energy grid providers and traditional actors. At least that's the view that I have here in France, and obviously it's true in Germany as well. Why do you think that there's so much enthusiasm around these technologies, in your opinion. And where did all this come from?

What was the sort of pivotal moment where all the CIOs that like the traditional energy utility companies said, oh, blockchains are the way for the future of our industry? So for me personally, this is one of the big questions, Mark, I have. Because, of course, a lot of people looked into fintech innovation with blockchain. And then for me, the big next wave was that people started looking into energy in blockchain. And there are around 90 startups that are looking into propositions energy on blockchain.

And a couple of people counted use cases. People counted around 200 different use cases for energy and blockchain. It's a pretty well-researched field. A lot of pox have been done. And my personal conclusion is why people immediately jumped from fintech to energy. or a lot of them is because I think in Bitcoin, we are burning a lot of energy. And then what does it mean?

It means, okay, Bitcoin is equivalent. It's an equivalent to energy. It's an equivalent to money. There's a very nice connection. And then people immediately draw the conclusions. There must be value in combining blockchain and energy. And of course, the other conclusion is what we just discussed, that's a lot of decentralized assets, bottom up, solar,

wind, biomass. And of course, there must also be value to establish the transaction layer. And that's the reason why people jumped on this. I think there was an event, Horizon event in Vienna. And I have not been there, but I talked with a couple of, unfortunately I couldn't go. But I talked with a couple of people. And they said, yes, there's huge momentum, huge interest in the topic energy and blockchain. However, almost no one has a business model.

And that's a kind of challenge because there's not a technology penetration that allows to do all the nice things. In terms of the smart meters that are being deployed, in many countries, there are no smart meters or the wrong smart meters. In terms of solar batteries, it's just not deployed. It's regulation and the economics because today I get more money if I sell my energy to so-called feed-and-tariff or under the power purchase agreement because it's subsidized. and there's less money you make selling it to your neighbor, the peer-to-peer energy trading idea, for example. And that's the kind of challenge. And that was the reason why we started to looking beyond energy

because I mentioned, okay, we're interested in physical delivery and blockchain. That's the reason why we pretty much looking into other industries, supply chain, mobility. And that's also the reason why we started immediately with electric vehicle charging because that's something where we think it's an energy-related, use case, it's even going in mobility, and it's possible today. Because today we have very few charging poles, we have very few electric vehicles, and we have a standard. So there's a global standard, it's an ISO-15118 standard, it's very nice, because in blockchain land, a couple of people are crying for standards, and it's electric vehicle charging, we have a standard.

And this standard is a perfect fit to what we think, yeah, is a very good. like, yeah, is an electric vehicle charging transaction on the blockchain. And, yeah, the key conclusion we drove, it's doable. There's a standard and there's even a business model. Why shouldn't we go on the electric vehicle charging? Yeah, that's what we're currently pushing forward. What are you guys actually building when it comes to electric vehicle charging? Basically, we worked with, or we're still working with Lockett.

And it's pretty simple because we can think about sharing economy. you would like to share assets, assets such as a charging pole. And then you think about, okay, what is Locket doing? They have the smart lock. They're opening, closing a smart lock. So what's happening in the charging pole? Basically, we're switching on and switching off an electrical connection. It's pretty similar.

And the reason why we gave Sloket and called and asked them if we can deploy their smart lock POC into our charging pole, plus to extend the technology, the functionality, by reading out a meter, and then doing the billing and settlement of the electric vehicle charging transaction on the blockchain. In the end, it's pretty easy. You have an app. You basically locate a charging pole. You go to the charging pole. You take the ID of the charging pole.

You send a transaction to a smart contract. A transaction, for example, the deposit. then the smart contract sees, okay, there's money, and even the charging pole sees there's money, which means as a deposit in the smart contract, which means the charging pole can trust that's being paid. And of course, the electric vehicle or the driver can also trust because the charging pole doesn't deliver. Yeah, it gets back the deposit, which is very nice. So we basically have a notary-grade transaction on the serum blockchain for electric vehicle charging. And of course, you can think about putting a peer-to-peer node on an Ethereum client,

on other blockchain client in every charging pole. That's quite a mess, a lot of work. And what we are right now building, one of the systems we call share and charge. And we are collaborating with a lot of other charge pole providers, especially in Europe, big ones, but also in North America. And the basic idea is to connect a back-end system. with the blockchain, which means we can put in one sweep entire fleets of charging poles on the blockchain. And it's pretty easy because if you look in the traditional architecture of charging poles,

let's say a thousand charging poles, they're connected via a machine-to-machine communication network to a central gateway in the data center. And in traditional systems, they're coming commercial applications on top of the communication gateway. And what we are basically doing, we are connecting the communication gateway to the blockchain. And by establishing this connection, we basically have in one sweep the entire fleet of charging poles, the entire fleet of charging poles on our decentralized platform. And we are right now really pushing forward to get an installed base in place, which means we're doing a couple of MOUs, a couple of further proof of concepts with people who have relevant assets. and we start with charging poles, but also we are looking into parking lots and all this kind of stuff. Because in the end,

so when we have mobility transactions on the blockchain, when we even have a wallet, a blockchain wallet in a car, then of course we can think about providing additional transaction services, such as toll collection, parking, insurance, yeah, and other things. And that's kind of the more longer-term vision to establish a decent-class platform, that can handle mobility transactions.

