In the recent technological advancements, an internal PwC survey suggests that blockchain is going to be an influential digital disruption in the next five years in the energy sector. The blockchain technology is a type of a distributed, replicated and shared ledger used to manage and record transactions across multiple participants with some innovative features. With blockchain solutions, a centralized database becomes obsolete, and all participants in the network contain a copy of the database.
The potential of blockchain technology in the energy sector comes in 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. Particularly, Blockchain can simplify transactions for the wholesale power markets that are largely impacted through the renewable power generation.
Blockchain is gaining significant traction and now being actively used in the energy sector. Blockchain offers four key features that we can apply to different use cases in the energy sector.
Provides immutable record storage and verifiable transactions
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 requirements
Offers the provision to execute smart contracts upon completion of pre-defined business terms
Ensure transparency for all transactions and enable contract or transaction settlement close to real-time. Thus, forming the basis for traceability and trust between stakeholders.
Establish trust through shared reading of the blockchain database and by reducing the number of intermediaries. Fewer intermediaries lead to reduced compliance costs and reconciliations, allowing the creation of marketplaces with lower entry barriers, enabling the trading of smaller quantities.
Enable efficiency gains through reduced costs. Enable only fewer intermediaries to get involved, 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.
Strengthen control and security through the infrastructure design. Enable encryption levels, increased data protection, and limited settlement risk and fraud risk. These elements also promotes the idea of decentralization that can prevent market abuse through monopolies while requiring less legislation, costs, and regulatory oversight.
Companies can implement the blockchain technology for efficient wholesale electricity distribution by connecting end-users with the 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 the grid, and enable them to buy energy from the grid at a cost they find suitable. It can result in a more equitable and stable energy marketplace having lower electricity costs.
Energy firms are also thinking beyond wholesale energy distribution with blockchain applications. According to a Blockchain In Energy report by Wood Makenzie, more than 59% of blockchain energy projects are developing peer-to-peer energy markets. A peer-to-peer energy network consists of a shared network of individuals, in which they can trade and buy excess energy from other users. Individuals who produce their own energy will have the ability to trade it with their neighbors and peers.
Such firms are using enterprise Ethereum blockchain solutions. For instance, the Energy Web Foundation have used Ethereum, Truffle developer tools, and Gnosis multi-signature crypto wallets to develop their platform.
Blockchain energy solutions enable consumers to achieve greater transparency, efficiency, and control over their energy sources. Additionally, its immutable ledger facilitates secure, real-time updates of energy usage data. The energy data includes different types of data like market prices, marginal costs, energy law compliance, and fuel prices. 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. Bad actors often intentionally manipulate or misreport data. It can 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.