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]]>Phoebe Makin shares her journey from government legal trainee to Ashurst projects associate and explains why aspiring lawyers should grasp every opportunity that comes their way
Ahead of this afternoon’s virtual student event with Ashurst, we caught up with Ashurst projects associate Phoebe Makin, who shares how she switched from a science degree to a legal career, and now works on cutting-edge energy transition deals at the firm.
Makin’s path into law was far from conventional. Instead of following the typical route of a law degree and training contract, she began by studying human biology at university — a subject she quickly realised she had little passion for. “I found studying to be a bit of a slog… I just didn’t engage with the subject matter well at all,” she recalls of her undergraduate days, which ended with a 2:2 degree — a result she feared “put me in a difficult position if I ever wanted to move into law.”
When choosing her IB subjects, Makin had debated between law and medicine but ultimately followed her strength in science. Looking back, she acknowledges it “wasn’t the best decision,” yet her journey shows that early choices need not be final. “Just because you make a decision at the point of choosing your A-levels or IB, it doesn’t mean that you have to stick with it to the end,” she reflects.
After graduating, she worked in a series of legal-related roles, including at what is now the Legal Aid Agency, where she first encountered formal legal documentation. “Having that opportunity really spurred my interest in law,” she recalls. A later role at the Office of the Public Guardian’s call centre gave her a taste of client interaction. While not “legal advice” as such, it involved “guiding customers through the LPA application and informing them on the deputyship process in the court of protection” and helped cement her determination to pursue a legal career. This led her to enrol on the Graduate Diploma in Law (GDL), formally pivoting towards a career in law.
Makin later joined the Inns of Court College of Advocacy (formerly the Advocacy Training Council), where she coordinated advocacy training events for barristers and judges. It was, she recalls, “a really great opportunity” that allowed her to work closely with “senior judges and barristers.” Crucially, the director there encouraged her not to delay and to take the next step towards law if that was her goal. Makin listened: she enrolled on the Legal Practice Course (LPC) and applied for a training contract with the Government Legal Department (GLD), which she secured.
At the GLD, she became part of the first trainee cohort in the Commercial Law Group. The programme offered a secondment to one of the government’s panel law firms, and Makin spent one of her trainee seats at Ashurst. Working in Ashurst’s projects team gave her a taste of high-end private practice after experiencing only the public sector side of law. It was an eye-opener. “On qualification I decided it was important for me to go into private practice and that’s what led me to applying for and taking up a role in Ashurst’s projects department,” she explains. Joining Ashurst as a newly qualified projects solicitor allowed her to hone her skills and gain a deeper understanding of the commercial drivers for both public and private sector clients.
Makin admits she did not initially picture herself at a City law firm and even held some preconceptions about City life. On the one hand, she feared “the expectations would be too high” as a trainee. On the other, she worried she might be “stuck doing the grunt work without an opportunity to stretch myself.” Her experience at Ashurst turned those assumptions on their head. “When I came to Ashurst, I had the perfect balance of being given responsibility whilst having sufficient supervision,” she says. The firm trusted her with “really fairly complex” tasks that stretched her drafting and problem-solving skills, while at the same time offering recognition and support. “The team gave a lot of recognition that certain assignments were above the usual trainee level, but they encouraged me to give it a go with no fear.” That combination of responsibility and guidance reflected the projects team’s culture. “Everyone is friendly, and always happy to give up their time to give you guidance and to support you in your development,” she adds. The positive experience made her decision to return to the department on qualification an easy one.
Now an associate in Ashurst’s projects and energy transition team, Makin spends her days on major infrastructure and renewable energy deals. But what does “projects law” actually involve? At its core, it means helping clients deliver large-scale projects — in sectors such as transport, infrastructure, and energy — by putting in place all the contractual and financial arrangements needed to bring them to life.
“We work on all forms of projects,” she explains, from traditional infrastructure builds to cutting-edge renewables. For new developments, the team drafts construction contracts and everything needed to get the project “built and up and running.” Makin focuses on financing, whether that involves raising funds for a new wind farm, managing the acquisition of an existing project, or refinancing. Projects lawyers, she says, navigate all types of funding — “equity money coming in from shareholders and sponsors” as well as loans from “third-party” lenders such as banks or government bodies. In practice, this means guiding a project through its entire life cycle, from early construction through to financial close and beyond. “It’s just that full breadth of the life cycle of a project that we deal with,” she sums up.
