The energy industry has been booming with inventions, including solar batteries, smart meters, electric vehicles and many more. Although it involves hefty investments in money, time and effort, choosing blockchain for energy and resources (E&R) boosts visibility, develops operating efficiencies, and eases regulatory reporting. Read on to find out the additional advantages of blockchain to the energy sector and why companies are adopting it.
Intersection Of Blockchain And The Energy Sector
Most of the mining of Bitcoin is carried out by adopting electricity. While initiatives like wind-powered mining farms offer a more eco-friendly path forward, waste and power consumption happens to be a challenge for the crypto community and it is where the energy industry and blockchain intersect. Today, the energy sector is a complex and highly-transactional system with various sources, distributors, middlemen, suppliers, and various start-ups that have evolved to streamline previous processes and develop new functionality. Few areas of possibilities include energy trading, P2P transactions, eliminating middlemen, accounting, data management, and automation.
Impact Of Blockchain On The Energy Sector
With the synergies between the energy industry and blockchain, we know that many projects have already started making use of this intersection. As per the ongoing collaborative projects, blockchain initiatives in the energy sector can be divided into eight categories:
- Metering/billing and security
- Cryptocurrencies, tokens, and investment
- Decentralized energy trading
- Green certificates and carbon trading
- Grid management
- IoT, smart devices, automation, and asset management
- Electric e-mobility
- General-purpose initiatives and consortia.
The energy sector can be divided into multiple categories considering the number of areas of possibilities. Therefore, it is not surprising given the complex nature of the industry. However, at the higher level, blockchain technology can advance the energy sector in the same domains they normally do – transactions and data management.
Use Cases Of Blockchain In The Energy Industry
- Commodity and offset trading: Commodity trading is one of the primary areas where blockchain can make a huge impact on its transactional ecosystem. Organizations presently fund millions to develop and access proprietary commodity platforms that can execute and track transactions. Other than many proprietary channels, blockchain can be utilized to ensure immediacy, immutability, and security of energy trading. Furthermore, there is an opportunity for trading and the creation of carbon offsets and green certificates, which are usually pricey to get. Metering systems and automated smart contracts can develop offset accessibility. It is an approach taken by various projects.
- Peer-to-peer Energy transactions (P2P energy trading): Being one of the primary value propositions of cryptocurrency, peer-to-peer transactions happen to be an avenue of advancement for the energy industry. Blockchain technology can enable users to directly trade energy. It is specifically promising for renewable energy sources like wind and solar, which the users can harness themselves. Such an innovation would particularly facilitate prosumers to enter the energy industry as a supplier. Some companies are already allowing their users to perform the same with microgrids, which enable prosumers to sell power to others in their community.
- Asset and inventory management: Having inventory management information and a shared asset source can be pretty powerful in the energy supply chain involving multiple stakeholders with high stakes. Blockchain comes with the power to unify the components of this process that typically happen to be obscure while additionally safeguarding the proprietary data and privacy of the involved parties.
- Metering and billing: Blockchain can be highly beneficial for billing and metering processes and could offer a number of advantages for both consumers and the energy suppliers. With a unified ledger providing a track record of energy delivery, the delivery and origins of energy is easier to automate for customers and become pretty clear for consumers. Certain energy management companies have experimented with various tests (multiple pilot initiatives) in this domain, including the connection of water meters and blockchain infrastructure to trace flows, as well as find issues in the cases of repair.
Advantages Of Blockchain In The Energy Sector
- Transparency and security: Apart from data management’s importance for increased transparency with the energy process, security also happens to be an equally important factor. For both companies worried about their proprietary data and consumers worried about their private data, blockchain technology can be a game-changer when it comes to shared information. Various startups and enterprises are researching modern encryption techniques for numerous projects and smart meters and hopefully, blockchain can bring a change for tackling these issues.
- Removing Middlemen: Blockchain is also effective at removing middlemen. This can serve to reduce costs imposed by energy retailers. With that being said, these retailers sell energy to the users from utility providers who, in turn, deliver the energy. A transparent and compact blockchain system can ensure users with direct purchases from the providers. Various companies are applying the Ethereum blockchain to perform the same, allowing users to buy electricity on a wholesale price other than purchasing via retailers.
Future Prospects Of Blockchain In The Energy Sector
Blockchain innovations within the energy sector are expected to reach a market size of USD 7,110.1 million by 2023, from USD 394.3 million in 2018, with a growth rate of 78.32% CAGR. It can be connected to the growing demand of blockchain innovations within the energy sector, the need to streamline infrastructure and additional business operations through immutability and transparency, not to mention mitigate the security issues within the existing infrastructure.
Many organizations are collaborating with numerous blockchain development companies and start-ups to reform grid management, supply chain management and energy trading.
In light to this, the power sector is one of the prominent end-users of blockchain technology within the energy sector. Additionally, this sector is deemed to own the biggest market share throughout the forecast period. Blockchain in the power sector plays a vital role in controlling distributed power resources and offers affordable and productive solutions to companies for recording and processing transactional data. In extension, the power industry possesses the highest number of applied blockchain solutions in R&D investments and energy projects. In light of this analysis, the applications of blockchain technology within the energy sector is expected to reach USD 10,287 million by 2026 as per the latest research.