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Legal Risks and Opportunities Related to the Use of Blockchain Technology in the Energy Sector
 
PIIS231243500022058-1-1
DOI10.18572/2410-4396-2019-1-101-106
Publication type Article
Status Published
Authors
Petr N. Maksimenko 
Affiliation: Mosenergosbyt, JSC
Address: Russian Federation, Moscow
Journal nameEnergy law forum
EditionIssue 1
Pages101-106
Abstract

Legal analysis of the regulatory framework governing public relations in the electric power industry makes it possible to conclude that significant changes are required to ensure the possibility of actual implementation of the advanced technologies, to mitigate legal risks for all subjects of the electric power industry, and to ensure protection of the rights and legitimate interests of both the electricity consumers, and the sales, generating and network companies. The legislator and the professional community have a global goal: to develop a concept for the functioning of the electric power industry, which in the mediumand long-term perspective will ensure the high investment attractiveness of the Russian energy sector and maximum satisfaction of all market entities. To that end, first of all, it is necessary to identify those legal risks and opportunities that must be considered and worked out for the evolutionary development of the industry. The author examines the legal basis for implementation of the blockchain and “smart” contracts in the wholesale and retail electricity markets, and considers peculiarities of the legal status of the electricity industry entities in the use of new technologies. The positions, opinions and statements contained in this article are the private opinion of the author and may not coincide with the official position of the entity, for which he works, or of any other entity.

Keywordsenergy law, energy law, legal regulation in the energy sector, legal framework of blockchain in the electric power industry
Received05.02.2019
Publication date01.03.2019
Number of characters18648
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1 As noted in the literature, the blockchain is a distributed register (database) consisting of interconnected blocks of transactions registered by the users [1]. In fact, transaction entering is an expression of will of the user to perform certain actions, for example, confirmation of the settlement and/or completion of the transaction. It is important to note that, according to the general rule, the created blocks are invariable as they are stored at the same time by all users of the register, and to change them, confirmation by each party is required. Herewith, the validity of the transaction is verified at two levels: by the person settling it and by the user confirming this action (for example, by the payer and the payee). Each subsequent block includes information from the previous one, which makes it impossible to change previously created blocks. To correct them, it is required to create a separate transaction. A key advantage of blockchain is the increased level of data reliability and their protection against interference and tampering.
2 Despite the fact that all users of the system have access to the data, which are entered independently by each database participant, the system allows creation of a centralized register, the essence of which consists in the fact that transactions and new blocks are formed by a trusted center (the person responsible for entering information into the register), and the users initiating the relevant transactions are entitled to verify their correctness and control the registration.
3 Speaking about “smart” contracts, it is necessary to pay attention to the fact that they are a tool derived from the blockchain and operate on its basis. There is no agreement in the doctrine on their definition; however, it seems that it is possible to agree with the definition of a “smart” contract, according to which it means a contract existing in the form of a program code based on the blockchain technology, and ensuring its independence and selffulfillment of its terms and conditions in the event of occurrence of circumstances predetermined in it [2]. It should be noted that the use of “smart” contracts materially simplifies management of legal documents, in particular, releases the counterparties from the obligation to prepare legal documents in hard copy, and also is as a more reliable alternative to other data transfer methods such as e-mail, etc. [3]. Currently, the most used platform for development and application of “smart” contracts is Ethereum, which comes into use by such major companies as Microsoft, Alibaba, and others [4].
4 Turning directly to the possibility of application of the considered technologies in the electric power industry, it is possible to make a conclusion about their potential usefulness both in the wholesale electricity and capacity market (hereinafter referred to as the WECM) and in the retail electricity markets (hereinafter referred to as the REM).
5 As for the WECM, regulation of supply and demand as well as adjustment of automated contract performance and development of distributed generation are among the most obvious means of implementation of the blockchain technology and “smart” contracts.
6 In case of the REM, the main direction of implementation of these technologies will be improvement and transformation of existing contractual relations. However, taking into account the greater number of details and peculiarities of their regulation, conclusion and performance of the contracts in the REM, the blockchain and “smart” contracts can solve a significant number of current problems. The following can be distinguished among these problems: unreliability of the counterparties, growth of the accounts receivable from the consumers, limitation of the consumption mode, accounting, quality and losses of electricity, and many others. Moreover, the blockchain has a great potential for development of the technology of electricity accumulation and storage [5].
7 It can be assumed that upon full imple- mentation of the blockchain and “smart” contracts in general, the WECM and the REM in their current form will cease to exist, and some hybrid market with its own peculiarities and the method of functioning will emerge in their place.
8 As was previously discussed, introduction of the blockchain technology can radically change the functioning of the electric power industry. The current state of laws in the energy sector can be recognized as satisfying the goals of reliable energy supply, energy security, and so on. At the same time, in the context of the sector development, attention should be paid to one of the fundamental principles specified in Federal Law No. 35-ФЗ dated March 26, 2003, On the Electric Power Industry (hereinafter referred to as the Law on the Electric Power Industry), keeping the balance of the economic interests of the suppliers and the consumers of electricity. If we consider the technologization and digitalization of the industry under study in the context of the future observance of this principle, it can be concluded that the current laws will not make it possible to fully ensure its proper implementation.

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