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Ponton launches Enerchain blockchain trading product

London β€” German IT company Ponton has launched its blockchain-based Enerchain product with the hope that distributed energy groups will begin peer-to-peer trading within months, Ponton managing director Michael Mertz told S&P Global Platts Tuesday.

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Enerchain is targeted at trade at local level within energy communities, trading of flexibility within distribution grids, and wholesale trading with delivery at balancing zone level, Mertz said.

"As European energy markets became more decentralized, over time Enerchain could become the leading trading infrastructure for emerging markets," he said.

The product is being promoted for its ability to accommodate bespoke products, "which are difficult to establish on other venues, such as load curves, certificates, or flexibility," he said.

Bilateral trading on Enerchain is to cost users a flat fee of Eur500/month ($557/month) irrespective of trade volume, the company said.

Enerchain's underlying blockchain framework delivers a block time of one second at most, and an average end-to-end transaction latency of less than a second, it said.

Through 2017 there was talk of peer-to-peer trading on Enerchain eventually challenging centralized wholesale power and gas trading on exchanges or via brokers, with proof-of-concept development funded and guided by 44 leading European energy trading companies.

While test trades were carried out between the likes of E.ON and ENEL, Endesa and Gas Natural Fenosa (now Naturgy), however, a wholesale market platform based on Enerchain backed by utilities is yet to emerge.

Now Ponton is emphasizing the merits of blockchain at local level, with Enerchain being demonstrated in the state-funded NEW 4.0 project in northern Germany.

Enerchain has been linking flexibility providers (demand responders, battery storage) with grid operators in a test environment in the Schleswig-Holstein and Hamburg region. The aim is to cut redispatch costs in congested local networks struggling with excess wind generation, Mertz said.

Last year German redispatch orders cost the system (and so consumers) Eur1.4 billion, network regulator BNetzA said last week.

"There are only a few viable blockchain business cases, but those where a third-party role is replaced by a distributed infrastructure are more than promising," Mertz said. "Enerchain is only the beginning of decentralized trading in many industries."

While other trader groups like Vakt are looking at using blockchain technology to replace cumbersome post-trade reconciliation processes, Enerchain is unique as it focuses on just trade execution.

Originally designed for the digital currency Bitcoin, blockchain is a digital ledger that records transactions. A transaction can involve any digital currency, or contracts, records or other information.

Transactions on blockchain are done peer-to-peer without a central marketplace operated by an exchange or a broker.

The blockchain's network of registered computers continually validates transactions, building blocks of transactions that are then permanently entered in the ledger.

Nobody can change the ledger, it is immutable. It is shared with all members at all times. It is not stored in one central place, reducing the risk of cybercrime.

--Henry Edwardes-Evans, henry.edwardes-evans@spglobal.com