The inception of Bitcoin in the year 2009 opened the doors to blockchain for the world and an innovative payment technology. However, gradually people realized that in addition to making payments, blockchain has a plethora of different applications and the energy sector is one of them. In 2017 with every passing day a new firm got on board with blockchain, the energy sector couldn’t stay too far behind. Plenty of blockchain applications aim to distribute the energy sector, decrease the costs associated with the transactions and keep data more efficiently.
The global energy ecosystem
In this day and age, it is almost unbelievable to imagine a world in absence of energy resources which are responsible for backing the processes that run 24 hours a day and 7 days a week without halting. Whether it is solar energy, nuclear energy or renewable energy made by wind, water or the sun, the world needs uninterrupted energy to support the ongoing industrial processes which have become a vital part of our daily lives and without which most people can’t imagine surviving.
The worldwide market of energy is approximately worth $2 trillion dollars and is run by a few organizations which have the power to manipulate it because of the lack of competitors in the market. Due to this the energy providers have all the power which lets them reap the most profit for themselves. This leads to a lack of contribution on the part of the customers and their role is limited to the purchase of energy.
In the 21st century the behavior of the customers is an important factor that determines the market trend and having said that, the current model has a few yet evident shortcomings which can’t be ignored.
In the modern day blockchain has moved plenty of markets from centralized to decentralized and it is hoped that it does the same for the energy sector.
Blockchain technology in the energy sector
Most of the blockchain based energy platforms are inclined towards peer to peer (P2P) energy sectors. Currently there is a plethora of startup companies that have significantly put money to apply blockchain to the energy industry.
Although different startups approach this idea in distinctive ways, the general idea by all means remains unaltered: making a working worldwide energy sharing platform that satisfactorily manages demand and supply all over the world. Once executed, it will become conceivable to think of electricity as an exchangeable commodity relying upon the inclination of the customer.
If there is a word that goes hand in hand with blockchain, it is ‘disrupt’. Basically, what blockchain does is that it ‘disrupts’ the conventional way of doing business by providing a decentralized alternative solution. Given below are few of the ways through which the energy sector can be disrupted by the revolutionary technology which is blockchain.
The emergence of distinctive energy rates
Currently, electricity prices are regulated by centralized energy providers. Blockchain can possibly decentralize the market with the end goal that rates will never again be settled by these centralized bodies. The consumers themselves will determine the rate through their demand. So, it is safe to say that the market itself will determine the price of the energy. Energy costs will start to act like exchangeable assets that react to demand and supply indicators in the electricity market.
This will further give consumers a lot of options to choose from depending on the price and other factors. They can browse through blockchain listings and opt for the most viable option.
Making payments of electricity through cryptocurrency
Cryptocurrency is the local monetary standard of the blockchain technology. By bringing blockchains into the energy market, digital currencies can be utilized to pay for energy. Through the tokenization of the grid, cryptocurrency can be utilized to make energy payments.
There is a significant amount of sub-applications to this model. First is the tokenization of energy by the electricity authorities. An example of this is how WePower a European company powered by blockchain which has the prime aim to provide green energy is making use of this model.
So basically, with the help of tokenized cryptocurrency, energy can be purchased and sold on the platform just like other cryptocurrencies are traded.
P2P Electricity Trading Ecosystems
With the energy sector distributed and electricity turned into a tradable commodity, customers can start trading energy within the P2P market. This can likely lead to a substantial economic growth for both the energy consumer and the supplier in the energy sector. If energy becomes an exchangeable commodity on the blockchain then consumers will potentially have a lot of advantages to benefit from (lower costs, transparency of the process, just to name a few).
Already there are a few blockchain based companies in the market that are focusing on providing solutions custom made to suit the P2P energy trading sector. An example of this are Electron and Power Ledger. Electron is a UK based company whereas Power Ledger is based in Australia.
Microgrids have taken over metropolitan giants like New York, Sydney, Perth and areas in Germany and some of South Africa.
These microgrids permit exchanging energy inside a predefined zone. One of the primary benefits of microgrids is that it tends to be utilized as a crisis manager in circumstances when there are problems with the main grid. Calamities like storms, earthquakes, and cyclones can cause severe disturbances by influencing the ecosystem of the main grid. If such an occurrence happens, microgrids can manage the network until the point when the main grid is back on the web.
There is a plethora of applications of the revolutionary blockchain technology in the energy sector. Although after the tokenization of the energy market, both the seller and the consumer will significantly benefit, there is still room for a lot of improvement before this practice can actually be implemented globally.
The problem that initially needs to be addressed is the scalability of the large blockchain network before we can consider largescale implementation of blockchain.
Whatever might be the case, it is evident that blockchain in the coming years has a lot of potential to disrupt the energy market.