Blockchain in Energy
Blockchain technology is the simplest form of the public ledger and shared database that assists in identifying, tracking and tracing every transaction on the enterprise blockchain network. These transactions are recorded in the form of blocks. These blocks are added to the blockchain in a linear and chronological order. The blockchain technology provides secure sharing of information while making the process transparent and immutable for all the participants. The blockchain technology shows the various applications in the energy industry vertical, such as payments, data management, smart contracts, supply chain management and others. Blockchain technology in the energy sector would enable people to trade energy among themselves and transform their business operations and services by providing transparency and immutability.
Blockchain technology has the future to alter the energy sector. Innovations such as rooftop solar, electric vehicles, and smart appliances have been driving the energy industry. Enterprise Ethereum blockchain uses smart contracts and systems interoperability to stimulate growth in upcoming technology in which energy and sustainability are less recognized.
Blockchain also offers solutions for renewable energy distribution. To improve the efficiency of utility providers, the distributed ledger is being used to track the supply chain of custody for grid materials
Oil and gas companies are majorly concerned about privacy and trade policies. Private blockchain networks provide data authorization and selective access to pre-approved parties. Private blockchains are also providing an interim solution with privacy features for businesses until the public blockchains start to implement the same.
The blockchain technology is widely used in the energy market for various applications such as grid management, energy trading, government risk and compliances management, payment scheme, supply chain management, and others for reducing disputes, lowering risks of fraud in delivery, ensuring payment certainty, offering transparency in trade asset movement, and providing improved flow of trade receivables. The energy trading segment accounted for the largest share of 47.2% in 2017 and is projected to reach $3,692.1 million by 2023, at a Compound Annual Growth Rate (CAGR) of 81.62%.
Major Benefits of Blockchain in the Energy Sector
Shorter settlement cycles with efficient back-office processes
Better data standardization and streamlined regulatory reporting
Monetization of new blockchain platforms and creating new business models
Cost reduction & environmental sustainability
More focus on transparency of Energy stakeholders without affecting the privacy of the data
Removal of expensive market frictions and intermediaries
Improved visibility, collaboration and operating efficiency made possible by blockchain’s transparency
The global blockchain in energy market is projected to reach a market size of $7,110.1 million by 2023, at a CAGR of 78.32%, from an estimated $394.3 million in 2018. This growth can be attributed to the increasing need to manage the infrastructure, rising global security concerns, ensuring transparent and efficient transactions, increasing innovation in trade and supply chain management, and the growing number of blockchain start-ups across various industry verticals.
According to an estimate, Europe is predicted to be the largest market for blockchain in energy from 2018 to 2023. In the process of achieving secure and accurate data to the customer, countries such as Germany, the U.K. and the Netherlands are investing in adopting blockchain technologies to solve instances of fraudulent activities across transactions between multiple stakeholders at a global level.
The US Federal Trade Commission has created a Blockchain Working Group to standardize the regulatory standards on the way transactions need to be written that will help in formalizing the regulations and addressing the uncertainties in the adoption of blockchain in the energy sector.
New product launches, partnerships, investments and expansions are some of the significant strategies adopted by the leading players like Microsoft, Accenture, IBM, Infosys and SAP in the blockchain energy market.
Emerging Blockchain in Energy Use Cases
• Decentralized Generation
Advanced communication and data exchanges between different parts of the power network are, to an increasing extent, required — making central management and operation more and more challenging. Local distributed control and management techniques are needed to accommodate these decentralization and digitalization trends. Blockchains or distributed ledger technologies (DLT) were primarily designed to facilitate distributed transactions by removing central management resulting in addressing the challenges due to the decentralised energy systems.
Renewable energy credits (REC), which are issued by the respective government authorities to the renewable power producers, help them in distinguishing themselves from the traditional fossil fuel power suppliers. Blockchain in energy is helping in removing the duplicity of the counting of RECs when multiple stakeholders claim the credit for the RECs, thereby eliminating the inefficiencies in the issuance and verification process of RECs.
• Grid Management
PONTON has developed an initiative of Grid chain, an innovative pilot software based on blockchain technology that simulates future processes for real-time grid management.
Filament provides blockchain IoT solutions such as smart metering, real-time monitoring, asset tracking, and asset management and has raised $6 million to allow electronic devices to be connected online in blockchain platforms. Filament enables smart devices to blockchain transactions that can integrate into different distributed ledger architectures by using their Blockchain solution.
• EV Charging
Blockchain solutions aim to provide incentives for privately developed EV charging infrastructure. With blockchain-enabled solutions, EV owners can gain greater transparency in energy charges and can potentially have a greater choice in selecting their energy supply solutions. Also, with the integration of blockchain technology with metering infrastructure, blockchains deliver automated billing in energy services for consumers and distributed generators, which helps in administrative cost reduction and faster billing cycles. Blockchain in energy is the present and future.
About the author: Praveen Jujjuvarapu is currently working as an Assistant Manager, Advisory in Energy and Power domain in MarketsandMarkets Research Pvt Ltd. He has a total of 7.5 years of work experience in the areas of operations and commissioning, supply chain management, advisory consulting, pre-sales and process excellence strategy.
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