Innovations involving the application of emerging technologies like the Internet of Things (IoT), automation, big data and analytics and artificial intelligence have become ubiquitous in the energy sector, thereby, disrupting the entire energy industry. The spree of innovations is approaching another level of massive disruption as blockchain technology is now being integrated into the energy industry.
In 2017, the global blockchain-in-energy market was estimated to be worth 279 million dollars, according to a study by MarketsandMarkets. The study forecasts that this market would reach 7.1101 billion dollars by 2023, at a CAGR of 78.32%, during the period of the forecast. The widening expansion of the blockchain-in-energy market points us to the massive potential that lies ahead for blockchain within the energy sector in the future where more blockchain-in-energy innovations would flood the market.
How can blockchain transform the energy sector?
The potential applications of blockchain in the energy industry are exceedingly vast. Some of these potential applications are already being implemented but are still miles away from achieving what is maximally possible with the fusion of blockchain in the energy industry. In some parts of Europe, massive investments have been made to leverage the use of blockchain in combating fraudulent transactions between stakeholders in the energy industry. Major tech players, such as IBM and SAP, have also launched solutions that involve the implementation of blockchain in energy. Here are some ways by which blockchain can transform the energy sector.
Peer-to-Peer Energy Trading
Renewable power generation is on the rise, and more smaller power generators and storage systems, like solar energy systems and electric vehicle batteries, are contributing to the power grid. As these renewable power generation and storage systems increase, the need for peer-to-peer energy trading becomes more pivotal to achieving efficient energy distribution.
Peer-to-peer energy trading allows consumers, who generate more energy than they require, to sell the excess energy to other consumers via a secure platform. The immense potential of peer-to-peer energy trading pushes the energy industry towards the creation of a sharing economy, which, in turn, enhances efficient energy distribution.
Through the integration of smart contracts, blockchain offers a useful leverage that is pivotal to the success of peer-to-peer energy trading. The implementation of smart contracts allows individuals to seamlessly trade without the need for a retailer or middleman. With smart contracts, individuals are able to efficiently trade energy, deciding whom to buy from and sell to, and under what conditions the transaction can hold, without having to worry about the complexities involved in trading energy. This significantly cuts down the costs associated with buying and selling electricity and makes the process more efficient.
An individual, for example, may be willing to sell energy of 5kWh. With blockchain-based peer-to-peer energy trading services, the seller can configure the suitable terms and conditions that must be met before the energy can be transferred to the buyer. A smart contract will ensure that the energy is transferred to the buyer only when the specified criteria are met. Once the transfer is made, the seller will immediately get paid.
The first recorded occurrence of peer-to-peer energy trading was in 2016. Since then, the concept has continuously blossomed. The idea of peer-to-peer energy trading is attracting quite a lot of attention within the energy industry.
Electric Vehicle (EV) Charging
Electric vehicles offer a very efficient means of transportation and are more environment friendly than their counterpart gasoline vehicles. However, a potential challenge associated with the use of these vehicles is the limited access to charging infrastructure.
Blockchain offers a solution to effectively tackle this lack of sufficient charging infrastructure. Blockchain-powered solutions can enable individuals to share access to their personal EV chargers with others through peer-to-peer (P2P) EV charging platforms. The shared access to EV chargers will attract a fee which will be paid to the owners of the EV chargers. This allows owners of electric vehicles to easily search for available chargers, at any location, and charge their cars when they need to, instead of relying on general EV charging infrastructure which are only available at specific locations. By utilizing idle EV chargers, blockchain-based solutions can increase access to EV chargers at any location, hence, driving the adoption of electric vehicles.
Settlement Of Trades And Validation of Transactions
Blockchain is widely perceived and used as a tool to ensure transparency, security and validation of transactions, in various industries. Through the idea of a distributed ledger, blockchain is suitably positioned as a tool for replacing administrative units and the use of central storage systems in the validation of transactions within the energy industry.
For Over The Counter (OTC) trades in the energy industry, such as OTC commodity trading, which ideally involves two counterpart parties, the process of confirming transaction details by both parties, to prevent errors or disagreements, can be automated with blockchain. With the use of blockchain, the exchange of trade confirmations can be done directly between the parties involved, without having to involve a middleman. This minimizes the occurrence of trade disputes in the energy sector. In the event of any trade dispute, the details of the transaction can easily be verified on the blockchain since the data stored on the blockchain is immutable, hence, all trade details can be easily traced and validated.
Supply Chain and Logistics
Logistics and supply chain are very complex systems.
In the energy supply chain, there is a continuous transfer of ownership of energy commodities, and other assets within the industry, as they are continuously purchased by participants in the supply chain and sold to other participants. Most of these ownership transfers are often recorded manually. Hence, there is a great risk of fraud since the information can be tampered with. Blockchain addresses this issue of fraud by tracking the movement of commodities along the supply chain and providing a tamper-proof data storage system. This reduces the cost associated with these processes, and also hinders anyone from falsifying ownership records by providing optimum data security.
Data sychronization is another key offering that makes blockchain promising enough to disrupt the energy supply chain and logistics. Blockchain enables the synchronization of data from multiple participants involved in logistics. This enhances the interoperability between all participants, which translates to cost reduction and significant improvements in traceability and regulatory compliance.
The Journey Ahead For Blockchain in Energy
Blockchain is expected to further disrupt the energy sector in the near future. We should expect to see more blockchain-based energy innovations. Peer-to-peer energy trading is one of the most attractive and promising applications of blockchain in the industry. In 2018, 59 percent of blockchain projects in the energy industry were focused on peer-to-peer energy markets, according to a report by Wood Mackenzie.
Other applications of blockchain in the energy sector, like EV charging, are also gaining traction. A limitation to the widespread deployment of blockchain designs is the difficulty associated with developing, deploying and maintaining them. However, major tech players are already offering easy-to-use services that simplify the development of blockchain infrastructures for solutions in the energy sector.