That's what we're pushing forward. And we start with charging and we start with getting an installed base as soon as possible in place. However, we are also aware of privacy issues and scalability issues. For that reason, we're looking to get the installed base in place, but to release the product only to few selected extreme users so that we can, yeah, that we have control and terms of, yeah, scalability issues, private issues with a small customer group and that we are not kind of putting too much pressure on the system, but we get all the learnings. And it's not only about the installed base and the technology. So we are also concerned about the user experience.

And that's the reason why we are pushing forward to hide the blockchain, to hide the crypto tokens, to offer to offer euro tokens. So we're basically also implementing a payment gateway, which means we are transferring euro into crypto euro or euro token. We are doing this. And, yeah, of course, then we have to deal with a couple of legal and financial regulatory issues. But in the end, our key objective is to have a system that's working end-to-end, that's hiding the blockchain, providing good end-user experience, automating all the underlying processes. that's basically demonstrating that's working for an ordinary customer. And of course, then the next step would be to address the other remaining issues that everyone has in terms of scalability and privacy.

But we would like to think it with the technology advancement in the blockchain field that we are all foreseeing in the next month. Because when you're talking about this, you're talking about this running on public Ethereum. So right now we did a choice to start with public Ethereum first to demonstrate that's working. However, I think connecting and stored base to public Ethereum is easy. But then scaling the users and putting transactions on the blockchain and also taking care about privacy issues a little bit more difficult. For that reason, we're starting with a smaller group of, we call it, extreme users.

But we're also working on the next version of the architecture to take into account that we need to scale it as well. So on a high level, when do you think as a user, you know, normal people are going to be using some of these things, you know, in normal transactions, how far out is that? What do you think are the first things that are going to happen? Yeah, in terms of electric vehicle charging, we are offering the solution to normal users. Yeah, so this will happen pretty fast, however, it's not available. So if I have an electric car, I can download that app and I can use it today? Yeah, not today. In the next eight weeks, that's our objective.

And so we're basically having an app. We are connecting the app to our payment gateway. You can load your basically, we're also providing a wallet. You can load your wallet with your credit card, your bank account, or whatever it is. Basically, your transfer euro, and then you get crypto euros. And with the crypto euros, you can do the transactions. Oh, wow. And that's going to be rolled in Germany first.

So if I, now all I need is to buy Tesla or something and then I can. Yeah. We call it a soft launch because we're not naive in terms of all the kind of technical limitations we have. So our strategy is to put. as many assets on the blockchain to demonstrate it's working. And of course, also to demonstrate that we have critical mass, because if you have 10 charging poles in the blockchain, there's no point in it.

And yeah, so we would like to, we're working on getting the installed base. We're connecting our own backend to the blockchain, which means in one sweep, we bring between thousand and 2,000 charge poles to the blockchain. And on the other hand, as I said, so we have a little bit of conservative approach, what we call soft launch,

in terms of holding it out to a limited number of users. So we talked about some of the limitations that we may face in implementing these technologies. And I think using something like Ethereum is a good idea for experimentation. But in the future, I think we mentioned earlier that we may want to move towards some permissions, sort of public consortium style blockchains. And one of the reasons there is, you know, obviously for confidentiality, privacy, that kind of thing. There's some other limitations that I'd like to address. One of the major problems or sort of limitations that we face when we're thinking about

connecting different grids together is this idea of being able to, you know, properly trace electrons. And so the way that I understand it, I mean, I'm not an engineer, but the way that it's being explained to me is you may be able to trace a payment or a token on a blockchain, but if you're producing energy on a smart grid through a solar cell, and then you're relying on the traditional energy grid to a supply energy when you're in low production, the grid doesn't make the differentiation between so that local green energy and the energy being provided by the grid. So could you explain to us then perhaps in better terms how this problem is actually being dealt with or how, you know, people thinking about this may want

to solve that problem if we are to have so this decentralized system with, you know, blockchain's managing energy credits and multiple sources of energy coming into our energy grids. Yeah, I think we're very early stages. So people start thinking about it. I would like to combine, of course, blockchain with AI, with decentralized systems that control energy, let's say, in a cell. And it's a little bit futuristic. But what people are doing, they're thinking about digital grid routers, that's Professor Aabe for, University of Tokyo and with the digital grid routers you can basically say I can take an

electron I can even say okay I would like to send the electron from or the electrons the energy from A to B and via a decentralized system I'm managing that only when I'm sending from A that only B is consuming the energy and of course then you need to track it you need to settle it to build it and that's the idea that blockchain and future digital grid technology can all do this on a decent level. There are some technical ways to self-regulate the system. Let's say there's a lot of renewable energy flowing in the system. Then there are flexibilities in the systems immediately reacting and making sure more energy

is consumed or stored in a battery, for example. And so when we have all this kind of self-regulating. grid cells, then of course, decentralized technology can immediately real-time automated to do all the kind of financial transactions to make sure people are being paid that dedicate the assets to a decentralized grid or digital grid router solution. Cool. I had no idea that these types of technologies existed or were being researched. Yeah, that's why I would like to add.

