Blockchain technology has been making waves in recent times and is the most talked about for its secure and decentralized system of storing and transferring information.
While the use of this technology is well known in the financial space, blockchain in the energy sector is a hidden secret waiting to be explored. Blockchain in energy and utilities can phenomenally transform and streamline energy production, distribution, and consumption processes.
Several stakeholders are already understanding this potential. As per a report, the global use of blockchain in the energy sector is projected to reach $1564 million by 2026, up from $127.5 million in 2018, a CAGR of 37.6%.
The use of blockchain in energy and utilities is the ideal solution for a competitive industry facing several challenges and can improve its internal processes and make it more customer-centric.
By using blockchain, energy transactions can also be more transparent and tamper-proof while making them accessible to all parties without any third-party intervention.
Additionally, blockchain can be used to automate payments, reconcile energy supply and demand in real-time, and reduce dependencies on third-party intermediaries like banks and energy market operators.
To understand this better, here's a look at the potential of blockchain in energy supply and the many opportunities it holds for energy producers and consumers.
How Can Blockchain Be Used in the Energy Supply Sector?
In a report titled ‘Building Block(chain)s for a Better Planet’ that was published in 2018 by the World Economic Forum in collaboration with PwC and Stanford Woods Institute for the Environment, more than 65+ use cases were highlighted on the use of blockchain for energy markets.
This report focuses on the key features of the blockchain that have the potential to improve efficiencies for utility providers and offer unique solutions for renewable energy distribution.
The key benefits of blockchain in the energy sector include the following:
- Reduction in overall costs for existing processes and infrastructure
- Environmental sustainability thanks to distributed ledger technology for managing energy distribution
- Increased transparency for every stakeholder without compromising privacy
Overall, the key features of blockchain technology, such as decentralization, security, transparency, and the ability to automate transactions through smart contracts, make it well-suited for energy supply transactions.
By leveraging blockchain for energy trading, the energy sector has the potential to transform and create a more efficient and sustainable system with improved security, traceability, and visibility.
What Are the Use Cases of Blockchain for Energy Supply Transactions?
As we have seen, blockchain for the energy sector has the potential to revolutionize the way we look at energy transactions, creation, and consumption, making it highly efficient and transparent.
Some of the promising areas where blockchain can be leveraged for energy supply transactions include:
1. Peer-to-Peer Energy Trading
One of the most promising areas for implementing blockchain in the energy sector is peer-to-peer energy trading.
P2P energy trading blockchain enables the creation of a decentralized energy market. Energy can be produced and sold directly to consumers, eliminating the need for intermediaries like energy retailers and creating a more transparent energy distribution.
Additionally, blockchain can be used to sell excess energy ahead. For example, for electric vehicle (EV) charging, homeowners with an EV charging point register on a P2P network and allow it to be used by other users.
Thus, they can make money by providing their charger to other EV users that would otherwise lie idle and create a solid passive income stream.
This has already been tested in a project called the ‘Brooklyn Microgrid’ where homeowners with solar panels could sell their excess energy to their neighbors using a blockchain-based platform, reducing the need for more energy creation, removing intermediaries, and reducing transaction costs.
This was replicated in several areas. Tata Power also rolled out a pilot blockchain-based solar energy trading project in Delhi in 2021, making this use case one of the most probable to be adopted for mainstream usage.
2. Regulation and Compliance
Another promising use case for blockchain in the energy sector is regulation and compliance. The energy industry is highly regulated and requires producers and distributors to comply with multiple regulations across geographies and as per the purpose. This can be extremely complex and often difficult for the energy sector.
Blockchain technology can help streamline the compliance process by providing a secure and transparent platform for tracking and verifying energy transactions.
3. Carbon Credit Trading
Carbon credit trading refers to reducing greenhouse gas emissions by allowing companies to trade their credits for emissions they have avoided. Unfortunately, the trading system in its current phase is often slow and inefficient and comes with a high risk of fraud.
Blockchain for the energy consortium can help improve the efficiency and transparency of the carbon credit trading process by providing a secure and decentralized platform for trading and tracking carbon credits.
The platform also ensures that there is no third-party intervention using immutable transactions, making the changes of fraud highly unlikely.
4. Renewable Energy Certificate Tracking
A key area of blockchain lies in its ability to create smart contracts, which can be easily used for Renewable Energy Certificates (REC). RECs are used to track and verify the generation of renewable energy. However, the current system for monitoring RECs is often slow and inefficient, with a high risk of errors and fraud.
Blockchain technology can help create a more efficient and transparent system for tracking RECs by providing a secure and decentralized platform for tracking and verifying energy generation.
5. Energy Data Management
Energy data management is a critical component of the energy industry, as it allows energy companies to monitor and optimize energy usage. However, the current system for managing energy data is often complex and challenging to manage, with a high risk of errors and data breaches.
Blockchain for renewable energy can help create a more efficient and secure system for managing energy data by providing a secure and decentralized platform for storing and sharing energy data.
Providers can use blockchain technology to create a secure and transparent platform for energy data management, allowing energy companies to quickly and securely share data.
To summarize, the use of blockchain in the energy sector has the potential to transform the industry, providing a more efficient, secure, and transparent platform for energy supply transactions.
While these real-world use cases might seem futuristic right now, the rapid pace with which the world around us is transforming, the likelihood of it becoming mainstream cannot be overlooked.
These examples demonstrate the potential of blockchain to create a more sustainable and efficient energy system. As technology continues to evolve, we will likely see even more innovations in the future.