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EW-DOS: The Energy Web Decentralized Operating System An Open-Source Technology Stack to Accelerate the Energy Transition © 2019 Energy Web Foundation December 2019

Table of Contents Key Takeaways 3 Preface 4 The Challenge 6 The Opportunity 8 A Closer Look 12 The Roadmap 15 Appendix: EW-DOS in Context 18 EW-DOS: The Energy Web Decentralized Operating System 2

Key Takeaways After three years of requirements gathering, EW-DOS leverages self-sovereign experimentation, and prototyping solutions decentralized identifiers, a series of with the global energy blockchain community, decentralized registries, messaging services, Energy Web Foundation (EWF) is evolving and integrations with legacy information its technology roadmap to focus on two technology (IT) systems to facilitate primary use cases: enhancing energy sector transactions between billions of assets, traceability and unlocking grid flexibility from customers, grid operators, service providers, customer-owned resources. and retailers. This stack is a common digital infrastructure that’s owned by none but To support enterprise-grade solutions in managed and maintained by all. these domains, we are transitioning our technology approach from a blockchain- To achieve our mission, EWF is developing and only architecture to the Energy Web deploying EW-DOS with market participants Decentralized Operating System (EW-DOS), a globally. Two initial deployments are already stack of open-source software and standards under way: integrating small-scale customers that includes the Energy Web Chain. into the wholesale balancing market for a European transmission system operator and bringing to life a first-of-its-kind renewables marketplace in Southeast Asia with PTT. This paper explains EWF’s refined vision for leveraging blockchain technology to accelerate the energy tran- sition, based on the past three years of research and collaboration with our network of more than 100 en- ergy market participants. It is intended for general energy and technology audiences. For a more detailed technical description of EWF’s current technology and roadmap, please see this paper’s companion piece: EW-DOS: The Energy Web Decentralized Operating System 3

Preface Energy Blockchain and EWF Since our founding in early 2017, Energy Web Foundation (EWF) has delivered on its initial vision. The energy sector’s first public blockchain—the Energy Web Chain (EW Chain)—is live. EWF has also released a series of open-source software development toolkits (SDKs) enabling market participants to more-easily launch new digital solutions that support the global transition toward low-carbon energy systems. This was accomplished with EWF’s 100+ member whose validator nodes are run by known corporations, organizations, the world’s largest energy blockchain many of them some of the largest and most-respected ecosystem, representing 280 million customers. energy companies globally. To date, we count more than 25 established companies hosting validator The energy blockchain space is maturing quickly. nodes across 15 countries spanning 17 time zones. From Thailand, to Austria, to California, to Latin America, major energy market participants have We are proud of the technology groundwork we have already launched or are in the process of launching laid, the ecosystem of market participants we have first-of-their-kind, enterprise-grade energy blockchain fostered, and the initial solutions being deployed that products on the EW Chain. leverage the EW Chain and our SDKs. But our mission to accelerate the global transition to a low-carbon Meanwhile, the EW Chain itself is one of the only future using decentralized and digital technologies public blockchains among any industry worldwide is far from complete. EW-DOS: The Energy Web Decentralized Operating System 4

