Jun 30, 20209 min read

How Does Blockchain Technology Disrupt The Energy Industry?

Energy companies, ranging from utility providers to oil and gas enterprises, are recognizing the transformative impact of blockchain technology.

In its ongoing journey to power the world, the energy industry has faced many structural challenges that have been addressed through the effective deployment of innovative and groundbreaking technologies. The resulting industry landscape is technology-rich and highly streamlined, yet is faced with a complex and costly transactional ecosystem that may prove itself as fertile ground for the introduction of Distributed Ledger Technology (DLT).

With many emerging digital innovations such as the Internet of Things (IoT), automation, Artificial Intelligence (AI), cloud platforms, big data, and advanced analytics, executives must decide how to adopt these digital capabilities with blockchain likely serving as the underlying backbone of the industry’s transactional infrastructure.

Global Market Insights Inc stated that blockchain technology in the energy market is predicted to hike around USD 18 billion by 2025.

However, in this article, let’s discuss how blockchain is disrupting the energy industry!

Key Benefits of Blockchain in Energy

Some of the potential benefits of the application of blockchain in the energy sector/industry include:

A reduced cost of utility bills and/or lower transaction costs in the market for gas or electricity, lowering the need for working capital.
New opportunities for communication among energy devices such as water heaters, electric vehicles, batteries, solar PV installations, and so on with the grid operator (smart grids).
Cost reduction due to more information for utilities and grid operators for the integration of volatile renewable energy capacity into the grid.
Access to affordable energy for the underserved communities through local and decentralized renewables grids.

List of Blockchain Use-Cases in Energy

Wholesale electricity distribution
Peer-to-peer energy trading
Electricity data management
Commodity trading
Utility providers
Oil and gas resource exploration
Oil and gas resource storage and transportation
Refined resource management and sale
Regulatory reporting and compliance
Global supply network

How does Blockchain impact Wholesale Electricity Distribution?

Image: thinkbridge

Companies looking to implement blockchain technology into wholesale electricity distribution focus on connecting end-users with the grid. Blockchain technologies combined with IoT devices enables consumers to trade and purchase energy directly from the grid rather than from retailers.

Grid+ is a blockchain energy company focusing on wholesale energy distribution. The firm has identified retailers as the driving source of inefficiency in the consumer electricity market. Retailers own very little of the grid infrastructure. Instead, they only manage the kinds of services that blockchain technology can replace, such as billing and metering usage. Grid+ also leverages the Ethereum blockchain to give consumers direct access to wholesale energy markets. This decreases costs, shifts production closer to demand, and moves all toward a cleaner energy future. In other words, supplementing retailers with a blockchain-based platform has the potential to reduce consumer bills by around 40%. By connecting users directly to the grid, Ethereum allows users to buy energy from the grid at a cost they desire. The result is a more equitable and stable energy market with lower electricity costs.

How does Blockchain impact Peer-to-Peer Energy Trading?

While wholesale energy distribution is a primary application for many companies, it’s not the focus of all energy firms. A Blockchain In Energy report by Wood Makenzie shows that 59% of blockchain energy projects are building peer-to-peer energy markets. A peer-to-peer energy market is a shared network of individuals who trade and buy excess energy from other participants. These energy markets benefit the masses because they reduce control from central authorities, such as wholesale entities.

Most firms are using enterprise versions of Ethereum. For example, the Energy Web Foundation utilizes Ethereum, Truffle developer tools, and Gnosis multi-signature wallets to build out their platform. As more and more countries reach energy parity, the cost of renewable energy becomes equal to or lower than traditional retail energy. Individuals who produce their own energy will have the ability to trade it with their neighbors and peers. The Australian-based company, Power Ledger, is a fast-growing technology company that has developed a world-first blockchain-enabled energy trading platform to make energy markets more efficient. They help people transact energy and trade environmental commodities. PowerLedger has connected communities to one another to create “microgrids.” Microgrids are a group of interconnected loads and distributed energy resources. They also exist as a layer on top of the national grid; however, theoretically, they can be separate and self-sustaining. Many blockchain energy companies imagine a future with larger and entirely distributed peer-to-peer grids.

