The application of Blockchain in energy may have not been as active as other sectors, but its use in bitcoin mining is as old as bitcoin Proof of Work. Blockchain in energy is one of the first applications of Blockchain. Nonetheless, it provides other use cases besides mining.
Before going deep to associate Blockchain and energy, it is essential to find where both intersect.
This article will start by explaining the traditional energy sector and where it intersects with Blockchain. It would further unravel some other applications of Blockchain in energy, citing some pilot cases.
Analyzing the traditional energy supply chain
Before the end-user receives or uses energy in any form, it goes through three primary channels: generation, transmission, and distribution.
Each channel is composed of several policymakers, retailers, and financiers. In a typical energy supply chain, there are bottlenecks, added cost, unnecessary work input, among others, which are as a result of middlemen or intermediaries. The energy sector has always employed emerging technologies like the Internet of Things, cloud storage, and other advanced technologies to solve energy billing (called metering), financing, inventory management and more. If able to realize Blockchain’s potential, the energy sector can embrace it for a breakthrough.
Today’s energy sector is highly transactional and complex with multiple sources, suppliers, distributors, and intermediaries. It does not only require crypto payment processors to streamline existing processes and create new functionality. Areas of opportunity include commodities trading, peer-to-peer energy transactions, middlemen retailers, data management, accounting, and automation.
Possibly applications of Blockchain in energy
Below are areas of applications of Blockchain in the energy sector:
1. Metering and billing
In developing countries, energy billing is one of the major problems. Sometimes the end-users argue the bills received. However, a digital smart meter that incorporates the blockchain DLT (distributed ledger technology) would make it easy to monitor. When an end-user and operators have wallet ID with private and public keys to verify transactions, it would be easy for operators to bill while enabling the end-users to verify what they use.
Although there are many notable projects solving metering and billing problems with blockchain, the Equigy Platform is a more recent application. It is a software that uses blockchain technology to “register and validate” tens of thousands of individual “energy transactions” between batteries and the grid. It is launched on 23 April 2020
2. Transparency and security
One of the top advantages of Blockchain over other Distributed ledger technologies (DLT) is transparency. It offers a distributed system where users in the same network transact seamlessly with one another, progressively, it offers them transparency of their transactions.
In energy trading, financing, and other energy sector requirements, Blockchain can help the system verify and perform transactions in real-time. Traders, retailers, and energy players transactions can be written on a single distributed ledger (DLT). This would be great for asset and inventory management When uploading in timestamp and uploaded to the single ledger of the company, the assets and records would not allow any mutation while offering a full transparent asset and inventory management.
3. Commodity and offset trading
The energy sector is a big industry comprising tradable assets and stocks, for example, carbon offsetting. Aside from offering a transparent ledger for commodity trading, users are guided by smart contracts. The smart contract is simply a predefined set of agreements written in codes to guide users. It is predefined to automatically execute commands when users adhere or perform the duty as enshrined in the contract, and when the contrary happens, it fails to execute.
When energy commodity traders enter smart contracts, the cost and time of trade are cheaper and faster because smart contracts would eliminate the delays and the charges of the middlemen. OSIsoft and Artemis Energy Services is a good example of this use case. They teamed up to create a distributed ledger technology for tracking, tracing, and trading energy while optimizing the electric grid.
4. Peer-to-peer transactions
The energy sector has a broad landscape that includes several sources of energy, operators, and a peer-to-peer would enable users and operators to sell, resell, charge, and regulate usage.
According to a Navigant Research report, peer-to-peer energy trading is top of blockchain in energy use cases gaining the most traction. However, incorporating blockchain peer to peer architecture to energy devices would enable parties to transact and resell as needed. An Australian company called Power Ledger is allowing peer to peer transactions with its microgrids, which allow prosumers to sell energy to members in their communities.
5. Regulatory reporting and compliance
Since the blockchain permits transparent peer to peer transactions, everyone can verify energy records, including regulators. In this case, if an end defaults, the data is a witness to enable regulators to detect noncompliance.
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