Over the past three years we’ve worked with our Blockchain is not a replacement for legacy member organizations to research and test more information technology (IT) systems in the energy than 100 use cases for blockchain in the energy sector. Blockchain should integrate with and sector, developed dozens of proof-of-concepts, and augment legacy IT. supported the launch of commercial applications. Along the way, we have learned the following: The Energy Web Chain is capable of supporting enterprise-grade applications with respect Blockchain technology is uniquely capable for to scale, cost, and data privacy—as long as establishing multi-party consensus, anchoring solutions are designed with the right architecture, trust, and providing proofs. It should be used leveraging the blockchain for its strengths. accordingly, and not primarily as a datastore or messaging platform. With these lessons in mind, we have narrowed our focus to support what we believe to be the two most- Open-source software and decentralized system valuable use cases of blockchain technology in the architectures are critical to unlocking value energy sector: enhancing energy sector traceability in the energy sector with digital technology. and unlocking grid flexibility from customer-owned Open-source and open architectures minimize resources. transaction costs, avoid vendor lock-in, and support standardization and interoperability. Our plan is to now work with some of the world’s largest energy companies to develop and deploy a Simply “adding blockchain” when attempting to new technology stack focused explicitly on these use solve a problem does little. Taking advantage of cases. We call this enhanced tech stack the Energy blockchain’s full potential requires reimagining Web Decentralized Operating System (EW-DOS). business and market processes—including the roles and responsibilities of different Our vision is for EW-DOS to become a de facto industry actors—while embracing new decentralized standard: a secure, open-source, shared operating architectures. system for the 21st century grid. It is a stack of software and standards, including the Energy Web Chain, that will enable market participants to digitally orchestrate low-carbon electric systems. EW-DOS: The Energy Web Decentralized Operating System 5

The Challenge Customers are on track to invest more in the grid than utilities by 2030. But today’s power grids and electricity markets are not designed for a customer-centric future. Utility-scale wind and solar are now the cheapest sources of electricity in most regions of the globe. Renewable generation will comprise an estimated 50–80% of overall capacity in the coming decades, largely replacing thermal generation assets. This alone represents the most dramatic shift in the electricity sector since the advent of alternating current. But perhaps more significantly, for the first time renewables and distributed energy resources (DERs, in over a century individuals, companies, and including distributed solar PV, energy storage, communities can switch to local, independently- electric mobility, combined heat and power, energy produced power at prices competitive with management systems, and “smart” appliances such as grid supply by investing in a mix of large-scale thermostats).1 1 Customer investment and DER deployment data based on EWF analysis of Bloomberg New Energy Finance’s New Energy Outlook, S&P Global Intelligence, and Rocky Mountain Institute internal data. EW-DOS: The Energy Web Decentralized Operating System 6

Customers are making the switch quickly: in the next These assumptions are no longer valid. Supply ten years, electricity end-users will spend a cumulative from renewables is variable, demand is becoming $830B on DERs and $7T on electric mobility. By 2030, flexible, and customer investment in energy is roughly a third of global installed capacity will reside projected to eclipse grid operator investment over the “behind the meter” (see Figure 1). Along with this next decade—investment taking place in a naturally massive investment shift is a coming tsunami of device decentralized way: some customers want backup interconnections: an estimated 3.5 billion internet- power, others want to lower their energy bill or carbon connected DERs are expected to integrate with footprint, and others simply want to control smart existing electric grids by 2030. appliances remotely. Taken together, these assets have the potential to form In this environment, asset and customer information the basis of decarbonized, flexible, resilient energy is fragmented across multiple siloed systems and systems the world-over. But there’s a fundamental is often invisible to grid operators.2 Consequently, problem: everything about today’s electricity many assets remain largely isolated from core system markets—from rules governing asset qualification, planning and operation functions, and DERs in to the way prices are set, to the systems used to particular are chronically underutilized and frequently monitor and manage the grid—assumes that supply is fail to capture their full potential value. controllable, demand is fixed, and grid investment is a centralized function driven by grid operators. We aim to overcome these issues with EW-DOS. 2 We use the term “grid operators” as a catch-all for entities responsible for administering markets and/or processes that maintain overall supply- demand balance on the grid. Terminology varies by geography and regulatory regime, but includes vertically integrated utilities, transmission system operators, distribution system operators, market operators, independent system operators, and regional transmission operators. Fig. 1 Global Installed Capacity by Resource Type 100% Thermal Generation Utility-Scale Renewables Distributed Renewables, Storage, and Demand Flexibility 80% 60% Utility-scale renewables—plus distributed renewables, energy 40% storage, and demand flexibility— surge to 66% of installed capacity, overtaking central thermal power plants as the cornerstones of 20% electricty generation. 0% 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 EW-DOS: The Energy Web Decentralized Operating System 7