One of the fastest-growing areas of Ashurst’s projects practice is energy transition, and Makin has already built up significant experience in the field. “One of the largest projects I’ve worked on is probably Moray East, the big wind farm off the coast of Scotland,” she says. The project involved a “hugely complicated contractual arrangement” covering both offshore and onshore components. Its financing structure had to account for “the complicated structure of the assets themselves,” making it both challenging and rewarding to be involved in. More recently, she has worked on energy-from-waste schemes, another key part of the shift towards cleaner energy. “Probably the ones I’ve led on more recently have been energy from waste,” she notes – an area where Ashurst has been particularly active.
The team is also advising on a wide variety of other low-carbon initiatives. “There’s quite a lot of other projects being worked on in the department, like battery storage, nuclear work and carbon capture, of course,” Makin tells us. Carbon capture and storage is “a big area” as governments and companies race to cut emissions. Her enthusiasm is clear as she lists the different sectors, reflecting the varied and forward-looking nature of projects law.
For aspiring lawyers, Makin stresses the importance of curiosity. Energy transition is evolving rapidly, and “it’s more crucial than ever to stay curious and up to date.” Her advice: “Keep abreast of all the developments because it’s such a nascent field in some respects.” Students who show they understand emerging technologies will stand out. “If students are able to speak to those and have done a little bit of research, that would be very impressive,” she suggests. Even a basic awareness of advances in battery storage, carbon capture, or nuclear energy can make a difference.
Before wrapping up, Makin reflects on the advice she would give to her younger self. It boils down to being proactive and open-minded. “Grasp every opportunity that’s given to you,” she urges. “If you go on a vacation scheme and somebody says, ‘oh let me know if you want to chat about X, Y, Z,’ take them up on that opportunity.” She cautions against tunnel vision, noting that even if you have a preferred practice area, every seat has value. “You might learn something that applies to the department that you’re most interested in. Or you might find there’s something much more interesting in the department that you’re in that you perhaps hadn’t accounted for.”
Above all, she believes in finding motivation within the work itself. “There is always something that you can find interesting in the work that you’re doing,” she says. “And that’s what’s going to keep driving your development as you move through your career.”
Phoebe Makin will be speaking at ‘Powering change: Exploring energy transition projects — with Ashurst’, a virtual student event taking place THIS AFTERNOON, Wednesday 10 September. Apply now.
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While the recent COP26 global summit on climate change may not have delivered as much as many were hoping for, there is definitely “momentum” for change, says Addleshaw Goddard energy and utilities partner Paul Dight. On whether net zero targets for carbon emissions will be achieved, he says: “I am confident it will happen, but less confident about the timescales. There is definitely interest, appetite and an understanding that this needs to be done.”
Dight leads Addleshaw’s low carbon and electric vehicles groups. He began his energy law career on his first day at the firm in 2005, when he was given work involving a wind farm development — the government had recently introduced a renewables subsidy regime, which led to a boom in this area. Having worked in the energy sector for more than 15 years, he has witnessed something of a sea-change in the priority companies give to green energy and wider sustainability issues.
“Our major clients tended to be intensive users of energy who wanted to control their costs or were forward-thinking on environmental issues and so wanted to move to greener energy,” he explains. “In the past three years, however, the market has changed dramatically. Now, almost all our clients — including the non-energy clients — are looking to move to greener energy, due to the net zero carbon challenge. They want more sustainable suppliers, recyclable packaging and greener power, and some are looking into whether they can generate their own power. All of our clients will need to know sooner or later how to decarbonise their operations.”
Dight says: “Historically, activity was on the whole limited to operator’s set targets by their regulators, those with a particular exposure to energy costs or renewables developers and investors. Whilst there have been some notable exceptions to this, with some more enlightened companies wanting to decarbonise ten years ago, for most, however, if energy wasn’t their core business, then green energy wasn’t a priority. That’s changed. This has gone from being an issue that doesn’t get prioritised to one that is now not only always discussed at board level but where boards typically have a specific person charged with sustainability. That’s fantastic. If it’s being talked about in the right circles, then it will get acted on. It removes some of the key hurdles historically faced by sustainability projects.”
