The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10. Presenting a live 90-minute webinar with interactive Q&A Energy Industry and Blockchain: New Applications and Issues for Counsel Distributed Ledger Technology in Energy, Smart Contracts, Regulatory Concerns Today’s faculty features: 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific TUESDAY, OCTOBER 17, 2017 Jesse Morris, Principal, Rocky Mountain Institute, Basalt, Colo. Molly Suda, Partner, K&L Gates, Washington, D.C.
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The audio portion of the conference may be accessed via the telephone or by using your computer's
speakers. Please refer to the instructions emailed to registrants for additional information. If you
have any questions, please contact Customer Service at 1-800-926-7926 ext. 10.
Presenting a live 90-minute webinar with interactive Q&A
Energy Industry and Blockchain:
New Applications and Issues for Counsel Distributed Ledger Technology in Energy, Smart Contracts, Regulatory Concerns
Natural Language: “Upon exercise of the Option by Option Buyer, Option Seller will deliver the MW Quantity and Option Buyer will pay the Strike Price.”
Smart Contract Code • Defines relevant terms for Option:
• Strike Price = $40/MW • Option Buyer = Company X • Option Seller = Company Y • MW Quantity = 100 MW
• Function code: • If Message Sender = Option Buyer, and • If Option Seller delivers MW Quantity • Then Option Buyer sends $4000 to
Natural Language: “Party shall be excused from Performance if prevented from carrying out its obligations because of an event or circumstance which was not anticipated or not within the reasonable control of the Claiming Party. . .”
Smart Contract Code: ???? • Subjective elements that are difficult to
define and translate into code • Difficult to assign a coded triggering
condition
ENFORCEABILITY OF SMART CONTRACTS
Are smart contracts legally binding in the US?
Probably yes, if done correctly
Normal contracting principles apply Is there offer & acceptance, intent, and consideration? An intention
to be bound?
Contract law adapted to digital contracting: E-commerce, shrink-
wrap or click-through agreements
Existing body of electronic signature and records law (e.g., Uniform
Electronic Transactions Act)
State Initiatives Arizona HB 2417 signed into law in April 2017: “A contract relating
to a transaction may not be denied legal effect, validity or
enforceability solely because that contract contains a smart contract
term.”
klgates.com 19
ENERGY INDUSTRY APPLICATIONS
BLOCKCHAIN, SMART CONTRACTS AND
ENERGY
klgates.com 21
Applications in the energy industry:
Improving efficiency and liquidity in wholesale energy
and derivatives markets
Facilitating integration of distributed energy resources
(DER), microgrids, and neighbor-to-neighbor energy
trading
Managing electric vehicle (EV) charging
Monitoring critical energy infrastructure
Verifying and managing trade in renewable attributes
Potential legal and regulatory issues
WHOLESALE ENERGY AND DERIVATIVES
MARKETS
klgates.com 22
• Improving back office functions • Counterparty onboarding; KYC compliance • Reduced settlement times
• Creating self-executing smart derivatives
DERS, MICROGRIDS, P2P ENERGY
TRADING
klgates.com 23
• Integration into wholesale energy markets • Role of regulators and local utility
Source : Microgrid Media
ELECTRIC VEHICLE CHARGING
Ensure charging during optimal times to support
the overall grid
Reduce transaction costs and facilitate greater
access and seamless use of charging
infrastructure
klgates.com 24
Source: California ISO
SMART ENERGY INFRASTRUCTURE
klgates.com 25
• Monitoring infrastructure to improve reliability and resiliency
• New business opportunities from data collection
• Cybersecurity issues
TRACKING RENEWABLE ATTRIBUTES
Track RECs and RINs to meet state and federal
renewable goals
Metered data ensures renewable MW or fuel is actually produced
Distributed ledger to enable trading and prevent double-spend
without need for central register
Regulatory reporting and monitoring
klgates.com 26
FRAMEWORK FOR BLOCKCHAIN
ADOPTION
klgates.com 27
AM
OU
NT
OF
CO
MP
LE
XIT
Y A
ND
CO
OR
DIN
AT
ION
HIG
H
SUBSTITUTION TRANSFORMATION
• Smart derivatives
• Online shopping and
e-commerce
• Transactive grid and
peer-to-peer networks
• Napster and Uber
LO
W
SINGLE USE LOCALIZATION
• Utility Billing Systems
• Email on ARPAnet
• Smart energy
infrastructure
• Internal corporate
networks
LOW HIGH
DEGREE OF NOVELTY ADAPTED FROM “TRUTH ABOUT BLOCKCHAIN,” HARVARD BUSINESS REVIEW, MARCO IANSITI AND KARIM R. LAKHANI, JAN-FEB 2017
• 300 apartments with digitized heat pumps and on-site water tanks
• Each pump can be controlled by the grid operator – Stedin – to reduce coincidental peaks
• With blockchain-enabled trading agents in each heat pump, customers can “own” their flexibility (cooperating to reduce demand charges, selling flexibility to retailers)
• The same system can be extended to EV charging
38
Presentation Overview
Economic potential of blockchain in energy
Obstacles to adoption
Why the Energy Web Foundation?
