Blockchain in Energy: It’s Getting Serious Bookmark has been added
Blockchain in Energy: It’s Getting Serious
Market value of blockchain in energy sector is an expected $7.1b by 2023
In the increasingly complex energy sector, transaction administration, asset registration and data utilisation are still very inefficient. Corporations and startups are looking to blockchain technology for solutions. How about you?
April 04, 2019 | By Koen de Natris & Jacob Boersma
Let’s start with the numbers: In the energy sector, there are currently three big blockchain consortia, 122 blockchain startups and 44 blockchain patents. The startups already have combined investments of more than 450 million dollars, and 85 percent of them are still going strong—a very high percentage compared to the average life expectancy of a tech startup. Still not convinced? It’s predicted that by 2023, the market value of blockchain solutions in the energy sector will be 7.1 billion dollars.
Blockchain activity in the energy sector focuses mainly on the three areas with ample opportunity for distributed ledger technology: Transaction administration, asset management and data utilisation.
Administration of transactions
With the thousands of organisations in the energy sector all having their own databases and registration methods, it’s a challenge to keep information in sync and to prove the origin of electricity. The rise of prosumers, consumers who produce electricity via PV systems, for example, further complicates transaction administration. There is a clear need for a mechanism that coordinates transactions, supply and demand. This should be an agreed upon protocol and platform on which all transactions can be executed.
There is also an increasing need for real-time or near real-time information to balance the grid. Although there is already much investment in updating legacy systems, the blockchain is an interesting alternative for recording real-time transactions. The robust blockchain protocols ensure that registered transactions are the same for everyone, and the origin of transactions can easily be tracked.
Registration of assets
Large corporations with a multitude of assets in various regions can profit from smarter and unambiguous asset management, including maintenance history and certifications. This can prove valuable when it comes time for an audit or sale. In this case, the distributed ledger could verify claims about assets to third parties, such as a buyer or auditor.
Asset management on a blockchain is also interesting for the increasingly fragmented landscape of energy production. More and more families and businesses have their own solar panels or, as in the case of prosumers, use other methods for producing their own energy. An independent registration of those assets would prove useful for governments, energy companies and network operators. It could, for example, enable certification of green energy produced by decentralised installations, something that is not currently possible for prosumers.
In the ever-changing world of energy production, with higher peak demands on electricity (due to factors such as increasing EV ownership), smart grid management becomes even more important. But for this to happen, (real-time) data needs to be aggregated. Here, too, blockchain technology can play a role: Data from the distributed ledger is trustworthy and available in real-time or near real-time, which benefits load management.
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Governance of blockchain solutions
But there are still challenges ahead. Rules and regulations have to be adjusted to allow, for example, peer-to-peer energy trading. The high initial deployment costs of blockchain solutions, on top of existing investments in current legacy systems, are a further challenge.
Organisations tend to worry most about technological constraints, but a bigger challenge is more likely governance. Working with distributed ledgers for transactions and asset management calls for a transformation of the internal processes, and moreover, for a willingness to think in terms of collaboration in ecosystems and the value chain instead of solely focusing on one’s own organisation. Blockchain in energy cannot succeed without close cooperation, such as what we see in consortia like oil trading platform VAKT.
Using blockchain technology can bring efficiency to such collaborations, saving costs for the involved parties. At the same time, it can help embrace prosumers, stimulating the amount of green energy going into the grid. So where are you in this journey?
Want to know more about blockchain in the energy sector? Please contact Koen de Natris & Jacob Boersma.