PARITY is a project that revolves around a central theme described as “Pro-sumer Aware, Transactive Markets for the Valorization of Distributed flexibility enabled by Smart Energy Contracts”. With this definition, it is clear that blockchain technology is involved mainly because smart contracts are in the mix. In this project, Hive Power is responsible for implementing the blockchain Local Flexibility Market.
However, blockchain technology is not the only form of tech involved in PARITY. The IoT also has a significant role to play in this valorization process.
In simple terms, PARITY hopes to use blockchain technology and IoT to help conventional grids deal with the integration challenges of new RES by engaging end-users who will become effectively aware of prosumers to enable stable energy pricing.
What are the Objectives of PARITY?
The vision of PARITY focuses on implementing local energy sharing that helps with pricing and easing the stress on the grid as well as giving value to its flexibility sources such as EVs, heat pumps and batteries. It is also a new business model that puts prosumers on a pedestal, allowing the opportunity for energy exchange such as P2P energy trading and dynamic pricing.
This guarantees security and automation of operation through blockchain technology, smart contracts, demand-side management and the IoT.
How PARITY Works
Under the initial lab trial for PARITY, a smart contract scenario was created to monitor consumers’ energy consumption via their devices and, in turn, exchange this information with the blockchain, automatically deciding settlements and further actions. The Hosts included:
- IoT Gateways also acting as blockchain nodes
- Light devices
- HVAC devices
- Smart plugs
- Oracles; which served as a link between the physical world and virtual blockchain world
The Internet of Things (IoT) has an ecosystem involved in this project. Within this ecosystem is the IoT Gateway which is deployed on-premises with an Information Management cloud infrastructure that helps with data processing and persistence.
A gateway that enables communication between the Building WSN and the IoT cloud and ambient sensing, control and sub-metering data provision through multiprotocol gateway communicating with a wide variety of off-the-shelf sensors make up part of this ecosystem.
A few other critical elements of this ecosystem are:
- The Information Management cloud normalization.
- Semantic annotation.
- Compression of data and calculation of KPIs.
While within the blockchain ecosystem, PARITY Cosmos sidechain aims to interconnect with the Cosmos blockchain, support the market and smart contract aspect, and facilitate interconnection with other authorized off-chain parties through relevant interfaces.
The Oracles involved in PARITY are responsible for verifying and transmitting real-world events in a trusted and secure way by triggering smart contract transactions and retrieving anonymized data from specific prosumer service legal agreements (SLAs) to be used as key performance indicators to the blockchain smart contracts framework.
The Local Flexibility Market
Local flexibility of PARITY enables multiple uses across the board, like in prosumer apps that include informative billing and automated profiling. The Local Flexibility Market also runs on the Hive blockchain platform, while PARITY Oracles and DER dispatch are part of the multiple-use cases enabled by PARITY.
The Local Market design of PARITY follows a defining structure:
- Market participants which include Distribution System Operators (DSOs), prosumers, aggregators and market operators
- Instruments for providing flexibility such as market-based and control-based instruments (LEM & LFM)
- Market operator
- Local scope of the market
- Coordination between flexibility requesting parties
Two markets are introduced within this concept, the Local Electricity Market (LEM) and the Local Flexibility Market (LFM).
- LEM encourages P2P trading among prosumers and is operated by Local Electricity Market Operator (LEMO)
- LFM, however, activates flexibility for the needs of DSOs. Under this, the Explicit LFM design is a market platform operated by the Local Flexibility Market Operator (LFMO), while Implicit LFM market design is implicitly integrated into the LEM. DSOs can impose varying grid prices, and prosumers can react to this via their trades on the LEM.
The Roles of Stakeholders
Distribution System Operators have a traffic light concept that outlines their response to specific regulations within PARITY called the traffic light concept.
- BLACK means a grid outage, and at this stage, the DSOs disconnect everything in the constrained area for the safety of the grid
- RED means distribution grid is constrained; here, DSOs can override market-based contracts and perform direct load control
- YELLOW means the DSO has forecasted constraint violations; here, Implicit and Explicit LFM are activated
- GREEN means there are no constraint violations, and DSOs perform active grid monitoring
ESCOs (Energy service companies) are also stakeholders in PARITY because they focus on developing and building financing projects that save energy, reduce energy costs, and decrease the cost of maintenance and operation on the customers’ end. They offer improvements in energy efficiency based on a performance contracting method, so compensation for projects is directly linked to actual energy cost savings. In PARITY, ESCOs will enable fair pricing at all ends.
Risks and Barriers Encountered With PARITY
Obstacles that stand to hinder the fast adoption of PARITY include:
- Administrative barriers like lack of regulation and charging cost rules
- Standardization barriers like diversity and interoperability
- Trust barriers such as emerging technologies, security and privacy
- Technical barriers like networking and reliability
- Cost barriers such as pricing and margins
Pilot Sites And Use Cases
Pilot Sites have been spread across four European countries; Spain, Sweden, Greece and Switzerland. They range from office buildings, residential buildings to fuel stations for EV charging points.