How does Blockchain impact Electricity Data Management?

Image: Utilities Middle East

Blockchain can provide consumers greater efficiency and control over their energy sources. Additionally, an immutable ledger provides secure and real-time updates of energy usage data. Various types of energy data include market prices, marginal costs, energy law compliance, and fuel prices. In April 2018, the Chilean National Energy Commission (CNE) announced that it had launched a blockchain project focused on energy. The governmental department uses the Ethereum blockchain to record, store, and track energy data.

Data is often intentionally manipulated or unintentionally misreported and omitted. The financial costs of intentional corruption and accidental clerical errors can be detrimental to businesses and governments. The transparency of public blockchains further reduces the chances of monetary or data exploitation.

How does Blockchain impact the Oil and Gas Industry?

The implementation of blockchain technology in oil and gas trading can lower costs associated with the maintenance of various trading systems. Furthermore, blockchain can also reduce costs associated with labor, data management, data visibility, settlement delays, and inter-system communication. BTL Group, an enterprise blockchain company, completed a pilot project with ENI, BP, and Wein Energie. The pilot demonstrated that the use of blockchain technology to facilitate and track gas trades reduced overall costs by 30–40%. Instead of building out a system for each commodity, Enterprise Ethereum enables fast integration of new commodities by re-programming the original smart contract

The oil and gas industry is comprised of thousands of companies. These firms are roughly split into three categories : upstream, midstream, and downstream. The journey of one drop of resources can include hundreds of separate entities, companies, processes, and legal agreements.

Blockchain Application for Streamlining Access to Renewable Energy

Energy Web Foundation (EWF), a non-profit set up by the Rocky Mountain Institute and Grid Singularity, had launched an Ethereum-based platform for energy, named Tobalaba. EWF is accelerating a low-carbon, customer-centric electricity system by unleashing the potential of blockchain and decentralized technologies. Their first app, Origin, aims to simplify and enhance the certificate of origin markets for renewables.

Origin is sort of a marketplace where all smart meters on solar PV within the grid can communicate. Also, it provides a common dashboard for tracking energy consumption. It does so by recording the provenance of renewable electricity generated, with details of source type, time, and location, along with the carbon footprint.

In other words, Origin is a digital renewable energy platform that:

Enables direct and transparent renewable energy procurement,
Facilitates participation from different types of energy assets,
Fosters the development of new renewable energy projects.

Blockchain Technology in Financing Energy Access

Image: Pixabay

In many regions of Africa, communities are not connected to the respective national grids. Most of these groups depend on solar panel projects that often remain unfunded. Blockchain-based crowd-financing initiatives could close this funding gap.

Individuals around the world can remotely purchase the photovoltaic cells used within the solar panels on African homes. The solar panels are constructed only when a sufficient number of solar cells are pre-purchased. Following the implementation of the solar grid, households can pay rent in cryptocurrency to the actual owners of the solar cells.

The Sun Exchange is a blockchain-based solar energy finance platform in Africa that operates on a similar model. It enables anyone in the world to purchase solar panels in Africa and then earn revenue from them.

In this model, investors usually buy solar cells and lease them to schools, hospitals, factories, businesses and end-users in other developing nations. The Sun Exchange marketplace arranges the monthly lease rent.

Energy Cryptocurrencies

Renewable energy cryptocurrencies aim to motivate solar prosumers (a person who consumes and produces a product) by rewarding them. It is similar to how Bitcoin encourages miners to commit processing power to the network by incentivizing them with Bitcoins for each block of transactions mined. The following are some of the cryptocurrencies developed to encourage renewable energy:

