The energy business has faced several fundamental obstacles in its quest to fuel the world, which has been addressed by successfully implementing creative and pioneering innovations. However, it’s not simply a matter of altering the energy we use to produce more renewable energy; it’s also a case of modifying how we ingest, manufacture and exchange it, resulting in higher resource performance and reliability. As a result, implementing a significant paradigm shift in energy markets and the management of power networks need to be one of the primary concerns.
Digitisation of the electricity supply has introduced “smart” metres that combine with AI and machine learning technologies. They evaluate vast volumes of data and take meaningful steps to cut operational and servicing expenses in electricity generation, limit transportation inefficiencies, and modify consumer behaviour. These advancements, however, are simply scratching the surface of the dilemma associated with the new energy realities. The market structure and administration of its primary product, energy, need to be dramatically disrupted if we are to find a long-term and truly sustainable solution to this.
The current crises in the energy sector
The biggest issue in the energy sector is environmental pollution and global warming hence, climate change. It is the result of conventionally used fossil fuels, which release the highest amount of Carbon-di-Oxide (CO2), and the pursuit of a greener and more sustainable energy to power the massive population on earth and their industrial requirements. The ironic part is that while we are trying various methods to curb fossil fuel emissions, many are causing more demand for fossil fuel, leading to either increasing or not having any effect on the ultimate carbon emission rate.
In the current system, the electricity supply is one-directional, flowing from the manufacturing plants to consumers, with the whole process regulated centrally in each nation. Customers here cannot participate in any decision-making regarding the production or usage of the power.
As a result, the system demonstrates a massive potential for error, fraud, and a lack of transparency. For example, to generate a unit of electricity, a power plant goes through the following steps:
- Logging data onto a spreadsheet
- Sending data to a registry holder
- Further logging of data and the creation of an authentication certificate
- Brokers making deals between buyers and sellers for delivering that certificate
- A subsequent party verifies those certificates post-purchase.
It’s a complicated and messy process with possibilities of major pitfalls, and any form of decentralisation wasn’t kept in mind while designing it. That’s why the distributed ledger technology of blockchain applications will need to step in to simplify the process and make it much more efficient.
The rise of prosumers
Over the years, a curious solution to these crises has emerged – P2P energy trading, to have fairer energy consumption and distribution. The concept is that instead of purchasing energy from a multinational organisation, you could buy it from other energy consumers — who, under the improved system, would become prosumers — a term given to people acting as both producers and consumers of electricity simultaneously.
For example, we can have neighbour-to-neighbour trading, where a neighbourhood microgrid allows participants to buy and sell energy in their peer-to-peer network. So, essentially, you’d have the opportunity to produce power for your household and sell any excess power you made to your neighbour instead of returning it to the utility company.
The only way to make this process streamlined, secure, and effective is to incorporate blockchain technology into this mix.
In a nutshell, a “blockchain” is a collection of cryptographically secured, time-stamped “blocks” of digital data stored in a database shared among its registered members. A network of peer-to-peer computers (or “nodes”) scattered throughout the globe authenticates all incoming information before preserving it in the decentralised repository of blockchain apps. A blockchain record is unchangeable, permanent, and protected by numerous layers of encryption that make it nearly impregnable by any outsider (read: cyber criminals).
Blockchain Solutions to the Issues of the Energy Sector
Despite being more popular in the finance industry, blockchain technology is transforming many industries worldwide. The energy sector seems uniquely equipped for blockchain applications owing to its distributed architecture. Given the colossal advancement of the Internet of Things, the whole energy and resources industry’s activities may eventually be converted into a massive worldwide web of interconnected gadgets constantly talking to each other in real time. We can leverage this remarkable technological evolution and implement much more secure blockchain technology to these devices to achieve all of the following –
- The Energy Supply Chain
The end-to-end process of fishing out hydrocarbons, giving them a structure we can work with, and then supplying them to customers goes through many hands, like notable energy firms, federal investigators, and independent service providers. Currently, this system and the data in this system are highly fragmented and segregated, making it extremely difficult to gain a holistic view of all these steps, which also prevents businesses from improving the process. Blockchain technology can deliver real-time productivity and flexibility, trust of immutability, and transparency, allowing organisations to communicate confidential, business-critical intelligence on a single platform without jeopardising it.
- Energy Trading
- Decentralisation: Over a decentralised blockchain platform, energy suppliers directly connect with energy consumers without needing a central body to mediate. All transaction records would be decentralised and stored on a blockchain, allowing for a shared, encrypted log of all energy transfers and commercial activity.
- Transparency and security: Since the network is secured with user anonymity and encryptions, all parties use the same system and only one transaction entry point. All transactions are transparent to all system participants. So, transactions like energy trading can be documented and resolved practically instantaneously in a trusted process.
- Automation with smart contracts: Each entry in the blockchain can also contain executable computer code that reflects the contract’s terms that can be validated automatically by smart contracts without any human intervention. Blockchain smart contracts can decide on the requirement of production of electricity for a particular prosumer grid, which grid-connected devices should produce the electricity, and whether any need ramping support. It cuts down the cost of intermediaries and human errors. One can use it as quite an effective and dependable shared trading system for both physical and monetary transactions of energy commodities. Thus, blockchain technology can accurately govern communication infrastructure and energy warehouses.
Blockchain applications can be at the crust of the energy trading process.
- Tracking Green Energy
The ownership and operational status of resources such as smart metres, pipelines, charging stations for electric vehicles, and energy production sites (e.g. solar systems) can be documented and managed via a blockchain-based registry.
A blockchain-based digital contacts log can help national and regional governments supervise and regulate carbon markets, reduce emissions credits, and deliver sustainable energy certifications to the right places. Blockchain technology can let credit vendors and purchasers digitise their credentials and document their purchase and possession changes transparently at a low transaction price.
The blockchain-powered future
Green energy providers increasingly use digital peer-to-peer networks to bypass the intermediary and interact directly with interested customers. There is a constant rise of prosumers who are determined to take charge of their power consumption and welcome blockchain applications with open arms.
Residents in Brooklyn, New York, successfully sold sustainable power using smart contracts on the public Ethereum Blockchain platform, boosting participant confidence and transparency. Several trials in Perth and Southern Western Australia are ongoing, which allow citizens to purchase, trade, or exchange extra solar energy with anyone linked to the Western Power network. Giants in the field like Shell, Deloitte, and more are going all in for a blockchain-powered sustainable energy future. There is a lot more to come, so stay tuned with Blockchain Australia™, as with so much passion from individuals and commercial organisations, the future of distributed energy looks hopeful and quite fascinating.
If you have any queries regarding Blockchain Technology, get in touch with our team of experts.