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It is expected that Blockchain will have a major impact on the energy sector. Blockchain technology in the energy sector should offer the benefits of a decentralized market, facilitate peer-to-peer business, allowing consumers to negotiate directly with lower transaction costs and increase network transparency.
Blockchain aims to revolutionize almost everything in the energy sector. This means that there will be reduced transaction costs, improved productivity and better network management.
Decentralization
Blockchain technology is decentralized, which means that no singular entity can control it. All banks and governments are centralized and can dictate and control personal finances and information. However, decentralization means that there is no single objective to be violated and no one is divulging people's information to anyone.
This decentralization is proving beneficial to the energy sector massively. Decentralized energy is not yet widely understood, but refers to when the energy is generated by the network. Energy will be produced near where it will be used, rather than in a large plant.
There are many advantages of this, including reduced transmission losses and lower carbon emissions. In the long term, decentralized energy creates many advantages for the economy. It can also offer more competitive prices than traditional energy, which will see an increase in the number of companies wishing to use the technology. Even if the initial installments of this type of energy can be more expensive, the decentralized energy tariff creates more stable prices.
Using this smarter type of energy, home builders and developers will be assured that the energy they are using is supplied locally, sustainably and competitively. This is because decentralized energy is the cheapest way to achieve carbon footprint goals.
Electricity rates
Blockchain has the power to change the market in the energy sector. Because of its decentralized nature, blockchain is able to eliminate the rates fixed to the centralized bodies. This is because the electricity tariffs are provided by centralized authorities, which means they are responsible for the high costs.
Once the blockchain has infiltrated the market, the electricity tariffs will begin to behave as negotiable goods that will respond to supply signals in the electricity market. The advantage of this is that consumers will have a bundle of choices when choosing the electricity service provider. This means that consumers will be able to look into the blockchain listings to find the best offers to meet them.
Peer-to-peer trading platforms
If the energy sector fully embraces the decentralized blockchain technology, consumers can start trading in the P2P market. Consumers can benefit massively from this since electricity can be used as a negotiable asset. Blockchain will offer benefits such as network transparency and low transaction costs.
There are companies based on the blockchain that already work to create solutions that adapt a peer-to-peer electricity market. Companies such as Power Ledger and Electron are among the first to implement this P2P market.
Microgrids, which are a localized group of electricity sources, also appear in cities such as New York and Sydney. These microgrids allow a specific area to exchange electricity. With natural disasters such as floods, earthquakes and hurricanes occurring so regularly, reserve plans must be put in place, and this is what the microrades offer. They can support a community or city with enough power to function until the main network is back online.
Companies exploit
Blockchain will only become mainstream if more companies start using it. However, blockchain has already proven to be more than beneficial for the energy grid. Here are some of the current blockchain projects in the energy sector.
Start-up blockchain WePower recently focused on a year of data on the Estonian electricity grid. The project included the capture of all consumption and production data from the Elinger transmission system operator from Estonia on the blockchain. This hourly data of 700,000 households were aggregated by address and turned into 39 billion smart energy tokens.
Each token is a digital energy purchase contract that automatically settles for one kilowatt hour of energy. Tokens are exchangeable and can be sold in the local energy wholesale market.
UK-based distributed accounting technology and smart contractor Applied Blockchain became a member of the non-profit organization Energy Web Foundation (EWF) in 2018.
EWF is an ecosystem of global energy companies, service companies, network operators, blockchain developers and users, and infrastructure providers working together to implement large-scale blockchain-based projects.
Energy Web Foundation and PJM Environmental Information Services Inc. (PJM-EIS) have recently announced a significant collaboration in blockchain energy. The project focuses on the development and testing of a market-wide reference implementation of a decentralized tool kit for the renewable and carbon energy markets. The toolkit simplifies and improves the way in which customers purchase renewable energy.
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