One the most important trends to emerge at the start of this year has been the increase of discussions around the application of blockchain technology within the energy sector. A variety of utility companies have begun to embrace the concept of deploying blockchain in order to facilitate energy trading. Recently Siemens committed an undisclosed amount towards LO3’s blockchain platform.
There are many reasons why blockchain makes sense for utilities, and they all devolve down to cost and efficiency. At its core, blockchain is a distributed ledger and can be used to support a digital energy market where power can be bought, managed and exchanged through one real-time network. Part of what makes this even more versatile is blockchain enables parties to complete transactions using smart contracts.
With smart contracts, different agencies can automate the release of energy once specific criteria have been met. This means that an energy provider company could attach a smart contract to the distribution of energy initiated by a wind turbine or solar panel before allowing the transfer of energy to another entity or customer. In essence, blockchain is offering to bring increased automation to the energy market.
Automation will reduce the need for manual processes, which monitor energy transfers. Currently energy asset utilization runs at a limited figure of 50% capacity but blockchain has the potential to balance energy grid and consequently improve the asset utilization of capital intensive networks. However, that is not the only factor in the energy sector’s interest in blockchain. The rise in prominence of decentralized energy sources like batteries and solar panels has increased the need for a distributed ledger lead solution like blockchain.
Blockchain offers an open distributed database that can be used to process transactions amongst disparate groups of contributors. Every block is operational and verified 24/7. This eliminates “arbitrage risks” or “data-sync problems’”. It also means that blockchain has no single point of failure. This eliminates the risk of accidental loss or destruction of important transfer data.
The icing on the cake is that blockchain remains accessible. It is an open network where anyone can add blocks and review transactions in real time. Unlike a centralized database, there are not any gatekeepers and multiple contributors can upload to the network simultaneously.
This removes any dependency on intermediaries and promotes trust among contributors. These two elements combine to enhance current offerings and provide new revenue streams to energy providers. With lower external transaction costs, comes lower internal costs and reduced risk. In other words blockchain technology has the capacity to boost productivity and profitability in tandem.