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Our first blog post about blockchain in the power industry, identified key questions power executives are typically asking us. We now explore whether power executives should be taking blockchain seriously and the possible benefits.
Blockchain Buzz & Reality – should we be taking this seriously?
The Buzz – The numbers published about blockchain globally are staggering. Forecasts such as, ‘The business value-add of blockchain will grow to slightly more than $176 billion by 2025, and then it will exceed $3.1 trillion by 2030’ and the market value of blockchain in the energy sector is an expected $7.1b by 2023 are sparking the interest of power executives and start-ups. Blockchain’s core characteristics of trust, transparency, immutability and disintermediation have enticed 122 energy sector organisations to participate in blockchain and 40 publically announced projects have been deployed as of March 2018. These projects can either be individual client applications or platform / network plays looking to disrupt the traditional enterprises way of doing business and enabling new business models. Two platforms that demonstrate the potential of blockchain based energy ecosystems at scale are Ponton’s Enerchain and VAKT (and the sister platform Komgo). What both platforms have in common and makes them unique, is they were created by competitors and participants from across the energy value chain to solve common industry pain points for the whole network to benefit. VAKT was created from investments by nine leading supermajors (BP, Equinor and Shell), traders (Gunvor, Koch and Mercuria) and banks (ABN Amro, ING and Societe Generale). Enerchain was created in 2016 and now boasts more than 43 participating firms including: Centrica, e-on, EDF, Enel, Iberdrola and Endesa. In both examples, blockchain provides the technology backbone or ‘trust layer’ to enable the ecosystem participants to confidently transact with each other.
The Reality - there is no agreed definition of blockchain and what constitutes a blockchain solution. Many have and will call their projects ‘blockchain projects’ in an attempt to grab headlines or increase their company valuation. At Deloitte, we have even coined the label ‘Block-wash’ to highlight the over exaggerations of the benefits and uses of blockchain technology. What is real, when it comes to blockchain, is that it is still an emerging technology being tested and explored within and across enterprises and industries. For some use cases, alternate technologies can do the job as well if not better than blockchain. Implementing blockchain solutions to co-exist with existing process and systems is not straight forward; like any other technology project with new and additional complexities. Arguably the greatest challenge to blockchain’s success is nothing to do with the technology - collaboration between enterprises and governments to define standards and legislation, build and adopt solutions could well be the biggest challenge.
Being pragmatic about how blockchain can address your organisation’s pain points and business opportunities is critical. This will help develop the business case for investment but also help in determining whether any proof of concepts and trials were a success, and whether to continue at scale.
The Dollars and Cents – what are the benefits?
Deloitte, in its 2018 global blockchain survey, identified that greater speed, new business and revenue sources and greater security/lower risk are the key value drives reported for blockchain against existing systems. To dig deeper, we need to investigate the benefits of production solutions. Although proof-of-concepts are helpful in determining whether to scale a solution, they are not always a reliable measure for what the actual benefits of a solution will be at scale – they only act as predictions. Scaling and commercialising solutions will incur management and internal resource costs, development costs, security and legal costs and possibly tax implications. Like any technology project, these costs can be larger than predicted.
However, companies and consortia that are implementing production based blockchain solutions are either not at scale or mature enough yet are largely keeping quiet on the benefits realised. This makes it difficult to ‘truly’ know whether the technology is really living up to its hype for the enterprise.
Yet, for the likes of VAKT and Enerchain the business case and value proposition, in theory, is very appealing. Although still early days in their journey, if their platforms are a success, the investors and consortia members will not only benefit from digitalisation, process and back-office efficiencies, but also revenue generation from participant transactions, platform membership fees and appreciation of the value of the platform – a win-win all around.
Our next blog will share our use case assessment framework and PoV on what the most promising use cases for Australian power companies are.
Roger is a Consulting Partner specialising in providing client-side technology advisory solutions. He has extensive global experience working across multiple technologies and industries, is a member of Deloitte’s Global IT Strategy advisory team, and leads the Australian IT/Operational Technology Convergence Practice.
Christopher is a Director within Deloitte's Technology Strategy & Transformation practice and specialises in emerging technologies with a focus on blockchain. Having previously worked in Deloitte's UK Blockchain Lab, Chris has hands on experience advising and delivering blockchain based solutions for Energy, Automotive, Transport and Logistics and Financial Services clients.