Energy Industry Evolution Employing Blockchain Technology
Blockchain technology shows great potential for radically transforming the energy industry, with its multiple uses. It can play a role in energy supply transaction execution, clearing processes, metering, billing, documentation of ownership, the state of asset, renewable energy and white certificates, guarantees of origin and emission allowances.
The energy industry can embrace blockchain technology applying some of the principal assumptions used in the financial sector such as the decentralized storage of transaction data. But the difference between the energy and financial industry’s final product must also be taken into account because an energy unit requires a network infrastructure for transportation and distribution. Owing to blockchain’s decentralized business model, the energy sector’s payments can be done via crypto-currencies eliminating the need for third-party intermediaries. The delay time can be eliminated with transactions such as funding and automatic payments requiring a sequence of approvals governed by smart contracts, with no need for a letter of credit. Blockchain also provides data security and system transparency, facilitating industry efficiency.
The potential cost-saving and process efficiencies are too compelling to ignore. Some energy companies have calculated the savings to the tune of 30 to 60 percent on their structural costs. These savings come mainly from reduced labor costs, reduced manual and semi-automated process-related efforts, reduced capital costs through faster settlements, and reduced technology costs by reducing the dependency on multiple systems. Large utilities and commodity traders are collaborating to analyze and create a legal framework in the energy sector via the Energy Web Foundation consortium aiming to accelerate blockchain technology.
Growing pro-environmental concern around the globe, is giving rise to climate change mitigation measures wherein nations are focusing on integration of renewable energy in the energy mix. For instance, Energimine offers their platform as a peer-to-peer marketplace and reward platform to buy and sell energy using energy tokens. This application of blockchain aims to encourage reduction of global energy consumption.
Though the full deployment of blockchain technology necessitates a clear framework where all participants agree on predefined rules based on common standards, Blockchain is predicted to grow and accelerate the world energy transition, contributing to the creation of an energy system that shall not only be cost effective and more resilient, but decarbonized and decentralized as well.