The Opportunity Use decentralized technologies to enhance energy-sector traceability and unlock grid flexibility from customer-owned resources. Bigger databases, more-efficient algorithms, or faster computers alone will not overcome the challenges facing grid operators. The problem is today’s grid architecture. Centralized architectures like the ones used to operate responsibilities. We believe in democratizing the way the grid today ultimately place the burden on a single renewables and DERs are integrated into grids, such party to maintain infrastructure, administer user roles that: and permissions, update data based on events over time, and establish a secure way of coordinating data Regulators set high-level rules of engagement; across multiple discrete technical and organizational boundaries on a permissioned basis. In such Grid operators provide platforms for transactions architectures, data is duplicated across systems, which as well as visibility into outcomes; increases the risk of inconsistencies. This in turn leads Individual customers, retailers, DER installers, to low trust and high cost. and other actors perform many administrative Instead, we believe market participants ranging from functions that currently reside within grid regulators to grid operators to customers need to operators. fundamentally re-evaluate their respective roles and EW-DOS: The Energy Web Decentralized Operating System 8

Our vision is to develop and deploy EW-DOS, a summarize who you are, where you’ve been, and stack of open-source decentralized technologies where you’re allowed to go or not go now and in the and standards to meet global requirements for future based on a variety of factors. Passports are a establishing identity, enforcing rules, and facilitating global standard for verifying identity and credentials; transactions between billions of assets, customers, individuals are granted specific permissions based on utilities, service providers, and grid operators. attributes like nationality and the rules of different jurisdictions; the passport itself contains both intrinsic data about you as well as dynamic data like visas and travel history, which evolve and update over time. With EW-DOS, we can support widespread value creation via the two EW-DOS is a tool for similarly establishing digital “passports” for every customer, asset, service most-promising use cases we have provider, and authority in a given electricity uncovered to date: system. But instead of a central entity being in charge of verifying credentials and issuing the passport itself, 1. Enhancing traceability in the energy any individual can create a passport and establish sector, giving market participants the ability verified credentials over time through interactions purchase a variety of digitalized, attribute- with peers or various authorities. based green commodities ranging from International Renewable Energy Certificates Here’s how digital identities fit into the EW-DOS (I-RECs) to certified green electric vehicle architecture, step by step (see Figures 2 and 3): charges or low-carbon fuels (e.g., biogas). Digitalize: Any customer, market participant, 2. Unlocking deep demand-side flexibility, or device that wants to participate in a given enabling grid operators to tap into the vast electricity market first establishes a self-sovereign technical potential of customer-owned digital identity to coordinate with other systems distributed energy resources in a trustworthy, and participants. Every digital identity is anchored low-cost, scalable way. on the EW Chain and fully owned and controlled by its creator forever. Authenticate: Once identities are created, local EW-DOS works by completely inverting today’s grid operators and market participants need system of top-down, unilateral management of a system to authenticate them and know, for energy-sector data acquisition and management. example, whether a given solar PV system in Asia or an electric vehicle in California is what Instead of any given person or device maintaining it says it is and has the attributes it claims to separate digital accounts for every product and have (e.g., power capacity, ownership). To do so, service they use (i.e., duplicated identities among identity owners make claims to peers or relevant market participants) there’s one universal and authorities such as grid operators and installers. persistent identity controlled by the identity owner and accessible to all other market participants. When Every claim is authenticated (or not) through conditions change (e.g., a customer switching from bilateral transactions, in which the “claimer” one electricity retailer to another), there is no need to (i.e., identity owner) provides a “verifier” (e.g., a start the registration process from scratch. The identity DER installer) with agreed-upon documentation owner simply updates its verifiable credentials, directs or data to prove a given credential. For a simple new relevant actors to its modified identity, and uses example, picture a DER owner claiming to a DER their identity to sign messages, perform transactions, installer that they own a 5 kW capacity battery and interact with market platforms. or solar PV system. As claims are verified, the underlying digital identity becomes richer and Travel passports are the best analogy for describing more trusted. Identity owners can also use claims how EW-DOS works. At a very high level, passports to delegate other entities to perform transactions EW-DOS: The Energy Web Decentralized Operating System 9

