This interview is part of our new Blockchain In Energy series, where we interview the world's leading thought leaders on the front lines of the intersections between blockchain and energy.
In this interview we speak with Jan Lozek, CEO of the innogy Innovation Hub, to understand how his company is using blockchain to transform the energy business, and what the future of the industry holds.
1. What’s the story behind innogy Innovation Hub? Why and how did you begin?
JL: innogy Innovation Hub was set up in 2014 as part of an internal change project within what was then RWE. The Hub’s founding mission – which it still is today – was to co-create the energy system of the future by identifying the game-changing ideas, people, business models and technologies that will build that future, wherever they are, and providing them with funding, mentoring and a platform for co-creation, collaboration and convergence. While we can’t say exactly what this future of energy will look like, we know that it is being driven by four core global trends: decarbonisation, decentralisation, digitisation and democratisation. We also know that the future of energy will be shaped, not just by innovations in the energy space itself, but by disruptive change across a number of adjacent sectors such as the construction and automotive sectors. To hone our efforts we therefore decided to focus on four key areas:
- Disruptive Digital: the digital technologies that have the potential to disrupt and replace existing value chains
- Cyber Ventures: the technologies that will become a critical part of securing a decentralised, digitalised and interconnected energy infrastructure
- Smart & Connected: new technologies that turn buildings into smart organisms, connecting people and infrastructure in a decentralised energy system of interconnected devices, improved analytics and digital services
- Machine Economy: emerging decentralised technologies that will provide the infrastructure for a fully automated real-time system where energy is balanced, controlled traded and invoiced based entirely on machine-to-machine interactions.
2. Why Blockchain at all?
JL: At innogy Innovation Hub, we believe that blockchain represents a paradigm shift in how the internet works. The UN estimates that internet users increased from 738 million to 3.2 billion between 2000 and 2015. With copious amounts of data floating around, personal information stored in centralized servers is prone to hacks and malpractices, as seen in the Cambridge Analytica scandal. Blockchain offers a decentralised means for people to protect their personal information. We are transitioning from the internet of information using HTTPS/TCP to the internet of value via a new trustless protocol allowing one to send value from A to B without any intermediary. Blockchain is a cutting-edge technology that we, as a VC, have to take seriously.
3. Please describe some use cases that you see as relevant to transform the energy industry and how blockchain is already used:
JL: Blockchain offers new opportunities, especially concerning the challenges of making the energy infrastructure more flexible. The protocol acts as an abstraction layer for the Internet of Things, identifying and bundling the availability of solar systems, charging stations, smart home devices, and heat storage devices. Thanks to blockchain, actors in the energy industry can interact with each other and benefit from basic features of the new protocol: legitimacy and immutability of transactions, with a built-in clearing house functionality (a database that can transfer value/money from A to B), thereby setting in place the foundation of the future decentralised and digitised energy system.
4. Where does innogy apply blockchain?
JL: Our colleagues from innogy SE – the energy retail business – are currently preparing a feasibility study on the topic of peer-to-peer networking via the blockchain. The study aims to develop a new product that strengthens the prosumer (those who produce as well as consume energy via for example solar panels) in his/her new role and incentivises the generation and consumption of local electricity to reduce the load of the grid. Pertinent questions that need answering include: How can we foster energy self-sufficiency? How can we promote network-friendly behavior instead of just expanding the grid? How can we design local tariffs and new business models for owners of small generation units? All of this needs to be tested and here we also rely on some portfolio start-ups of the innogy Innovation Hub to show how innovation can be transferred into our own group.
5. Could you share a specific customer/user that benefits from what you offer? What have your start-ups done for them?
JL: We believe that it is vital to understand how we treat our future customers. This becomes particularly relevant for the energy business in Germany at a time when EEG (Renewable Energy Sources Act) subsidies come to an end. The goal of the P2P feasibility study is to empower consumers. Potential use-cases include auditing and tracking the origin of their energy consumption and controlling their consumption to maximize the use of locally produced power when produced at attractive prices. We, at innogy are bringing about a paradigm shift by transitioning from energy-as-a-commodity to energy-as-a-consumer experience.
6. What other blockchain use cases in the energy industry are you excited about?
JL: E-mobility is definitely a hot topic. At some point, the car will become a client of the future energy system where it can decide whether to buy, sell, or hedge energy. Share & Charge, our spin-off, provides, for example, an open-source, decentralised digital protocol for electric vehicle charging. This standard will enable seamless and smart charging by globally integrating charging poles and electric cars into the energy system of the future. The solution utilises rapidly evolving blockchain technology, with the promise of improving the end customer experience, business processes, and IT security.
Another interesting use case is in Guarantees of Origin which are seeing steady growth. Over the last 15 years, Renewable Energy Certificates (RECs) have heralded the move towards decarbonisation. Blockchain technology can be used to track not only the origin of RECs but also to automate manual, cumbersome processes that inhibit the energy industry from evolving.
Blockchain is all about trust – it enables countries blighted by energy issues to effectively connect to the top-down energy transition by developing efficient business models based on trust. P2P Trading, congestion management and registration of installations over the Blockchain are all interesting use-cases, where in my eyes, blockchain can provide substantial efficiency gains.