He continues:
“I believe passionately in decarbonisation and the need for renewable energy, it’s a subject that’s all pervasive — businesses, our clients will have to embrace it, and law firms will have to embrace it. The next generation will have to be on top of it because it will impact on almost every area.”
Dight studied at Leeds University, speaks Portuguese, French and Spanish, and trained at Hammonds Suddards Edge, practising insolvency law before moving to Addleshaw in 2005 and making the switch to energy, utilities and infrastructure.
He advises on a variety of energy projects — wind farms, solar farms, electric vehicles, battery projects, infrastructure and utility networks — on their acquisition and disposal, and regulation. He is currently involved in helping Volkswagen in Germany on its global alliance arrangements with Ford, advising on battery and electric vehicle charging and on several wind and solar projects.
“All the projects require a lot of collaboration and teamwork with lawyers across a range of practice areas,” he explains. “The work requires a broad range of knowledge, covering the areas of corporate, commercial, planning, property, construction and finance. Consequently, lawyers in this area will collaborate and work in teams to pool their expertise. The energy and utilities group encompasses all disciplines — it’s very diverse in its expertise — so anyone interested in this space, whatever kind of lawyer they are, can get involved. You have to have a very good commercial and regulatory understanding and an understanding of the energy market itself.”
Dight says:
“I love this area of work because it’s so relevant. I love talking to my children about it, and knowing that in some small way I’m helping to save the planet. That I am able to make a difference as a lawyer gives a wider context to my work, and my children can see why I do this. There are new structures and technology developing all the time so every deal is fresh and problem-solving is always required. It’s great to be at the forefront of change and I am proud to be part of a firm that has so much experience in this area and provides the platform that we do.”
One major trend in this area is the installation of charging stations and other infrastructure for electric vehicles — the ban on new diesel vehicles comes into force in 2030. “That’s a massive shift — people need the confidence to know they can get from A to B without being stranded and that relies on the charging infrastructure being in place,” Dight says.
He continues: “There are a lot of challenges to overcome, for example, not all platforms are compatible so not everyone can use all the chargers, and there are significant cost challenges in installing the infrastructure in rural areas. However, people are always coming up with new technology and new solutions. For example, Volkswagen has announced a new product, a battery buffered charger, which should make connecting to the electricity grid easier and cheaper than conventional chargers in certain locations. It’s exciting to be involved in these types of developments. You can see the future and that’s not actually very far away but there are hurdles that need to be resolved first, and you are working to help resolve those.”
Paul Dight will be speaking at ‘Solving tomorrow’s problems — with Addleshaw Goddard’, a virtual student event taking place on Thursday 25 November. You can apply to attend the event, which is free, now.
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Lauren Vallender’s journey with White & Case began in the penultimate year of her law degree. After securing a vacation scheme with the firm, which led to a training contract offer, one might assume that she was always certain about a career as an international commercial lawyer. This wasn’t the case.
Along with the vacation scheme, she also undertook additional opportunities — including a role as a legal researcher for a production company, and an internship within an in-house legal team. When it came to selecting her path, what sealed the deal for Vallender was the ability to put into practice the international legal theory she had enjoyed studying during the second year of her undergraduate degree. From conflicts in law across different jurisdictions and the complexities in the commercial issues arising from these, international commercial law had it.
Vallender first encountered White & Case at a law fair she attended at university, and after meeting the graduate resourcing team, trainees and listening to a presentation that she “can still remember now”, she was certain it was the firm for her. The presentation centred around partners, associates and trainees reflecting on a restructuring deal they had just completed. Listening to those speakers, with their genuine passion for their work and what they were doing, sold it for her. She had known that she wanted international work, and opportunities to work with both governmental entities and non-governmental organisations and that was, and continues to be, White & Case’s “bread and butter”, Vallender explains.
Her fondness for the firm only grew during her vacation scheme, where everyone was “incredibly warm and welcoming”. Vallender learnt first-hand that diversity was not just lip service by the firm and everyone she met came from a variety of backgrounds. White & Case’s celebration of difference was evident and those from different backgrounds, with different experiences, were welcomed for their differences. During her vacation scheme, she struck the delicate balance between working on her tasks but also enjoying her time and getting to know the firm. This meant her training contract interview at the end of the scheme felt more like a conversation.
