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16 July 2020

China’s State Grid Corporation opens its Blockchain Technology Lab

State Grid Corporation inaugurated its Blockchain Technology Laboratory on July 6th in China, to support its aims regarding a decentralized digital grid which uses the Internet of Things. The Laboratory will see both R&D and run pilot projects of blockchain business models.

State Grid is the country’s state-owned utility, with assets worth $600 billion dollars.

Last October, the Chinese premier Xi Jinping himself identified blockchain as an important innovation for the energy sector and industrial reform, and the government has been pushing it since 2016.

Blockchain technology promises to play a central role in distributed energy generation, consumption, and trading, allowing peak-shaving and Demand Response actions, performing a role similar to Virtual Power Plants. All of these will be important in a future where much of the grid is powered by distributed renewables and small-scale energy storage.

This kind of digitized, decentralized power grid infrastructure is making huge progress in China in 2020. Two important new sources of demand are data centers and 5G base stations – large-scale energy consumers which must have power reserves to draw on – reserves which can be provided from distributed energy storage and renewables, with the proper technology to administrate things.

Blockchain, with its tamper proof receipts, addresses a core problem – how to co-ordinate consumers, generators, and grid companies, and distributed energy storage – which otherwise run into problems of trust and communication amid the multitude of small-scale, rapid, multi-party transactions. Furthermore, blockchain achieves this in a lateral manner, instead of needing to set up in a centralized communications hub as seen with other Virtual Power Plants.

Additionally, market regulations need to accommodate VPPs and similar digital structures. China is a great power for energy storage manufacturing, but the commercial side of energy storage plants remains undeveloped, limiting the industry. As manufacturers compete to have the lowest prices, there is a lack of transparency surrounding quality and component details, and a risk that safer products may be outcompeted by shoddier ones.

The first Chinese state-owned blockchain company, State Grid Blockchain Technology, was founded August 2019 for R&D purposes, by the same State Grid subsidiary handling the new Blockchain Laboratory, namely “State Grid E-Commerce.” Besides power transactions, blockchain will be useful for all kinds of commercial activities that need a secure distributed audit trail, ranging from electronic legal communications to cross-border transactions.

In May, the State Grid Corporation ran a ‘State Grid Chain’ trial, using blockchain with energy storage to automatically maximize consumption of renewable energy on the spot market. This was part of the 100-day ‘Green Power Three River Sources’ event held in Qinghai province.

The Luneng Haixi Mixed Energy Demonstration Project participated in the ‘State Grid Chain’ experiment. The project has 200 MW solar PV, 50 MW CSP, 400 MW wind, along with a 100 MWh battery. This power plant was commissioned in early 2019, but prior to the introduction of blockchain it was not being used to its full potential, especially not its energy storage component. This was due to deficiencies in information sharing between the components of the project, limiting its ability to participate in the market.

With the ‘State Grid Chain’ model to follow, energy storage is set to grow in Qinghai, one of the western peripheral provinces which have traditionally seen a large share of solar and wind development.