As per an internal PwC survey, blockchain technology can prove to be influential for digital disruption across the energy sector. Blockchain is a type of distributed, shared ledger across a network of nodes. Businesses can use it to record transactions across multiple participants. With blockchain solutions, a centralized database becomes obsolete, and all participants in the network contain a copy of the database. It can enable companies in the energy sector to revolutionize various outdated processes.
The potential of blockchain technology in the energy sector comes twofold. In the short term, blockchain solutions can enable companies to streamline processes. While in the long run, they can have a disruptive impact on the whole market infrastructure. Specifically, blockchain can simplify transactions for the wholesale power markets involving renewable power generation.
Blockchain is gaining significant traction in the energy sector. Blockchain offers four key features that we can apply to different use cases in the energy sector.
It provides immutable record storage and verifiable transactions.
It enables secure and verifiable records of digital transactions. Nobody can alter or change records, thus, preventing data corruption.
A blockchain solution can be “permission-less” (open to the public) or private (closed) as per business security requirements.
They offer the provision to execute smart contracts upon completion of pre-defined business terms.
The distributed ledger of blockchain ensures transparency for all transactions and enables contract or transaction settlements in real-time. Therefore, it forms trust among stakeholders.
The infrastructure design strengthens data control and security across the network. It also promotes decentralization to prevent market abuse through monopolies while also adhering to legislation and regulatory oversights.
The shared ledger establishes trust through shared reading of the blockchain database and by eliminating intermediaries. Fewer intermediaries lead to reduced compliance costs and reconciliations. Further, it enables marketplaces with lower entry barriers, enabling the trading of smaller quantities.
Altogether, characteristics of the technology enable efficiency gains through reduced costs. They involve fewer intermediaries, simplify processes and infrastructures, and ultimately increase operational efficiency.
Additionally, organizations can further improve operational efficiency through the digitization of assets and their token issuance.
Companies can implement blockchain technology for efficient wholesale electricity distribution by connecting end-users with a power grid. Blockchain combined with IoT devices can facilitate users to purchase and trade energy directly from the grid instead of retailers.
For instance, Grid+ is a blockchain energy company that uses a blockchain platform for wholesale energy distribution. They believe that supplementing retailers with a blockchain-based energy distribution platform can lower consumer bills by around 40%. It can directly connect users to a grid and facilitate them to buy cost-efficient energy. It can result in a more equitable and stable energy marketplace having lower electricity costs.
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Energy firms are also thinking beyond wholesale energy distribution with blockchain applications. According to a Blockchain In Energy report by Wood Makenzie, various blockchain energy projects are developing peer-to-peer energy markets.
A peer-to-peer energy platform comprises a shared ecosystem that they can use for trading and buying excess energy from other users. Further, individuals who produce their energy can exchange it with their neighbors and peers.
Such firms are using enterprise Ethereum blockchain solutions. For instance, the Energy Web Foundation has used Ethereum, Truffle developer tools, and Gnosis multi-signature crypto wallets to develop their platform.
The energy data comprises market prices, marginal costs, energy law compliance, and fuel prices. Blockchain energy solutions enable stakeholders to achieve greater transparency, efficiency, and control over the data. Additionally, its immutable ledger facilitates secure, real-time updates of energy usage data.
Indeed, in April 2018, the Chilean National Energy Commission (CNE) launched a blockchain project focusing on energy data optimization. The government used the Ethereum blockchain to record, store, and track the data of energy usage. It is because bad actors often intentionally manipulate or misreport data. It can be detrimental for businesses and governments to bear the financial costs of intentional corruption and accidental clerical errors. To address this challenge, the CNE enables everyone to access the records of transactions and prices.