During her training contract she completed seats in projects, development finance, corporate, M&A, banking as well as a secondment to a large credit fund and an overseas seat in Singapore. Eventually, Vallender qualified as an energy, infrastructure and project finance associate.
When asked why she chose to specialise in energy, infrastructure and project finance, she tells me that “specialise isn’t quite the right word because it’s a very broad area”. It is that broad nature that drew her to it as the work entails aspects of all four of her seats. Indeed, Vallender’s career highlight reflects this blend. As a first seater, she worked on a $20 billion liquified natural gas (LNG) project in Mozambique — a project which brought unprecedented legal matters to the forefront, with issues emerging from the government and large banks. Helping out with the due diligence for this project, she had the opportunity to get to know the aims and interests of the parties involved. It wasn’t until she returned to the practice area as an associate that the deal was finally concluded, which she says led to a “real sense of satisfaction”.
On advice for aspiring international commercial lawyers, or those aiming for training contracts in London generally, Vallender says “try and demonstrate you’re interested and be interesting”. Showing interest does not require a 20-page CV, filled with legal work experience. Non-legal experience is just as valuable as legal work experience and it is crucial to draw on those experiences, and show how they align to your interest. To follow in Vallender’s footsteps, doing a wide range of work is useful as there is a real spectrum of clients within the energy, infrastructure and project finance team: governments, renewable energy, gas and oil companies and large banks to name a few. For students wanting to get a head start in their preparations, she recommends being up to date with current events and news. Even by reading headlines, information is assimilated (even unconsciously) and trends can be identified.
On being interesting, Vallender comments that it is important to remember that “this is potentially someone you’re going to work with during tough times or late nights”. Being professional matters, but personality and having interests outside of law equally matters, and aspiring lawyers need to demonstrate that they are well-rounded individuals.
Reflecting on her journey, the final piece of advice Vallender offers is:
“It’s not a race. Just make sure the firm is a good fit for you, as much as you are for them. Find a firm that aligns with your values and how you want to be trained; and the way they expect you to work gets the best out of you.”
Lauren Vallender will be speaking alongside other White & Case lawyers from different offices during ‘The world in transition — with White & Case’, a virtual student event taking place today (Thursday 28 October). You can apply for one of the final few (and free) places to attend the event.
Any views expressed in this publication are strictly those of the authors and should not be attributed in any way to White & Case LLP.
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“My most memorable project to date has to be the extraction of methane from a lake in Rwanda, to be used to generate electricity. That was all very experimental and involved constructing new technology in a remote part of Rwanda, to provide much-needed electricity, as well as reducing the risk of explosions from the lake. It was fascinating,” says Rosa Mottershead, an energy project finance lawyer at Norton Rose Fulbright.
Mottershead, who is based in the firm’s London office but commutes in from Cambridge three days a week, will often spend time travelling far and wide on long-standing energy projects. That has slowed since having her two children but the opportunity is still there for the taking. Since that project in Rwanda, she has continued to work on energy projects in emerging markets, and recently advised lenders on one of the world’s largest solar energy projects in Egypt.
Before she started at the firm, Mottershead studied philosophy and history at the University of Leeds. Upon finishing her degree, law seemed like the obvious career choice for Mottershead, who was looking to further the skills she had gained during her undergraduate degree.
Shortly after embarking on the Graduate Diploma in Law (GDL) at City, University of London, she secured a training contract with Norton Rose Fulbright. She completed six seats (as was the case in 2003 when she started her training) in acquisition finance, project finance, litigation, shipping finance on secondment to the global firm’s Paris office, corporate M&A and a final seat which saw her return to the firm’s project finance team. “It was a busy period and I was given a lot of responsibility,” she says on her second spell there.
It will probably come as no surprise then that Mottershead chose to qualify into the firm’s projects department. Initially working on oil and gas projects, including the development of a major power station in the Middle East, Mottershead built up her practice to focus almost entirely on projects in emerging markets, mostly in Africa. Her book of business is threefold: advising lenders, sponsors and governments on the development and financing of wind, solar, hydro and biomass/biofuels projects.
Mottershead spent time on secondment to a development bank — an experience she found “invaluable”. She explains: “I was working with the wider team at the client, including parties you wouldn’t normally engage with as external counsel. I got to really understand the client’s appetite for risk, and how this fits into the company’s wider business objective.”
