Blockchain technology has brought innovative solutions to several industries aside from finance. Seeing its application within the transport, healthcare, communication and trade sectors among other industries. The energy sector is not an exception either. Energy goals for the future require systems that incorporate decarbonisation, decentralisation and digitalisation. This shift is to empower consumers, reduce monopoly of power generation and increase efficient and sustainable use of energy. Blockchains or distributed ledgers can be employed by national governments, private supply companies, technology developers and consumers towards these goals.
Today, I will only focus on the future goal of decentralisation and explore how blockchain technology will empower this process. The primary purpose of blockchain is to remove the need for monopoly and/or intermediaries and replace them with a distributed network of digital users who work in partnership, that is, peer to peer (P2P) networking.
Disrupting the status-quo
A centralised eco-system in power generation sees energy coming from a large power station which is then distributed to several regions of the country through a national grid. This monolith of power generation and distribution is now being challenged.
First, is the long-distance transportation, which comes with a massive loss of energy. With the world evolving into more energy consciousness, new ways are actively being sort to reduce this wastage during transmission. One way to solve this is by shifting to localised production of energy within communities. This generally evolves into creation of micro-grids within communities to share common resources and drive towards efficient power generation. Block chain then comes in to securely track energy sources, energy type, units generated, units purchased and location of consumers in those localised systems.
Second, it’s addressing the renewable energy produced by small-scale producers. Energy conscious industries and home owners are installing solar plants and wind farms. These supplementary, alternative sources are often difficult to track, manage and operate within the larger national grid system. Blockchain can come in to solve this and ensure secure recording of ownership and origins of alternative energy supplied and consumed. These secure data structures created in digital ledgers can be shared and distributed without using a central point of authority.
Benefits of Blockchain in the energy sector
According to commercial reports done by Deloitte and PWC, blockchains have the potential of transforming energy related products and commodities into digital assets that can be traded.
This gives opportunity for income to small-scale prosumers (those who produce for their own consumption). For example, an industrial facility with surplus power generated from their wind farm can supply to the local community through a localised grid and track related data through blockchain technology. Thereby, turning their assets into income-generators and actively participating in the energy ecosystem.
Transactions being made by the small-scale producers can be solidified further within blockchain by incorporating smart contracts (I briefly discussed this in my other article here). These digital contracts will store the rules and conditions of agreement and automatically self-execute the agreed terms upon delivery. Legally binding the two parties involved in the transaction without need for a third-party.
Low-value transactions can then be made cost-efficient and small independent suppliers can further unlock the value of investing in renewable energy systems. Small-scale distributors get an opportunity to actively participate in a sector that would otherwise only be accessible to energy suppliers with a strong portfolio.
Evolution into decentralisation majorly empowers consumers and evolves grid management into a system that encourages consumer mobility and supplier interchangeability. Blockchain technology then securely facilitates flexibility in trading platforms and optimise flexible resources within these decentralised systems. Do you think this is the future we’re heading to? I’d like to hear your thoughts.