or claims on their behalf. Claim messaging and traceability example, authorized wind plants may data storage can be done “off-chain” or “on-chain” be added to an International Renewable Energy depending on the application. The Energy Web Certificate registry and begin producing digitally- Chain is primarily used for providing proofs about unique I-RECs that authorized corporate buyers each identity, enabling market actors to achieve can purchase directly. For a flexibility example, consensus about a given identity or claim without authorized behind-the-meter batteries are added needing to share or expose underlying data. to a local transmission system operator registry and begin participating in the wholesale market Authorize: Once authenticated, identities must for frequency regulation. Actual market operations then be authorized to participate in electricity are accomplished using a mix of decentralized markets or services for which they are qualified. To architectures and existing information and do so, grid operators, regulators, and/or retailers operational technology systems, depending on create registries that query the pool of on-chain the requirements of the specific application. Over digital identities and integrate all identities that time, operational and contractual data can be fed meet defined eligibility criteria for any given back to digital identities as verifiable claims to market, product, or service. These registries further augment the performance or “reputation” enforce market rules or business logic based rating of each identity. on the verified claims of digital identities, thus providing the foundational identity and relational In this architecture, blockchain-based digital data that other business processes and systems identities become the common reference point for all rely on—from market bidding, to dispatch, to participants and systems within a given market. Just settlement. as real-world passports form the basis for establishing identity and permissions (e.g., the ability to travel or Operate: With identities allowed into their work) in any region, they are the basis for registering respective registries, the corresponding customers and monitoring the actions of assets and customers in and resources can participate in markets. For a electricity markets. Fig. 2 Decentralized identifiers—enriched by multi-party attestation of verifiable claims—form the backbone of EW-DOS digital identities. Asset type: Lithium-ion Battery 1 TSO Registry 2 DSO Registry 3 EV Registry Third Party A Jones Residence 012345 Energy Storage System Reputation Score Model # Boulder, CO, USA 40.014984, -105.270546 M Model # Verified? kW Capacity Verified? 85 Third Party B kWh Energy kW Ramp Rate /MIN Verified? Verified? 7,300 5.5 kWh/yr kW Third Party C 1–1.5 kW/min EW-DOS: The Energy Web Decentralized Operating System 10

Fig. 3 ‘EW-DOS Passports’ based on decentralized identitifiers (DIDs) reside in an Identity Directory that interfaces with various application registries. dApp1 dApp2 dApp3 dApp4 Operate TSO Application Registry DSO Application Registry EV Application Registry 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2 3 3 3 3 3 3 3 3 1 2 3 1 1 1 1 Authorize 2 2 2 2 3 3 3 3 1 2 3 1 1 2 2 3 3 Identity Directory 1 1 1 1 1 2 2 2 2 2 Authenticate 3 3 3 3 3 1 1 1 1 1 2 2 2 2 2 Digitalize 3 3 3 3 3 EW-DOS: The Energy Web Decentralized Operating System 11

A Closer Look The Energy Web Decentralized Operating System (EW-DOS) Fig. 4 EW-DOS is our vision for a stack of open-source software and standards enabling market participants to digitally orchestrate low-carbon electricity systems. dApps dApp 1 dApp 2 dApp 3 Existing IT Systems SCADA DERMS AMI ADMS EW Origin EW Flexhub Oracles Toolkits Application Registry Reference Architecture EW-DOS Legacy / IOT Link Messaging Identity Directory Storage Bridges Energy Web Core Chain Abstraction Layer (API) Energy Web Chain Complete or in development as of Q4 2019 Roadmap 2020 Auxiliary Services EW-DOS: The Energy Web Decentralized Operating System 12