That's a very cool thing, because today we can send IP package. via routers from IP address A to B. And with these types of technologies, we can send energy from A to B. And this is very nice because today, there's a physical flow of energy and a commercial flow. And today commercial and physical flow, they're completely separated.

And so with this type of technology, we can bring commercial and physical flow in sync again. And also, if we think about what does it mean for fintech innovations, when I can send energy from A to B in almost real time. I store it at B, which that also means I can send money from A to B because there's an equivalent between energy and money. And that's another new kind of topic that people can consider. Yeah, because one of the problems when you're dealing with sort of traditional grid

and the smart grid, so let's say on one hand, like you have, Okay, let's take this example. Like you have a household, that household is consuming energy from multiple sources. It's consuming energy from like the solar panel on its, on, you know, some local businesses' rooftop. And it's also consuming energy from, say, a coal fire, fire plant. And those different sources of energy have different costs. And perhaps the government is incentivizing the inhabitants to use, to better, like, make better use of their energy so that they're, only using that solar energy and not the coal fire power plants and there may be other incentive

mechanisms and once once you start there's no way of differentiating what's a green electron and what's a you know like a dirty electron and and that's that's where it starts getting blurry for me is how how do we differentiate those and how can like the blockchain itself doesn't solve its problem but it seems like these other technologies might be. No, it helps to solve the problem because if I know that behind a smart meter that's measuring the energy is being injected, there's a coal-fired power plant or let's say a solar cell,

then I can tax the energy basically at my house. I have a solar cell. I'm feeding energy in the grid. Then the energy that's fed into the grid at my house and I have a smart meter data I basically can put a renewable energy certificate on the blockchain that's telling that my household via the smart meter delivered energy in the grid. And by the way, this energy package was a green package

because the blockchain knows because there's a registration means in place that the energy of my smart meter is green and the energy of another meter is, let's say, brown. And then people can start differentiating this. And in the end, it can mean that my energy is more. more valuable than other energy because it's green and they have the renewable energy certificate. You also mentioned another very important topic from energy perspectives that is locality. Because today businesses who can prove the local community, they are green, they are using green energy,

can now do this with the local renewable energy certificate. And one of the business models in energy we are looking into is combining people, people who have, let's say, solar cells with a business that has a complementary load profile. And the business in this case can be a supermarket because in summer when the sun is shining and solar cells are producing energy, we need a lot of energy to cool down the cold storage in the supermarket. And of course, in winter or during night, when there's no sun, we need less energy. So it's a little bit complementary, which means we can connect the power generation of local solar cell houseowner. with the consumption of the supermarket,

brings the two together, and suddenly we have a local relationship, a local business model, a local transaction. And of course, for supermarkets, it's very interesting because they can engage with their customers in the city. They can even start thinking about loyalty tokens, all kinds of other tokens.

And so, yeah, that's pretty huge in retail to have a local value proposition and to engage with local customers. Yeah, not to mention that energy that's being produced locally, there's less loss than energy that is being produced further away. So you also can, I think I read somewhere that five or six percent of all of the energy and the US grid was being lost simply over long distances. One thing that you mentioned there that was really interesting was this idea of loyalty point systems and incentivizing. This is actually one of the objectives of this project.

that my company Stratom is working on with Bougainobilier in Lyon is incentivizing inhabitants of an eco neighborhood to use green energy by then providing them, rewarding them with these sort of fidelity points that they'll be able to use in local businesses and this type of thing. So we can already start to see so the new business models emerging and incentive models emerging and not necessarily from like the state or, government actors, but from, in this case, a real estate promoter. So this is what we also see.

We do a lot of customer insights. We talk to local businesses, and they're a little bit bored when we start, when we, of course, start talking about blockchain, new energy contracts. But when we mention the term local relationships and local loyalty points, local proposition then they immediately wake up and they really like to start engaging with us on these kind of propositions cool well carson thanks so much for coming on thanks so much for sharing a bit about what you're up to what's going on with energy blockchain and and some of the exciting projects are happening this side actually we were talking about it before sebastian and i

think you're the first person uh that's been on the show that's kind of you know working for and old school, old school more or less company. So yeah, thanks so much for coming on. Yeah, thank you for having me. It was a real pleasure and you two guys are real heroes for me because when I started listening to the first podcast, it really inspired me to look into further use cases. Cool. Thanks so much for that. Thank you. So yeah, we're going to look forward to what's coming with Carson and their innovation. Actually, there's a nice video of a block charge, which is their electric vehicle project, which we're going to link to in the show notes, if you want to check that out. And yeah, thanks much for the listener for, you know,

once again tuning in. We are part of the Lysotipcon Network so you can find this show and other shows on Lachdorpecon.com. And if you want to support the show, then please leave us an iTunes review. It helps new people find the show. And thanks so much for being back next week.