The premise and promise of blockchain technology in the energy industry
The recent emergence of Bitcoin and other cryptocurrencies have introduced us to the concept of blockchain, which combined with the significantly reduced costs in renewable energy sources and advanced energy storage technologies in the last decade has opened up the global electricity market to a whole new spectrum of possibilities.
The current market is mainly monopolized by large corporations that center around maximizing the levels of energy production to ensure profits. As a result, the contribution of consumers in this model is limited to just that, being a consumer. With the help of blockchain technology, the industry is able to start the transformation from its present centralized architecture to a more decentralized peer-to-peer energy trading market that enables the consumer to produce and trade with others within the grid, essentially becoming a prosumer.
This prosumer model is exactly what the current market leader -Power Ledger- is all about. Their model, along with an early ICO timing is what has given them a good head start on their rivals. However, this is only a head start – it is no guarantee of future leadership, or even survival in a market this volatile.
There is a lot of similarity with the bitcoin market; large spike in November and a smaller, but still significant rally in April/May. In addition, there is the general falloff and level out that we have seen in recent times, which is an indication of the fact that none of these companies have much more than proof of concept and trial projects. Once companies appear and mature to a level that there is actual implementation, and brick and mortar projects, then we will begin to see who the real leaders are.
In the last year, the energy token market has burst into life – from having just a few players to grow at an exponential rate. Power Ledger has a substantial share, but the others are fast catching up and new companies are appearing every month.
In opposition to the many new startups, the large energy corporations of today are also seeing the changes and looking to adapt – GE Energy’s John Carbone said about the new GE pilot: “Through blockchain, we think there’s an opportunity to create a marketplace where we can connect these participants”. In addition, Shell, BP and a host of others are working in a consortium to develop a blockchain-based digital platform. A statement from the consortium said: “The platform aims to reduce administrative operational risks and costs of physical energy trading, and improve the reliability and efficiency of back-end trading operations”. As evidenced by the amount of investment and number of active projects the blockchain is seen as a true game-changer, yet with such a nascent technology there are still questions to be answered before the industry is ready for true adoption. Blockchain scalability, cybersecurity and the lack of basic understanding of how the technology works remain challenges that need to be overcome.
Setting standards and ensuring the long-term interoperability across industries will be an important part of the future policy and regulatory efforts, but before the technological standards can be set a lot of testing and pilot studies are still needed.
Blockchain technology has the potential to entirely change energy as we know it, first by starting with the individual sectors and ultimately transforming the entire energy market. It will speed up the transition to renewable energy sources and give us real and immediate ways to replace fossil fuels, encourage renewable energy production and battle against global warming.
In other words, we are on a journey in the transition to a new energy world – decentralized, digitized and decarbonized!
-The Energy Bit
Photo credit: David Dodge/via Flickr