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NETWORK / 19 / MAY 2018 and consumed. In particu- lar, the challenges presented (particularly for the DNOs) by a transition from fossil-fuel and nuclear based centralised generation to renewable and distributed generation, and the growth of small-scale domestic and commercial generation by 'prosumers' – who both consume and produce electricity themselves (e.g. through solar panels) and whose power flows are bidirectional. The charac - teristics of blockchain can offer some potential solutions to these challenges. 1. Realising the value of distributed generation: monitoring energy con- sumption and trading (a) Peer-to-Peer (P2P) trading Electricity makes its way through various parts of the energy chain. Blockchain tech- nology could be used to digitally track the exchange of electricity across a distributed grid, ena- bling the secure and transparent trade of electricity directly be- tween consumers. A blockchain system can support a cryptocur- rency in the form of tradable tokens, each representing one kilowatt-hour (kWh) of electrical power. The price of each token could be determined by regula - tor approved market access so…ware parameters interfacing with market drivers established by the grid (think mobile phone Apps) and which might be de - signed to encourage sustainable and balanced network services (e.g. discourage long distance power transmission and peak demand use, and incentivise use of energy storage). A block - chain participant will require a digital wallet that can either be linked to a traditional bank ac- count or charged up with digital currency. That individual's participation so…ware can then transact with other participants, by buying and selling tokens, with immediate credit settle- ment, to correspond with their electricity supply and demand requirements. ticipating flats throughout the community, allowing them to share renewably-sourced energy between one another. Solar pan- els were installed on 17 blocks of flats that make up the estate. The addition of communal battery storage systems, further allow the energy produced by the solar systems to be stored, shared and traded between flats to reduce electricity wastage. The project is being supported through Government grant funding to support UK industry regulator Ofgem, which is cur - rently researching the potential for blockchain within its "regu- latory sandbox". 2. Grid balancing The increase in small-scale distributed generation, the resulting decrease in the scale of energy transactions and in - crease in trading volume create challenges for grid balancing. Blockchain can eliminate the need for a centralised approach to market clearing and trusted third parties, opening the way for a secure, transactive electric - ity environment where balanc- ing is continuous. London-based energy tech company Electron has been awarded substantial funding from the UK'S Energy Entre - preneurs Fund to demonstrate how blockchain can transform the market for electricity grid balancing. Electron's platform leverages blockchain technology to allow multiple parties to co- ordinate and share the value of a single consumer's action. 3. A blockchain-based renewable energy trading platform as a means of obtaining project capital One of the potential benefits of a blockchain-based energy trading system that employs tokens is that it could help renewable energy producers transact directly with energy buyers (whether they be end- users or investors (emphasis added)). A trading platform could therefore also permit the raising of project capital by issuing tokens for electricity to be produced and delivered in the future. Currently, renewable project developers typically need to demonstrate to funders that they have a revenue source for the plant's o—ake (giving greater certainty around income needed to repay sums due under limited recourse financing), for example by way of: (i) a long- term Power Purchase Agreement (PPA); or (ii) securing revenues through a support scheme, such as Feed-in Tariffs, the Renewa - bles Obligation or its replace- ment, Allocation Rounds for Contracts for Differences. Initial coin offerings (ICOs) have seen great success raising significant finance for a huge range of diverse projects. 4. Streamlining inefficient processes With blockchain there is no paperwork or intermediary. Transactions typically rely on smart contracts (a form of computer code executed on the blockchain). This technology can be deployed to eliminate lead times for currently cumber - some processes such as supplier switching, which today typically takes between 17 to 21 days to conclude. Blockchain as an end- to-end digital service can also handle 20 times the volume of switches currently occurring. 5. Registration service for supply-point meters and generating assets Blockchain could usefully be used as a definitive, industry- wide, registration service for supply-point meters, generating assets and their characteris - In Brooklyn, New York, start- up LO3 Technology has been running a test project enabling neighbours to buy and sell solar (PV) power between themselves via a blockchain platform. If customer 'A' has excess power available, then through the blockchain, 'A' can transfer that excess to the microgrid to enable customers who do not have a PV roo…op installation to purchase and use it. The Brook - lyn microgrid demonstrates that the technology can be used to realise value in localised generation within a distribution network for the small-scale trad - ing of environmentally friendly electricity. The UK's balancing codes and settlement systems do not allow for the level of P2P trading detailed above. Instead, the electricity generated by the prosumer can only be used on the generation site or delivered to the grid and sold to a sup - plier, usually at a nominal price. Capturing the full potential of distributed generation therefore requires new market models (and accompanying regulations, codes, and distribution use of system charging methodologies) to permit, and appropriately regulate P2P trading. (b) Monitoring electricity consumption in a local network to minimise wastage In the UK, Verv has claimed the first launch of a blockchain- powered P2P energy trading pilot at a housing estate in Hackney. The Verv platform is installed in around 40 par - In Brooklyn, New York, start-up LO3 Technology has been running a test project enabling neighbours to buy and sell solar (PV) power between themselves via a blockchain platform.