Vattenfall, a Swedish energy company wholly owned by the government, has announced that its energy trading division Business Area Markets has teamed up with 22 other European energy trading firms for conducting peer-to-peer trading in the wholesale energy market using blockchain technology.
Currently, BA Markets trade either via energy exchanges or directly with counterparts through brokers and broker platforms. Blockchain technology could help save money by eliminating the need for a centralized energy market place. By lowering transaction costs, the technology will also enable the trading of small scale decentralised production and consumption.
Vattenfall said the proof of concept will help it understand the blockchain technology and determine whether a decentralised solution can match existing trading platforms when it comes to trading volumes and transactional speed, but at a lower cost.
“Blockchain is widely seen as one of the most interesting and disruptive technologies for the coming years, with Bitcoin as the best-known example of a cryptocurrency based on this technology. With Blockchain, one party can tradepass a good such as money, securely withto another party without a third party intermediary involved, such as a bank,” says Christian Tobias, Solution Architect at BA Markets.
The trial is being hosted by Hamburg-based Ponton, which allows trading organisations, using encryption technology, to anonymously send orders to a decentralised order book. All this is done “peer-to-peer”, that is without a central marketplace operated by an exchange or broker.
“On average, we enter into 1,400 deals per day across all energy commodities and markets,” says Kilian Leykam, Manager Business Development Trading. “Each deal causes transaction costs and has to be processed in our trading, reporting and controlling systems. Once we are able to apply blockchain technology in energy markets, we will be able to operate more efficiently and at lower transaction costs.”
The proof of concept will run until the end of this year. The participants intend to start live trading on the blockchain towards the end of this year. If successful, it would become the first blockchain-based P2P trading system going live for wholesale energy products.