39
A number of issues need to be addressed
Issues to address
• Transaction costs
• Large data sets
• Data privacy
Wholesale
Distribution Edge
kWh $
Emerging system architecture Today’s focus
40
Performance – where we are today
Number of transactions per second
56,000
450
20
4
41
Performance – why it is a problem
Existing blockchains cannot support commercial applications
Scale
Time to execute
Where we are today with blockchain technology
Proof of concept Commercial
42
Performance – How do we go there?
Existing blockchains cannot support commercial applications
Scale
Time to execute
Proof of concept Commercial
Where we need to be
43
Presentation Overview
Economic potential of blockchain in energy
Obstacles to adoption
Why the Energy Web Foundation?
44
Our core beliefs to promote adoption
Leverage the best technical talent
Focus infrastructure on application needs
1
2
3
Create an open source core infrastructure
Promote an ecosystem of users 4
45
Criteria Smart contract capability
Path to scalability
Open access
Open source (GPL v3)
Permissioned validation
Capable of confidentiality
Used by ecosystem
Tested at scale
EWF Blockchain
Ethereum
Bitcoin
Hyperledger
? ?
IOTA
Tendermint
= meets criteria = does not meet criteria *via public ethereum blockchain
* *
Leverage the best technical talent
46
Criteria Smart contract capability
Path to scalability
Open access
Open source (GPL v3)
Permissioned validation
Capable of confidentiality
Used by ecosystem
Tested at scale
EWF Blockchain
Ethereum
Bitcoin
Hyperledger
? ?
IOTA
Tendermint
= meets criteria = does not meet criteria *via public ethereum blockchain
* *
The ethereum blockchain is closest to meeting our criteria in the energy sector and a natural starting point
Leverage the best technical talent
47
Create an open source infrastructure
Hydro Wind Solar
DERs Dist. Networks Coal
Gas Nuclear
Blockchain (core and additional functionalities)
Application
Blockchain infrastructure
Device interface
• Proprietary • For profit • “Easy”
Certificates of Origin
Transactive Energy …
EV Management
• Open source • Not-for-profit • “Difficult”
… …
48
ARK Equities
Focus infrastructure on application needs
EWF Affiliates as of Oct 3, 2017
49
Promote an ecosystem of users
~100 energy blockchain startups will benefit from the EWF infrastructure
50
EWF Time Table
Affiliate recruiting
• Round A – Feb-May ‘17
• Round B – Sep ’17 – May ‘18
Event Horizon Conferences ”Go live”
• Vienna – Feb ‘17
• Berlin – April ‘18
• “Launch” – H1 ‘19
• H1 2019 (est.)
• Commercial start date
• Token generation event
Development (May ‘17 – H1 ‘19)
• Use case task forces
• Technical development
Releases and test (Nov ‘17 – H1 ’19)
• Additional functionality
• Application testing and feedback from task forces