The work of a projects lawyer largely depends on trends in the wider economy and government policy, as both are key forces for investment change. There are a number of issues that will shape the energy market in the months ahead. One of which is, of course, Brexit. There has been talk about the impact of Brexit on financial services, and Mottershead predicts a slump in investment (as you’d expect amid political uncertainty) but services such as energy, she notes, will still need to be delivered irrespective of the political climate in the UK, and internationally.
Under the Paris Agreement, the UK has recently adopted a target for net zero carbon emissions by 2050 in a bid to tackle climate change and reduce reliance on fossil fuels — a central theme that will be discussed at Thursday’s Building a sustainable energy future event held at Norton Rose Fulbright’s London office. “The UK is heavily reliant on gas and petrol-fuelled transportation, which means there’s a lot of work to be done to meet the new model in the years ahead,” she says.
The transition to a low-carbon economy has, in turn, fuelled investment in green energy projects. The government published its Green Finance Strategy earlier this summer which recognised the pivotal role the financial sector plays in delivering sustainable finance. It sets out its expectation for all listed companies and large asset owners to disclose their exposure to climate-related risk by 2022.
The green finance market is only going to grow — it’s estimated to reach £280 billion per year in 2030 and £460 billion in 2050 — which is great news for lawyers working in this field. “The push towards sustainability presents a really good opportunity for lawyers,” says Mottershead. “It’s an interesting time to be involved in cutting-edge deals involving both science and politics, with the opportunity to develop and expand products such as green bonds and green loans.”
For students hoping to enter this exciting branch of the legal profession, Mottershead has this to say: “It’s important to have an international mindset: be switched on and show an interest in the goings-on around you. Norton Rose Fulbright is an international law firm, the work we do is inherently global in nature, and junior lawyers can be called upon to work on a deal in any of our offices across the world (Norton Rose Fulbright has over 50 offices across five continents) — it’s exciting but you have to be prepared.”
Arguably, the most important quality energy enthusiasts need, to navigate this environment, is adaptability. “The industry is constantly evolving; it covers a broad spectrum in which there’s a lot of crossover,” explains Mottershead, who often finds herself switching between different types of projects. And whether it’s necessary to understand the science and technology behind the types of projects she takes on, Mottershead, who rows, gardens and performs in a six piece band in her spare time, says: “You don’t have to be a super science whizz to work in this practice area but it helps to have an understanding of the business world in which your client operates.”
Rosa Mottershead will be speaking alongside other Norton Rose Fulbright lawyers at Thursday’s ‘Building a sustainable energy future’ event. The event is fully booked.
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In spring 2016, a blockchain-powered project in Brooklyn, New York was piloted to enable the residents to buy and sell renewable energy directly to their neighbours. The project, run by a digital start-up called Transactive Grid, aims to disintermediate the central electricity suppliers and network providers through the use of blockchain technology. Participants in the project connect solar PV systems installed on their rooftops to a network of computers, which continuously record the energy generated and trade the excess within the community.
All buildings in the project are interconnected through the conventional power grid, with the energy transactions being managed and stored using a central blockchain. The project uses both smart meter technology and underlying blockchain software: the smart meters record the wattage of energy produced, while the blockchain software executes and records the transactions. All energy is bought and sold without a central energy company being involved; the blockchain platform manages the market autonomously.
The Brooklyn Microgrid project is too nascent for us to assess properly its likely impact on the electricity market. Whether the microgrid concept can evolve beyond merely an interesting local community initiative into something more fundamentally transformative remains to be seen. Nonetheless, there is little doubt that the underlying blockchain technology is capable of heralding serious transformation (or disruption, depending on your viewpoint) to the energy sector as a whole.
So, what is blockchain technology?
At a very high level, blockchain technology describes a collection of software programs that enable identical copies of data to be recorded, maintained and verified across a community of users, enabling them all to agree on the data’s authenticity and veracity. To achieve this, blockchains use decentralised storage platforms to record the data across a peer-to-peer network: each computer within the network can hold a complete copy of the data (i.e. in a ledger) and confirm blocks of new transaction messages that are submitted for entry onto the ledger by other members of the network.
In other words, it is basically a shared database: an enormous spreadsheet that runs simultaneously on thousands — in some cases millions — of computers (known as “nodes”), and which is open source, so that anyone of those nodes can read, check and add to the database.