In this section we describe at a high-level each license by showing the expiry date and the picture component of EW-DOS. but without disclosing their home address, name, or age. The core Identity Directory is a smart EW Core contract that contains the universal list of DIDs and associated claims on the EW Chain. This EW Chain: A public, Proof-of-Authority blockchain architecture gives end users greater agency over operated by over 25 companies from 14 countries how their digital identity (and associated data) spanning 17 time zones. The EW Chain hosts is used and stored while also offering seamless decentralized identifiers, executes smart interoperability with all decentralized applications contracts, and provides proofs for verifying the running on the EW Chain. state of data and events. It features a native token (EWT) and a suite of templates for creating all Storage: Given the volume of data in the energy types of traceable digital assets. sector, as well as the complicated regulations governing its use, it will be impractical to store Chain Abstraction: Application programming data on blockchain at any reasonable scale. interfaces (APIs) that provide a standard EWF is experimenting with various emerging communication interface between on-chain decentralized storage solutions, but we expect components (e.g., decentralized identifiers and that in most cases existing storage solutions (e.g., smart contracts) and off-chain systems and data. either private cloud or on-premise database) will Analogous to middleware in a conventional be used for commercial applications and the chain operating system. abstraction layer will serve as a connective layer to on-chain components. Messaging: It’s best practice to send messages (i.e. perform transactions) on blockchain only EW Auxiliary Services when the underlying data requires multi-party consensus. Most messaging between identities, Legacy and IoT Link: EW-DOS does not replace contracts, and applications should be done existing IT systems but rather augments them off-chain using established standards (e.g., by providing a mechanism for more-easily AMQP, MQTT, STOMP, COAP). EWF’s messaging establishing identity and attributes for customers solution leverages these standards to establish and energy-sector assets. EWF is developing a decentralized messaging option facilitating multiple reference architectures for securely high-volume/low-latency messaging that can connecting legacy IT systems (e.g., CRM, ERP, also be integrated with on-chain transactions and billing engines) as well as IoT devices to on-chain signatures. components. Toolkits range from server-side integrations into big SCADA systems to small, Identity Directory: The Identity Directory lightweight implementations that can run on a organizes decentralized identifiers (DIDs), which small IoT device. Link toolkits make use of the are self-sovereign digital identities that can messaging layer to communicate with other be created and stored independently from a applications. central authority. Think of a DID as a universal and interoperable online account that the Oracles: In many use cases, on-chain smart user controls and can be used to log in to any contracts and events require data inputs from platform or service. The identity holder (the off-chain events or systems. For use cases where “subject”) can add as much information as they it’s beneficial to leverage multiple input sources like to their identity (i.e., claims) and they can get (e.g., monitoring of local voltage for multi-party this information verified by authorities (e.g., a reconciliation, reporting of distributed solar for government, energy company, bank). Collectively, renewable portfolio standards accounting), EWF is this process authenticates an identity. These building on top of emerging open-source protocols verified claims can then be used to selectively for establishing a network of independent nodes disclose information to third parties, akin to a to provide event data to on-chain contracts. person proving that they have a valid driver’s EW-DOS: The Energy Web Decentralized Operating System 13

