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Blockchain is well known as the technology that underpins cryptocurrencies and it is useful to have an appreciation of how this technology is indeed employed in the crypto sector in order to identify how it can be used in other aspects of society and commerce. Blockchain technology is a digital ledger technology, or a spreadsheet typically duplicated multiple times and stored in a distributed network across many locations.
Certain blockchains permit participants in a network to transact directly with each other securely, cutting out third-party intermediaries and enabling peer-to-peer transactions. However, the capability of this technology extends beyond merely the financial sector as it can also be harnessed to transform the renewable energy industry.
Blockchain-powered platforms are set to reshape the renewable energy industry, for example:
from certifying the source of green energy by allocating generation assets to a specific point of consumption,
by helping to make the energy grid more accessible through data-sharing in real-time,
through enabling transactions between two parties.
The establishment of the provenance of electricity supplies by enabling tracked, verifiable, and secure transactions between the parties is a key challenge Blockchain technology can establish. Furthermore, this enables the bypassing of intermediaries (and their associated fees and inefficiencies) to transfer goods and information between buyers and sellers. Blockchain technology empowers people to become prosumers, i.e., producing and selling power and therefore resulting in a far greater decentralised and distributed energy sharing system.
Sources of UK national grid electricity generation * This is updated very 30 mins
The benefit of blockchain in the energy industry
Our reliance on electricity seems to grow and grow and the energy industry has been consistently catalysed by innovations such as electric vehicles, smart metering and rooftop solar, amongst others. With the potential to transform the energy industry, Blockchain technology arises as the next emerging technology to stimulate growth in the energy sector through its smart contracts and systems interoperability. The interest in Blockchain technology is furthermore being fuelled by concerns about climate change and the desire for organisations to improve their Environmental Social corporate Governance (ESG) credentials. One very tangible way to help the world is to use more renewable energy (such as solar), but one needs to be sure of how the electricity consumed was generated in the first place.
Blockchain technology use cases are very varied and indeed there are many identified benefits of using blockchains in the energy industry, all whilst helping the environment. These include a new business model for energy markets, real-time data management and moving carbon credits or renewable energy certificates onto blockchain-powered platforms. Blockchain technology has the potential to improve efficiencies for utility providers by tracking the chain of custody over power grids. Aside from this, it offers unique solutions for renewable energy distribution. Legacy energy suppliers in the petroleum sector suffer from a complex network of participants and supply chains which often lead to inefficiencies. There are a number of initiatives including, Komgo, Vakt and dltledgers that have been developed to help improve the way petrochemical firms using Blockchain technology operate. For other examples of how Blockchain technology is being used in the energy sector, Consenys has highlighted a range of other case studies.
Application of Blockchain technology in the energy sector
There are a few challenges that plague the popularising renewable energy usage. Two of these are the difficulty in handling renewable energy and the cost associated with proving that the energy comes from a renewable source - an overhead not required by other power generators. Blockchain technology may help solve these challenges. Without a doubt, as a promising technology, blockchains can be utilised in the energy sector for recording and facilitating transactions between generators and consumers of energy. Included in this used are:
peer-to-peer (P2P) electricity trading: many P2P platforms have been developed and several additional projects are underway. Part of the aims of these platforms is to sell excess renewable energy to other network participants through automated smart contracts.
the management of renewable energy certificates, grid management, electric vehicle charging and sharing are also part of the application of Blockchain technology in the renewable energy sector.
the Integrated Demand Response has shown, beyond doubt, to be effective in improving the operating flexibility of the system and energy utilisation efficiency via optimisation of the operations of flexible loads, energy conversion and storage equipment on the demand side.
The main benefits of blockchain in the energy industry include the ability to reduce costs, improve efficiency, environmental sustainability and increased transparency for stakeholders to track and trace power source generation whilst not compromising privacy. When looking at the use of blockchain-powered platforms in the energy sector, a report by Deloitte highlighted that the technology could help in: “trading, regulatory reporting and compliance and global supply networks”.