Blockchain in energy: powering a peer-to-peer ecosystem

Blockchain has transformed the finance world, providing a decentralised platform to connect parties in entirely new ways. It is now set to be the game-changer in the energy market, enabling the transactive energy landscape to become reality.
Frank Gielen, Education Director at InnoEnergy, examines its potential for reshaping the industry’s future

Blockchain originally emerged in the financial services sector as a platform to support cryptocurrencies such as bitcoin.

As a distributed ledger, it eradicates the need for a central party, and holds the potential to power many additional use cases. Financial institutions are increasingly investing in blockchain solutions and research company Grand View predicts that the global blockchain technology market will reach $7.74 billion by 2024. 

A large portion of that value will undoubtedly come from applications beyond its financial services heritage – and energy is one sector primed to make waves. In particular, blockchain could underpin a new distributed electricity system, facilitating decentralised power generation and a network of prosumers, affiliates and multiple power flows.

Historically, the utilities companies have been the facilitator. However, blockchain eliminates any central authority and itself becomes the unifying party. Control then shifts to the consumers, enabling them to buy and sell energy between themselves directly, without the need for the traditional utilities role. Technology has always been a major barrier to this type of peer-to-peer transacting but, with blockchain, there is now the real possibility of numerous applications.

A survey of German industry executives identified over 110 potential use cases for blockchain in the energy sector. That said, the market remains in the very early stages of its deployment. Various companies have initiated private blockchain projects to enable peer-to-peer transactions but these fall short of providing a truly accessible and market-wide approach. So far, only one company has emerged with an open blockchain solution – and it looks set to play a pivotal role in transforming the sector.

The Energy Web Foundation is a non-profit foundation with the goal “to unleash the potential of blockchain in the energy sector.” Its aim is for energy market participants to jointly fund and develop a single open source blockchain platform for the energy sector.

It will be capable of handling volumes of transactions per second never seen before and facilitating near real-time responses as well as a wide range of energy use cases. Crucially, it facilitates a platform where all players are invited to develop an ecosystem of connected parties. Being open and free to use, it is the only blockchain so far to answer to the specific needs of the energy industry. A test network of the platform went public in November 2017, marking a crucial step beyond the theory and into practice.

Blockchain in practice

And it is through practice that companies will bring the many use cases to life. The first of these is the fundamental concept of peer-to-peer transacting between homes. PowerLedger, the Australian blockchain startup, has run a pilot project around this application in Western Australia.

Applying a peer-to-peer architecture to the energy sector enables consumers to install PV panels in their house and then sell energy to other consumers. They are free to set the price, based on demand, or even offer it for free as a donation, for example, to friends and family.

In this new blockchain-powered world, the old concept of the energy consumer is obsolete and is replaced with prosumers, as both producers and consumers of energy. Also, one important proof point to emerge from the pilot is how this model leads to a much lower overall price for energy. Now, InnoEnergy reports on in a recent webinar, the challenge lies in scaling to full implementation.

Following on from exchanging energy between homes is the possibility of distributing it from homes to vehicles. As electric vehicles gain in popularity, having the right charging infrastructure is vital. Blockchain will enable drivers to park their car at another party’s home or business charging point and then pay them directly for energy consumed from their smart meter.

Factoring in regulation

Aside from technology, a major question around blockchain’s adoption has been regulation. This has been the topic of extensive discussions, with the aim of ensuring energy production, distribution and usage is appropriately regulated throughout the new value chain.

Certain countries, such as Sweden, Austria and Germany have already taken a friendly stance towards its adoption. However, blockchain is essentially an internet so extends beyond the confines of physical borders. Therefore, as it takes hold, the priority will be to implement regulations on a more global scale.

Lower prices are one important advantage of peer-to-peer transacting. Another is the awareness it will bring to a wider population. Until now, consumers have not been involved in the intricacies of how the energy market works. They remained detached from how energy is generated, distributed and consumed. However, as prosumers, they have a vested interest. They can start to understand energy as a valued asset, like gold.

With greater awareness comes more considered behaviours – and perhaps this is where the real value of blockchain lies. As the industry champions efficiencies and the transition to renewables, blockchain could smooth the way as prosumers take a far more collaborative and involved approach. As a result, it will naturally encourage more efficient usage, greater cost savings and, ultimately, a smoother path to ‘new’ energy.  

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InnoEnergy partners with FutureLearn to offer insight around the hype on blockchain and its role in the energy sector, as well as courses on smart grids and solar energy. Its online course “blockchain in the Energy Sector”xzzfdytszbbuyczqxsrf is available to join and will help participants understand how blockchain works, where the technology has come from and why it will empower energy customers like never before. To see a list of all InnoEnergy online courses, please click here.

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