Bridges: As blockchain technology continues to EW Origin: A series of customizable open- mature, we expect multiple blockchain platforms source software modules designed to support and protocols to emerge for specific use cases provenance and traceability use cases, including and/or geographies. To enable identities and digital renewable energy marketplaces. Origin contracts running on the EW Chain to interact with includes three core components: certificate peers on other blockchain networks, purpose-built issuance, tracking, and reporting systems, as well smart contracts called bridges are used. Initial as extensions for electric mobility and battery bridges are designed to transfer tokens between storage tracking. different blockchains, but over time functionality will expand to enable any arbitrary data or EW Flexhub: A series of customizable open- transaction to occur between networks. source software modules designed to support grid balancing and demand flexibility use EW Toolkits cases in a variety of regulatory environments. Examples include enabling vertically integrated Application Registry Reference Architecture: utilities to launch device-agnostic “bring-your- EWF’s application registry reference architecture own-device” demand response platforms to provides market participants a standardized way helping DERs participate in a variety of wholesale to create bespoke registries with administrative electricity markets. This toolkit was borne out of features specific to a particular geography, requirements to enable DER participation in a two- market, or application. Application registries act second balancing / frequency response market. as an “authorization” layer, setting the rules and roles for DIDs that wish to participate in the given Other Toolkits: We are continuing to develop market. For example, a national grid operator additional toolkits for renewable energy, DERs, may create an application registry that dictates and electric vehicle market participation as we eligibility for participation in a wholesale market gather additional requirements from our global (e.g., DID must have verified claim as being a network of members. In-development toolkits qualified DER and that claim must be signed by include functionality that enable digital identities another DID that has a verified claim from the to settle payment; automatically conduct national regulator). evaluation, measurement, and verification (EM&V); post value in escrow; and engage in complex Every decentralized application (dApp) running transactions (e.g., financial contracts). on the EW Chain will have at least one application registry, but a given application registry can be applied to multiple applications (in the example above, a distribution utility could coordinate with the national grid operator and use the same registry for a local congestion management program). EWF’s reference architecture includes a series of open-source smart contracts and dApps for managing changes and updates to the registry and creating an audit trail of all interactions between DIDs within the registry. EW-DOS: The Energy Web Decentralized Operating System 14

The Roadmap EWF’s Plan to Drive Impact at Scale EWF’s theory-of-change is simple. To achieve our mission we work directly with some of the world’s largest energy companies—including utilities, grid operators, and others—to develop and deploy solutions based on EW-DOS. We believe we can transform the energy sector, can participate in. For ongoing market participation, enabling new low-carbon market designs of all bids—whether submitted individually or as part of an shapes and sizes (in both developed and emerging aggregated pool—are linked to DIDs to prevent double economies) by implementing EW-DOS in collaboration counting in multiple markets or pools. Following with major market participants. EWF has already activation events, DIDs serve as an anchor to reconcile begun to develop and deploy discrete pieces of EW- operational and financial data, and ultimately execute DOS with several market participants, including: financial settlement. In Europe, EWF is helping a transmission system In Thailand, EWF is co-developing a renewables operator integrate grid-edge customers to participate marketplace platform with PTT to simplify corporate in national balancing markets. A “prosumer” renewable energy procurement across Southeast engagement platform enables the country’s Asia. This digital marketplace platform uses DIDs and prosumers and hardware vendors to establish DIDs for a shared registry to streamline the onboarding of themselves and DER devices. The DIDs then are used existing and new renewable generation assets, helping to establish claims about DER attributes, location, buyers find options that meet their needs, indicate and capabilities to inform which market(s) the DER their demand for new renewable energy projects, EW-DOS: The Energy Web Decentralized Operating System 15

improve transparency into energy use across their conducted in-house using legacy IT systems, no supply chain, and prove their purchases for reporting problem. EW-DOS does not prescribe a particular purposes. The marketplace also synchronizes with a approach to privacy and is flexible enough to work solution developed for the issuing bodies of energy in any context. attribute certificates (EACs) to certify transactions using the DID standard and uses tokens to trace EACs EW-DOS is market and regulation agnostic. through their entire lifecycle from generation to It creates value in vertically-integrated utility retirement. PTT’s platform will also make it easier to territories as much as fully deregulated link electric vehicle (EV) charging with I-REC purchases competitive markets. It works just as well in to position EVs as a new, large renewable energy buyer established markets in Western Europe as it does category. in emerging economies. These are only two examples, but they highlight three EW-DOS is not a “use case” or an “application”; important points: it is public infrastructure that supports companies that want to build solutions. EW-DOS makes it possible to build private Like other infrastructure platforms such and/or proprietary solutions on top of open- as telecommunications, the Internet, and source software and a public, decentralized blockchains like the EW Chain, the applicability network. If a utility wants a completely walled-off of EW-DOS is limited only by the imagination. network where they are the only party capable It enables myriad use cases and applications, of confirming and rejecting DID claims (meaning especially those that leverage the swell of they can restrict who does / does not participate customer DER investment to envision a low- in the local market), EW-DOS supports that. If that carbon, decentralized electricity grid. same utility wants all operational matters to be EW-DOS: The Energy Web Decentralized Operating System 16