A blockchain can be permissioned (a private network where all participant nodes are known) or permission-less (a public network where anybody can act as a node). In either case, the validation process typically involves nodes solving state-of-the-art cryptographic problems, using complex algorithmic functions (known as “hashes”). These hashes are used to evidence that each transaction has been authorised by its sender and used to link each block of transactions to each other. So, once a block has been validated by consensus on the network, it is then added indelibly onto the ledger. This is deliberate and serves to shield the blockchain against cyberattack — any hacker would have to control more than half the entire node network to alter any record in the blockchain.
The overall process creates a mutual consensus mechanism through which it is practically impossible to alter any of the past, validated transactions on the ledger.
The first blockchain was developed as the basis of the crypto-currency “bitcoin”. Since then, various iterations of the core blockchain technology have evolved. These iterations deploy additional functionality, including blockchains which are beginning to integrate programmable logic to enable transactions to be effected automatically and consensually across the blockchain community (known as “smart contracts”).
Possible applications for blockchain in the energy sector
Apart from the prospect of decentrally generated energy being sold directly between participants in smart grids like that of the Brooklyn Microgrid, other future applications for blockchain are being envisioned across the energy sector.
Many possible uses, like the ones outlined below, remain at early stage development. But because blockchain technology, particularly through the advance of Smart Contracts, enables transactions to be made directly between individual participants, it is beginning to change the way that energy firms think about their businesses. Much like the disruption experienced by financial services over the last few years, blockchain promises the energy industry opportunities to exploit lower operating costs, faster processing capacity and to create new innovative sell-side business models.
Simplified energy supply ecosystem
A major possible use being explored is to deploy blockchain technology via Smart Contracts to redesign the energy supply value chain. The concept is that by creating decentralised common infrastructures, a future state can be created in which the current complex, multilateral energy value chain can be simplified dramatically. For example, Electron, a London-based energy start-up, is looking to apply blockchain technology to the industry’s asset registration services, to create a distributed shared platform for energy providers to obtain information about particular assets, and also to record any transactional changes to those assets.
Smart energy switching
Blockchain technologies could allow consumers to arbitrage energy rates in near real time, so that rather than paying for their energy needs at a fixed, set rate with a single supplier, they could switch dynamically between multiple providers on an intra-day basis to optimise best price. Such a dynamic purchasing model is possible due to the potential speed and efficiency with which blockchain-based transactions can, in theory, be effected. In their latest Report on Innovation and Regulation, the British gas and electricity markets regulator, Ofgem, continues to identify a strong desire to overhaul the current processes for consumers to switch their energy suppliers, so this type of development is likely to be of keen interest to energy market regulators.
Global energy transfers
Blockchain technology could form the basis of software platforms for “sending” energy, such as electricity or gas, anywhere in the world. These energy transfers could be made via interconnected software applications that are developed on top of a blockchain. The developers of such energy transmission platforms see them competing with the money remittance market; for example, enabling migrant workers to send energy back home in place of cash, or by giving individuals the choice to donate energy to specific charities or even developing nations, with all donations being recorded and verified transparently.
Energy credits
Decentralised storage on a blockchain of all records of renewable energy generated by consumers, communities or businesses could be automatically converted into government-backed digital energy credits. These credits, being a new form of crypto-currency, could in turn be used to purchase commodities, effectively operating as a direct renewable energy incentive.
Key challenges to adoption
While the industry’s recognition of the transformative potential of blockchain continues to grow, there remain considerable areas of risk on which the market and global energy regulators will be keen to focus as the technology and its applications mature.
One of the first hurdles is the lack of technical standardisation. It is unlikely that energy businesses that want to use a blockchain for a particular use will have all of the operational data needed to operate the service. Blockchain-based platforms will therefore need to integrate with both the energy businesses’ legacy systems and to exchange data with third party participants. To enable that data to be shared optimally, it needs to be standardised so that it is compatible and can interoperate efficiently across the distributed blockchain platform. Some helpful progress in this area is being made: in the spring of 2016 the International Organisation for Standardisation (ISO) received official applications to establish a new field of technical activity on blockchain and other distributed ledger technologies. Although a useful step forward, it will take time to achieve truly international standards for blockchain.
