Tokenized Energy Settlements via Blockchain Reconciliation

Resolve Bottlenecks,
Find Innovative SolutionsGenerate Solutions

Solution Overview

Problem

Energy trading settlements teams face lengthy delays due to manual data matching and reconciliation processes, leading to prolonged discrepancies identification and delayed payments, which are not scalable or efficient.

Innovation Solution

A tokenized energy settlements system utilizing a Private Permissioned Blockchain for data reconciliation, a Reconciliation Smart Contract for automated matching, and a Public Blockchain for real-time payment settlements, integrating with Energy Trading and Risk Management systems and third-party data aggregators for authenticated transaction data.

Engineering Contradictions & Design Principles

VSEngineering Contradiction Analysis

1Productivity

If manual data matching and reconciliation processes are used, then flexibility in handling complex discrepancies is maintained, but processing time increases significantly (3-4 hours per deal) and productivity decreases

Engineering Contradiction:

Improvesettlement processing speedVSAvoidreconciliation time

Core Design Contradiction:

ProductivityVSLoss of time

Solution Approach 1:

The patent replaces manual mechanical data matching processes with automated smart contracts executed on a permissioned blockchain. The smart contract automatically compares transaction data from both parties, identifies discrepancies, and initiates reconciliation without human intervention, reducing processing time from hours to near-real-time while maintaining the ability to handle complex energy trading scenarios.

Inventive Principle:

Principle #28Mechanics substitution (Replace mechanical system)

Solution Approach 2:

The system enables self-service reconciliation where the blockchain network automatically performs the matching and verification functions that previously required manual operational effort. The smart contract autonomously processes deal matching, validates transactions against agreed terms, and coordinates settlement actions without requiring continuous manual oversight.

Inventive Principle:

Principle #25Self-service

2Reliability

If manual transaction processing is used, then detailed human investigation can be performed for discrepancies, but the process becomes lengthy (25+ days) and scalability is limited

Engineering Contradiction:

Improvediscrepancy identification accuracyVSAvoidsettlement cycle time

Core Design Contradiction:

ReliabilityVSProductivity

Solution Approach 1:

The patent substitutes manual investigative processes with automated smart contract validation and blockchain-based discrepancy detection. The system automatically identifies mismatches between transactions and contract terms, providing reliable discrepancy identification within minutes rather than weeks, while the immutable blockchain record provides an auditable trail for any investigations needed.

Inventive Principle:

Principle #28Mechanics substitution (Replace mechanical system)

Solution Approach 2:

The system implements continuous feedback loops where the smart contract constantly monitors transaction data, compares it against the master agreement, and immediately notifies parties of any discrepancies. This real-time feedback mechanism ensures that issues are identified and addressed promptly, dramatically reducing the 25+ day settlement cycle while maintaining thorough verification.

Inventive Principle:

Principle #23Feedback

3Adaptability or versatility

If centralized manual reconciliation systems are used, then control over the process is centralized, but the system lacks scalability and cannot handle increased transaction volumes efficiently

Engineering Contradiction:

Improvesystem scalabilityVSAvoidreconciliation system architecture

Core Design Contradiction:

Adaptability or versatilityVSDevice complexity

Solution Approach 1:

The patent introduces a permissioned blockchain as an intermediary layer between the trading systems of multiple energy companies. This decentralized intermediary enables scalable transaction processing across multiple organizations without requiring a complex centralized architecture. The blockchain network can accommodate increasing transaction volumes by adding more nodes rather than scaling a centralized system.

Inventive Principle:

Principle #24Intermediary (Mediator)

Solution Approach 2:

The smart contract platform provides universal functionality that can handle various energy trading scenarios (spot markets, futures, options, swaps) through a single unified system. The same blockchain infrastructure and smart contract framework support multiple transaction types and counterparties, eliminating the need for separate reconciliation systems for different trading products and enabling the system to scale with diverse transaction volumes.

Inventive Principle:

Principle #6Universality (Multi-functionality)

Data Source

PatentUS20220114580A1Tokenized energy settlements application

Publication Date: 2022.04.14 KPMG LLP

AI summary

Systems and methods disclosed herein are directed to a tokenized energy settlements application. By combining capabilities to automate reconciliation, attest to transactions, and automate payment settlements for the energy industry, an embodiment of the present invention enables organizations to accelerate their post trade processes of transaction reconciliation and payment settlement.