Contributors About Energy Web Foundation All contributors from EWF unless otherwise noted. Contributors listed Energy Web Foundation (EWF) is a global, member-driven nonprof- alphabetically. it accelerating a low-carbon, customer-centric electricity system by unleashing the potential of blockchain and decentralized technol- Nitin Gavhane, Mani Hagh Sefat, Sam Hartnett, Walter Kok, Doug ogies. EWF focuses on technology integration and development, Miller, Jesse Morris, Mario Pavlovic, Micha Roon, Meerim Ruslanova co-creating standards and architectures, speeding adoption, and building community. In mid-2019, EWF and its member organizations launched the Suggested Citation Energy Web Chain, the world’s first enterprise-grade, open-source blockchain platform tailored to the sector’s regulatory, operation- EW-DOS: The Energy Web Decentralized Operating System. An al, and market needs. EWF also fostered the world’s largest energy Open-Source Technology Stack to Accelerate the Energy Transition. blockchain ecosystem, comprising utilities, grid operators, renew- Energy Web Foundation, December 2019. able energy developers, corporate energy buyers, and others. << >> The Energy Web has become the industry’s leading energy block- chain partner and most-respected voice of authority on energy blockchain. For more, visit Learn More For a more-detailed technical description of EWF’s current technology and roadmap, see this paper’s companion piece, EW-DOS: How It Works. To explore EWF’s existing technology stack, visit our Github and Wiki. To learn how to work with EWF, contact us at [email protected] To learn more about EWF’s mission, visit EW-DOS: The Energy Web Decentralized Operating System 17

Appendix EW-DOS in Context New energy market designs are coming fast. Along with them, so are shifts in roles and responsibilities across grid operators,3 retailers, and customers. There are growing trends toward dynamic retail tariffs, Even in instances where DER market participation local electricity markets, exposing retail customers to is allowed (e.g., aggregation in competitive western wholesale markets, and even “peer-to-peer” or other Europe, California’s DRAM program), established types of transactive energy markets that clear from the processes that grid operators use to integrate large- bottom up. With this context, there is a clear and urgent scale resources simply don’t scale to customer-owned need to transition customers—and their assets—from DERs. Other factors add further complexity, such as being a passive “end point” in a complex supply chain the arcane rules and systems that govern customer, to becoming active participants in a dynamic energy DER, and grid data. Maintaining an accurate state of system. both the physical and financial relationships between customers, DERs, and other market participants (e.g., Novel market designs and regulations are a necessary aggregators, service providers, and installers) is costly. step towards achieving the energy transition. For example, in some jurisdictions, retail customers are As a result, there is a high barrier to entry for prohibited from providing services to wholesale integrating DERs to the grid and operating them to markets. But passing policy is only the first step, and achieve a net benefit for all system participants. implementation is much more easily said than done. 3 We use the term “grid operators” as a catch-all for entities responsible for administering markets and/or processes that maintain overall balance between supply and demand on the grid. Terminology varies depending on geography and regulatory regime, but this list includes transmission system operators, distribution system operators, market operators, independent system operators, and regional transmission operators. EW-DOS: The Energy Web Decentralized Operating System 18

