Even as other industries are swept up in waves of disruption caused by technology, the energy industry has been slow to embrace change. However, the introduction of blockchain promises to speed things up and radically transform the industry’s processes and markets.
A blockchain is a growing list of records (called blocks) that are linked using cryptography. Each block contains a cryptographic hash of the previous block, a timestamp, and transaction data. By design, a blockchain is resistant to modification of the data.
There are two prominent use cases for blockchain in the energy industry.
- The first one is in enabling a peer-to-peer energy trading model. The proliferation of Distributed Energy Grids (DERs) or independent renewable energy sources (such as solar panels) that connect to the grid has helped to convert energy consumers into producers who are able to sell excess power back to the grid.
However, that process retains the existing dynamic of the electricity markets, centralizing the task of buying and selling energy under the control of the utilities. Bitcoin’s decentralized network could disrupt that paradigm and enable customers to sell excess power to each other within a given area. Several startups and utilities around the world have already developed pilots or are considering projects to test this possibility.
Even large energy firms are getting in on the action. British Petroleum p.l.c. (BP) and Austria’s Wien Energy are among the firms that participated in an energy trading platform trial earlier this year.
- Another common use case for blockchain within the energy industry is the development of cryptocurrencies for monetary payments. Several utilities have already begun pilot projects to enable such transactions. For example, Marubeni Corporation (MARUY) accepts cryptocurrency payments in some regions of Japan. In certain scenarios, the utility of blockchains goes beyond payments. For example, Bankymoon, a South Africa-based blockchain startup, partnered with Usizo to enable cryptocurrency monetary payments for bitcoin-compatible smart meters located in remote areas.