A related concern is the current deficiency of acceptable governance models for blockchain-based technologies. Many prospective blockchain projects envision participation between various third parties within the energy supply market. Since control over the underlying blockchain ledger is (by definition) distributed, detailed participation agreements may be needed to govern access, set rules of conduct and to apportion accountability and liability. In the absence of a strong governance framework to define clearly the roles and responsibilities of the blockchain participants, blockchain platforms will continue to struggle to achieve widespread adoption, no matter how compelling the underlying business case.
While strong governance is crucial to ensuring the delivery of effective, predictable and sustainable blockchain services, different participants in a blockchain will have very different commercial drivers and expectations. Currently there is considerable debate in the blockchain community around what form governance over blockchain technologies should take. Getting it right will take time, effort and collaboration.
Regulatory uncertainty is also a major inhibitor to the adoption of blockchain. Regulators now recognise that innovation will play a vital part in shaping the future of the energy system and that advances in technology are already increasingly affecting how energy is produced, transported, managed and consumed. Importantly, they are beginning to appreciate that technological innovation alone is not the whole story — new business models and operating processes, empowered by innovations such as blockchain, can also drive greater market competition and realise benefits for energy consumers.
However, up to now authorities have shied away from engaging in discussions on how blockchain technologies might be regulated. Encouragingly, the regulators have started to show signs of wanting to engage more proactively to create the right regulatory environment to foster innovation. For example, in early December 2016 Ofgem announced its launch of Innovation Link, a service to help technology-led businesses looking to operate in the energy markets obtain rapid feedback on the regulatory framework and what it might mean for their ideas. The regulator is also considering introducing a regulatory “sandbox” (something already successfully used in other industries such as financial services) to enable new products and services, including blockchain-based projects, to be trialled in a controlled environment within the existing regulatory framework. Part of the aim of these regulatory initiatives is to facilitate competition through innovation, but they also enable the regulators to become more familiar with blockchain technologies and to start to consider how the regulatory landscape may be adapted in the future to support them.
Aside from regulatory concerns, other legal issues need to be worked through too. The legal enforceability of transactions effected via blockchain technologies is yet to be fully tested. The contract law regimes in some jurisdictions (including the UK) present potential issues, particularly for permission-less ledgers. For instance, some question whether there is sufficient certainty as to the parties’ identities and/or all the contractual terms between the participants in a blockchain to stand up to legal challenge.
A primary benefit of blockchain technologies is that they are capable of generating considerable efficiencies for cross-border transactions, as the nodes on a blockchain can be located on servers anywhere in the world. In view of this, another significant enforceability question remains unanswered: who should have jurisdiction to hear any disputes and in what forum?
How blockchains handle data also needs consideration from a legal perspective. Any type of data can be encoded into a block for entry onto a blockchain. Where this is personal data (such as energy consumers’ billing or meter details) it will be widely transferred to every other node in the network, some of which could be located across geographical boundaries. Careful consideration must therefore be given as to how personal data transfers across distributed blockchains can comply with international privacy law. For example, principle eight of the UK Data Protection Act 1998 restricts (and places certain protections on) transfers of UK residents’ personal data outside of the European Economic Area. While ensuring data compliance for blockchains is not impossible (and a number of blockchain innovators are developing proprietary applications aimed at achieving this) all issues must be considered from the outset as part of the design process to ensure the blockchain’s underlying coding and protocols are programmed appropriately.
Outlook
As is often the case with potentially transformative technological innovations, blockchain platforms are being developed faster than the existing regulatory and legal frameworks can be adapted. Nonetheless, and despite other challenges, real world applications of blockchain technologies have already achieved some surprising traction within other industries such as financial services, where both disruptive start-ups and incumbent legacy firms are investing seriously, either in competition or collaboration, in ways to leverage the technology and realise some of the enormous potential benefits it offers.
Whether blockchain will gain similar maturity in the energy sector remains to be seen; proponents of the technology see no reason why it should not. Looking past the hype, however, it is clear that considerable work remains to be done, with significant further collaboration required between industry and regulators to deliver workable, secure and compliant blockchain solutions. In our view, therefore, it feels unlikely that 2017 will be the year for widespread blockchain adoption in the sector. Nonetheless, it would be a daring C-suite which decided to dismiss its potential and not keep a close eye on where this technology is heading.
Chris Bates and David Futter are partners at Ashurst in London.
This article was first published on Ashurst’s Insights Blog.
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