What began in the world of finance has moved into the power sector. Blockchain, a nascent technology most often associated with cryptocurrency, is a new frontier in the energy space, changing the way power is traded, with new business models for peer-to-peer and wholesale transactions, and a growing number of projects worldwide.
The power industry has undergone a transformation over the past several years, with utilities embracing new technologies, new sources of generation, and relying on data to make their operations more efficient.
Another emerging technology also could be transformative. Blockchain, originally devised for digital currency such as bitcoin, has moved into the energy space, allowing digital information to be distributed across networks. The idea is to allow consumers, be they individuals or commercial enterprises, to buy and sell energy directly between one another, in a peer-to-peer (P2P) trading manner. Blockchain is well-suited to this because it creates a transparent, auditable, and automated record of energy generation and consumption. It can result in energy efficiency and cost savings.
“There are dozens of potential applications of blockchain technology in the energy sector,” said Jesse Morris, chief commercial officer of the Energy Web Foundation (EWF), an open-source, scalable blockchain platform founded in 2017 to “accelerate the commercial deployment of blockchain technology in the energy sector.” Morris told POWER: “Some [applications] have to do simply with making the mundane more efficient, and making sure a basic transaction between a utility and their customers is a good one. For example, many utilities offer green power purchase programs for their customers. Programs like these [and markets for Renewable Energy Certificates (RECs) in general] have noble intentions, but are highly manual, opaque, inaccessible for most smaller participants, and largely unable to support higher-level functionality [such as consumption-linked purchasing or carbon-impact selective purchasing].”
The New York-based Indigo Advisory Group, which works with utilities and energy companies on market strategies, technology, and innovation services including blockchain, has studied use cases for decentralized generation, grid management, metering, electric vehicle (EV) charging, and the Internet of Things, which includes blockchain applications for the “Connected Home” market. As an example, blockchain technology helps solar power generators (Figure 1) feed excess electricity into the local grid, or sell it to other customers, and receive compensation directly from the customers rather than relying on a third party.
“It can be a disruptive technology for energy,” said David Groarke, managing director of Indigo, in an interview with POWER. “In our work with utilities, the first thing they want to know is, is this landscape stable and are there standards? Utilities, and power companies more broadly, are confused about what solution to go for. The market landscape for blockchain is very technology-driven, [but] utilities should look at the value chain more, and the technology second. It should be more of a business-led discussion, rather than a technology-driven discussion. There’s a real need for utilities to do proof of concept, to experiment a little bit.”
Europe Leading the Way
Indigo has identified dozens of use cases of blockchain technology in the energy industry, maintaining an ever-evolving list in its “energy blockchain use case repository.” Many of these use cases are pilot projects, with a number of efforts underway in Europe. There are also projects in China and Japan; in China, industrial technology developer Wanxiang Group plans a $30 billion investment in a blockchain-backed “smart city” project. Other countries developing blockchain projects around energy include the U.S., Australia, New Zealand, and South Africa.
Four Japanese groups—Kansai Electric Power Co., IT service management company Nihon Unisys, Mitsubishi UFJ Bank, and the University of Tokyo—in November said they are collaborating to study the potential of blockchain technology in electricity distribution. They will look at permitting solar power suppliers to sell excess energy using blockchain.