SolarCoin: SolarCoin, an MIT startup, pays individuals with an alternative digital currency for generating solar energy. SolarCoin aims to incentivize 97,500 TWhs of global solar energy production in the course of the next 40 years. It is a reward for solar energy producers. The SolarCoin Foundation gives energy producers blockchain-based digital tokens at the rate of one SolarCoin (SLR) per Megawatt-Hour (MWh) of solar energy produced, as SolarCoin is free. It is an additional reward for solar energy producers. It is separate from other incentives such as government subsidies or carbon credits. Whoever produces solar power may receive SolarCoin. It is like air-miles for solar electricity generation – only better because it isn’t tied to one company. SolarCoin is global, decentralized, and independent of any government. The distribution part of the project is designed to last 40 years. It is spendable and tradeable just like a cryptocurrency but focused on incentivizing real-world environmental activity: verifiably produced solar energy. You can get involved and claim your free SolarCoins like thousands of others across 73 countries.
M-PAYG: M-PAYG, a Danish startup, is on a mission to significantly improve access to renewable energy for poor people in developing countries by digitizing access to energy. The M-PAYG infrastructure involves a prepaid solar energy solution that provides individuals and households with access to solar energy through small-scale mobile money installments. Transactions in the M-PAYG network are made through cryptocurrencies and payment contracts are executed on the blockchain. M-PAYG is a provider of high-quality prepaid solar energy systems for the developing world. To use the system, you unlock it through weekly or monthly mobile repayments.
KWHCoin: KWHCoin is a blockchain-based community, ecosystem, and cryptocurrency based on units of clean, renewable energy. In this trading system, physical units of kWh energy are aggregated from multiple sources of origin, including smart meters, sensor readings, and green button data. This measurable output is tokenized on the blockchain to create KWH tokens. In other words, export energy is converted to KWH tokens and transferred to users’ digital wallets on the peer-to-peer energy trading application—The Grid. The Grid makes it possible for anybody in the world to buy or sell renewable energy resources. In the long run, KWHCoin will help the underserved gain energy independence. By lowering the cost of energy transactions, the platform will allow renewable energy to expand and bring newfound power to the remotest corners of the world.

Pre-payment for Energy Using Mobile

Image: Jing Travel

ImpactPPA is a blockchain-based technology platform that will transform the global energy marketplace allowing consumers of energy to “Pre-Pay” for electricity from a mobile device. ImpactPPA uses the power of the blockchain to provide a payment rail for investors, project developers, service providers, governments utility companies, and others drove from a trusted and transparent platform. The ImpactPPA solution also allows for the unbanked population of the world to gain identity and reputation through transacting on the platform for the most basic of needs – electricity.

The firm has deployed utility-scale or micro-grids in over 35 countries, generating, storing and delivering power. Power goes to a smart meter connected to the blockchain. Electricity consumers interact with their smart meter and purchase power from a mobile device.

In one of their projects, ImpactPPA is working with the Minister of Small and Medium Enterprises in India to rejuvenate the Indian textile industry called Harit Khadi. Harit Khadi, when fully deployed, will employ over 50,000,000 women in the cotton processing industry. ImpactPPA is set to provide renewable energy generation and blockchain technology for the project.

Although significant advances have been made with regards to the use of blockchain in the energy sector, several challenges stand in the way of blockchain energy becoming mainstream anytime soon. Energy regulations, which include specific guidelines on who can be a retailer and who cannot be, can pose serious challenges to decentralized cross-border platforms. Regulatory changes need to be initiated to ensure the participation of prosumers within a legal framework.

In the absence of regulation, investors might be reluctant to pump in the required funds to set up and operationalize a blockchain energy platform.

Notwithstanding the challenges, the general trends are optimistic as the benefits surpass the bottlenecks by a great margin. The application of blockchain in energy will lead to greater visibility, increased operating efficiencies, and a more streamlined regulatory reporting. It will eventually make energy systems more active, decentralized, and complex with multiple participants and actors.

This will call for more localized distributed control and management techniques. Eventually, blockchain energy will create more resilient neighborhoods and provide a more fit for purpose trading infrastructure as well as reduce grid congestions.

Conclusion

The widespread use of blockchain in energy will ensure that cleaner energy will be produced with consumers having greater control and having more options to choose from when trying to structure deals that have to do with energy management, including transport, storage, or having access in case of natural disaster strikes. Thus, the industry is changing, and there is quite a chance that soon the benefits of smart contracts and blockchain will enhance the way it works today.

Cover Image: EB Industries

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