There have been several use cases in PARITY, one of them focused on congestion management by DSO through the operation of LFM to increase DER penetration. The steps taken included detecting the network colour by DSO, activating LFM and mapping DER, which resulted in dynamic activation of flexibility in real-time to eliminate congestion.
PARITY is all about fairness and integration of all platforms and parties involved in the electricity distribution process. The project uses new-age technology to solve conventional and innovative challenges hoping to ease the stress in all quarters and improve sustainability. As Partners in the PARITY project, Hive Power understands the objective all too well and we’re seeking to chart a new course in the grid technologies industry.
For a few decades, the idea of creating a faster, more decentralised web technology system which is less dependent on human interference has been a defining factor for database innovations, cue in the blockchain database, which is what cryptocurrencies are run on.
However, that is not the only use of this blockchain technology; renewable energy innovators know this. Implementing this new form of technology to execute contracts smartly to help manage energy needs seems to be the way forward.
The basic idea of the blockchain database technology is that data is introduced into a block with a specified intake capacity. Once that capacity is reached, data is rerouted to a new block that is continuously chained to the previous one. This is done chronologically so that whatever data comes in first is retained first.
The blockchain database is most commonly used to store information as a ledger of transactions for now, but many more aspects of this technology currently remain unexplored. Data entered into decentralised blockchains cannot be reversed, and so they can be view by anyone and are not controlled by any single entity.
Blockchain technology deals with the issues of security and trust in several ways. The major one is its almost impossible allowance for alteration without consensus due to hash codes’ chain reaction. Each block has created these hash codes, with the codes of the previous block and timestamps getting stored in the block following it continuously.
The ultimate goal is to create a database where digital information can be recorded and distributed without the possibility of this information being altered or edited yet remaining completely accessible.
How Does Smart Contract Work?
So far, understanding the blockchain technology has been simple enough, so will smart contracts.
These are contracts that can be digitally executed when predetermined terms and conditions are met. They are lines of code that have been previously embedded to carry out an agreed-upon command when triggered.
According to IBM blogs “The benefits of smart contracts are most apparent in business collaborations, in which they are typically used to enforce some type of agreement so that all participants can be certain of the outcome without an intermediary’s involvement.”
To wholly understand how smart contracts work here is an example. suppose you’ve ever gone through the hassle of buying a new home or getting a loan to start a business and have gotten easily turned off by all the hoops, checks and rechecks you have to be put through to get a nod from your service provider before the actual process begins. In that case, you’ll understand the stress of the situation which can drag on for months at a time, leaving you in more distress than when you started. Well, smart contracts cut out all that hassle. You can almost liken it to switching from a 1994 Macintosh to a 2021 smartwatch.
Entering and re-entering personal information, verifying identity, interacting with different intermediaries, and unnecessary fees and commissions at every step are entirely removed in smart contracts. So this means there are less third party interferences and much smoother executions of contract agreements where all parties are abreast of all details, changes and conclusions as they occur. A huge preference for companies and organisations alike.
How Can Blockchain Smart Contracts Improve The Energy Sector?
With energy evolving before our eyes from the era of fossil fuels and their effects on the earth to renewable energy sources and energy storage and management, it would be wise to seek out an innovative way of reducing the hassle of the management aspect with the blockchain technology and smart contracts.
Bridging the trust gap is a critical factor of smart contracts. If your information is already stored on the blockchain, it is readily available for review and decisions can be made about agreements, payments and deals within shorter periods.
Here are some key benefits of smart contracts:
- Trust: because Smart contracts work with preinstalled code they are executed once predetermined rules are adhered to without third party involvement and, transparency is evident, all information is shared with involved participants
- Security: blockchain technology works with code, all data is encrypted making it increasingly difficult for hackers to have a field day because all records are linked to previous and subsequent records with time stamps and hash codes making any alteration completely affect the whole database, to change anything would involve changing all the information on the blockchain
- Accuracy: without excessive human interference the execution of smart contract orders happens seamlessly and according to exact requests entered into the blockchain, so there is less of a possibility of human error
- Speed: information on the blockchain is automated saving you the stress of unending paperwork or manually correcting and filling documents every time a contract is needed, it does the job in half the time traditional contracts would take
- Immutability: in blockchain, more blocks can always be added but not removed, so records of every transaction are permanent, this increases trust between all participants
- Cost-saving: with the expulsion of unnecessary intermediaries less money will be needed to complete agreements or execute contracts, this will only happen when all other benefits are fulfilled and trusted
Smart contracts are executed through codes that follow the “if/when/then” statements stored on the blockchain database. In the energy sector accuracy, trust, security and saving cost is paramount, and these are the major advantages of smart contracts linked to the blockchain.
In contemporary energy management systems, which usually involve the generation of orders, trade compliance, managing orders, price delivery, exchange execution and settlement accounting, are all time-consuming. The lack of flexibility allows for too many complications tying in several intermediaries.
As a grid operator, smart contracts and decentralised software guaranteed by blockchain technologies can be utilised to create a seamless, secure and efficiently distributed energy system promising to solve at least 80% of these highlighted pitfalls.