New market designs are providing pathways for expanded renewable and DER participation, but leave unanswered important logistical questions about how to efficiently do it. From Community Choice Aggregation in the United States, to DER participation in wholesale markets in Australia, to TSO-DSO Coordination in Europe, policymakers in developed electricity systems are experimenting with new designs to better accommodate new types of resources and achieve societal goals related to decarbonization, customer choice, and equity. In Africa, governments and businesses are looking to new policies and technologies to simultaneously decarbonize and expand access to energy in the face of changing climate and demographics. Despite differences in local conditions, there is nearly universal alignment on the need for a more distributed, renewable, resilient energy system. The question facing local leaders is no longer what to do, but how exactly to do it. In terms of scale, impact, and intricacy, this challenge assurances for kilowatt-scale assets vastly outweighs of integrating DERs into electricity markets is the value of each asset’s transactions. analogous to another industry currently undergoing widespread transformation: financial services. For these reasons, to date the primary way—often the Globally, an estimated 1.5 billion adults are currently only way—for DERs to participate in markets is via “unbanked” and lack access to traditional financial aggregators who pool DERs into groups big enough to products ranging from checking accounts to lines matter for traditional electricity markets. Aggregation of credit. Myriad reasons account for why so many is an undeniably useful tool, providing benefits both people remain unbanked, yet three prominent barriers to end customers as well as grid operators. But it does come to the forefront: 1) cost of those services, 2) not solve the fundamental problems of onboarding lack of access to financial institutions, and 3) lack and integrating DERs at scale and at low cost. of proper documentation and identity verification. Aggregation only outsources costly administrative In short, existing systems for performing “know- duties to aggregators themselves. These operating your-customer” (KYC) checks and basic account expenses are why even aggregators typically exclude management are either too complex or costly for certain types or sizes of DERs due to the impact on billions of people living in rural and/or developing company profit margins. economies. Thus, the global energy industry faces two Similarly, in both developed and emerging fundamental barriers to widespread DER integration. electricity markets, most DERs are a) too small First, there’s the issue of system-wide resource individually for large grid operators to care about, optimization for tomorrow’s electricity grids in a b) not worth the expense to justify traditional renewables- and DER-rich energy future. Second, processes for enrolling, and/or c) simply invisible to there’s the fundamental issue of onboarding, vetting, local grid operators. Yet there will soon be far too and sharing key information about DER attributes, many of them (DERs) to ignore or exclude—in both capabilities, relationships, and behaviors that allows number and capacity. system-wide optimization in the first place. It’s wildly impractical for a grid operator to physically With respect to system-wide resource optimization, commission every single smart thermostat in their tools like Advanced Distribution Management Systems territory, or to run dedicated fiber optic lines to (ADMs), Distributed Energy Resource Management every distributed solar PV or energy storage system. Systems (DERMS), and microgrid controllers are The administrative burden of managing financial already proven and continue to make progress. 3 DERs such as solar PV with smart inverters, battery storage systems, and flexible loads are technically capable of providing multiple grid services to multiple stakeholders, including the customer, local distribution utility, and wholesale/transmission system operator. DER maximize economic value to all stakeholders when they are utilized for multiple services. See RMI Economics of Series or WattClarity. EW-DOS: The Energy Web Decentralized Operating System 19

Onboarding and integration remains the thornier problem: Verifying Identity and Credentials: Just as banks need to perform “know-your-customer” checks to verify the identity of potential customers, assess their suitability for various products, and manage risk, grid operators need to qualify and register every asset that provides services to the electricity grid. They in essence need to “know-your-device” (KYD). Enforcing Market Rules / Allowing Market Access: DERs, like any asset, must only be allowed to participate in markets or provide services for which they are legally, technically, and financially capable. Such qualifications may change over time due to varying physical performance and/or evolving contractual relationships. In the banking world there’s an established (albeit imperfect) way of tracking “reputation” and enabling any relevant provider to allow or reject participation in a particular financial service: the credit score. In the electricity world, there’s no analogous reputation rating for small assets. Exchanging Information (and Value): At any given time a grid operator and/or other parties (e.g., aggregators, retailers, customers themselves) may rely on a single DER to provide a variety of services. To make optimal operational (i.e., real-time) and investment (i.e., planning) decisions, those entities need to have a common and accurate view of the attributes, capabilities, and state of each DER, its physical surroundings, and its contractual relationships. Therefore the identity, relational, and operational data associated with each DER needs to be authenticated and shared efficiently with all market participants that need access (e.g., regulators, TSOs, DSOs, aggregators, OEMs, customers). These are the challenges EW-DOS is purpose-built to solve. EW-DOS: The Energy Web Decentralized Operating System 20