Energy Web's Plan to Tokenize the Global Power Grid | Ed Hess

EnergyWeb, co-founded by Ed Hess, is developing a decentralized solution for the clean energy sector, aiming to address issues of trust and coordination in energy markets. The core problem EnergyWeb seeks to solve is the lack of trust in current ESG reports, with 94% of investors reportedly not trusting them. This lack of trust stems from the opacity and potential for corruption in traditional regulatory and reporting systems. EnergyWeb's solution involves a neutral, incorruptible verification layer powered by blockchain technology. The genesis of EnergyWeb lies in the early days of Ethereum. Ed Hess, coming from the energy sector, recognized the potential of blockchain's immutable smart contracts to revolutionize regulated and voluntary energy markets. Traditional rule-making in these sectors involves PDF documents that dictate market behavior, leading to complex, bespoke IT stacks for compliance. EnergyWeb's vision was to use smart contracts as the rules themselves, thereby accelerating markets and increasing transparency. Founded in 2017 as a consortium, EnergyWeb initially experimented with Ethereum's capabilities in the electricity market. Its first product was a joint chain, a permissioned proof-of-authority network where consortium members acted as validators. This served as a testing ground for proof-of-concept applications. Over the past four years, many of these applications have moved into production. The current EnergyWeb protocol functions as a "verified compute cloud," a two-sided market. On one side, there's the demand for verified compute from regulated markets, voluntary decarbonization markets, and electricity markets. On the other side is the Web3 ecosystem, providing the compute power through providers and stakers. Rulemakers, corporates, and auditors interact through the EnergyWeb protocol. Rulemakers define rules not in rigid smart contracts, but through a no-code, drag-and-drop interface, similar to Node-RED environments. These rules govern calculations like avoided CO2 emissions or compliance with electricity market participation. These rules form the premise for market interactions between corporates, and auditors can verify the execution of these rules. Corporates use a gateway to connect their internal data, which is then processed by these predefined, immutable rules within the verification environment. A key use case is the book-and-claim registry for sustainable aviation fuels. This registry involves fuel providers, airlines, and corporates buying certificates. The registry utilizes EnergyWeb's verified compute cloud to verify actions like certificate issuance, transfer, and retirement. The core innovation is moving from an offline, paperwork-heavy process to a network where players agree on rules for calculations related to clean energy and fuels. While this process existed before blockchain, the significant problem in decarbonization markets is the lack of trust in ESG reports. Blockchain provides a neutral verification layer that cannot be corrupted. Regarding data verification, blockchain doesn't solve the "garbage in, garbage out" problem – it doesn't verify the truthfulness of the initial data input. However, it *does* verify that the data was processed correctly according to the established rules. Traditional auditing is time-consuming, costly, and often based on sample data performed annually. With verified compute, corporates inject data into the verification environment where the rules for processing are already set and immutable. The calculation itself is executed in a decentralized manner, similar to blockchain, where multiple off-chain computers perform the same calculation. A majority consensus determines the correct outcome, and deviations result in penalties (slashing of stakes). This ensures the integrity of the calculation, even if the initial data was flawed. While EnergyWeb doesn't solve data cleaning (e.g., through IoT), it ensures the correct execution of rules between parties, increasing both trust and market coordination speed. The protocol significantly speeds up regulatory updates. Instead of a five-to-seven-year process for new regulations, the "rule-as-code" approach allows for near real-time updates, potentially within half a year, and even pre-simulation of new rules' effects. If incorrect data is entered, it's processed correctly and permanently recorded. If an auditor later identifies the data as wrong, the reputation of the submitting party suffers, creating an incentive for accurate data input. EnergyWeb is actively involved with the Australian Energy Market Operator (AEMO) for real-time market coordination. This technology is a significant innovation, with other markets like the UK and Canada exploring similar directions. While verifying data and regulations, EnergyWeb also facilitates coordination for trading carbon credits. Its primary function is to coordinate the immutable execution of rules in markets, acting as a decentralized version of SWIFT for electricity markets. This is crucial because electricity markets cannot rely on a single entity for settlement due to their sensitivity. In electricity markets, participants must register assets and provide data (predictions and real-time data) for spot trading. EnergyWeb's logic solves this data and rule execution aspect. Trading happens on top of this verification layer. The protocol doesn't handle monetary settlement but serves as a foundational layer for faster trading, enabling tokenization companies to use verified certificate movements. The EnergyWeb Token (EWT) plays a vital role in ensuring neutrality and security. It's used for staking, providing "skin in the game" for compute providers. Compute providers stake EWT to avoid simple attacks. If a provider alters the logic, their stake is slashed. Clients pay for verification services in fiat or stablecoins (like USDC), which are then distributed as fees to compute and stake providers. Energy companies are the demand side, typically not wanting to interact directly with tokens. Verification providers' participation depends on the specific verification group's rules, which can be defined by the client. Some groups allow KYC-verified compute and stake providers, while others might restrict providers to specific jurisdictions. Open testing groups also exist. To contribute compute, individuals can download a runtime software from energywebx.com, install it, and subscribe to a verification group, staking EWT. The impact on a user's machine is minimal, as the calculations are generally simple. Payments from clients are typically invoiced in fiat, which is then converted to stable tokens for payout to service providers. EnergyWeb is working on automating this process, recognizing that stable token payments are a growing area for corporates. Live use cases include the sustainable aviation fuel registry, which recently went live after extensive legal and financial regulatory approvals. EnergyWeb is onboarding several other verification groups. The company's strategy from the outset was to build collaboratively with the market through its consortium model, ensuring solutions were digestible for the corporate sector. The "regulatory unlock" has been significant, particularly regarding the acceptance of stable tokens for corporate payments. Previously, it was impossible for corporates to pay for verification services in a way that could be easily converted to stable tokens for service providers. This has now become feasible, enabling easier corporate onboarding. EnergyWeb integrates with broader DeFi by providing a verified data substrate for tokenization of real-world assets. While current RWA tokenization often focuses on digital or already liquid assets like bonds and stocks, EnergyWeb aims to enable the tokenization of more complex assets like debt for renewable power plants or their actual production. This requires real-time, verified data on asset performance, payments, and operations. EnergyWeb believes that tokenizing electricity assets, a significant portion of the global economy, is the next frontier, but it hinges on verified data and logic. The project emphasizes the need for patience, having been in development for nearly a decade. The core value proposition remains transparency, faster market coordination, and enabling a fully renewable energy world. The volatility of renewables necessitates rapid market coordination mechanisms that current systems struggle to provide. EnergyWeb's focus is on inter-company rule verification, and in ten years, they aim for the EnergyWeb Verified Compute Cloud to be a standard. For those interested in getting started, EWT tokens can be found on CoinGecko and CoinMarketCap. Users can contribute compute by visiting energywebx.com. Information on solutions can be found at energyweb.org. Providing compute and staking EWT earns service fees, not yield, and involves risk, as compute providers can be penalized for logic deviations.