Business models in the energy industry and the inevitable transformation
Current systems and their issues
Since the very first power stations in the late 1800s the global energy sector and it’s business models have been pretty stagnant to this day. The problem is not just fossil fuels but the concept of big plants with vast centralized distribution networks far away from the consumer, essentially causing remarkable inefficiencies in transmitting electricity and higher CO2 emission levels that ultimately manifest as extras on the consumer’s monthly bill.
Energy innovations and blockchain
During the last decade the energy sector has finally started taking significant leaps towards more localized renewable energy sources, which combined with the recently emerged blockchain technology enables us to think of the whole energy infrastructure in a new different way; as a two-way street, where the consumer becomes a prosumer.
Blockchain use cases
Though the blockchain use cases are numerous, three primary focuses have emerged in the energy industry: wholesale electricity distribution, peer-to-peer electricity distribution, and electricity data management.
Wholesale Electricity Distribution
Consumers can now trade and purchase directly from the producer, this is enabled by smart contracts that minimize the need for retailer providers. Blockchain-enabled sensors and controls allow for secure, decentralized data and improved grid flexibility.
Peer-to-Peer Electricity Distribution
Blockchain lowers the entry barrier and helps facilitate a distributed network of individuals and entities who buy and sell excess energy between one another within the grid, without a central or wholesale entity.
Electricity Data Management
A more efficient power allocation based on real-time demands through smart metering, which processes data in real-time to an immutable ledger on the blockchain; this helps avoid the mitigation of mistrust, bad credit and reduces the costs of the billing process overall.
Startups and Governmental Funding
Even the governments are waking up to this new technology. For example, through Horizon 2020, the European Commission has provided €83 million in funding for blockchain-related projects and could commit up to an additional €340 million from 2018 to 2020. Today there are more than 120 organizations and 40 pilot projects already deployed in the energy blockchain sector. The continued testing and piloting of blockchain projects will lead to important learning and enable the technology to continue to mature.
As we can see, the change in the energy industry will truly be revolutionary, but where that will exactly take us is yet to be seen. The use cases and exact business models are still mostly unknown. It is believed that AI and blockchain will have serious business implications in the next five to ten years but as we are perfecting the needed technologies, we will for sure learn and discover more. After all, it’s not about the destination, it’s the journey…
Photo credit: Vaibhav S/ via Flickr
Graphic by Sarah Harman/ via energy
Graphic by Kimberly Henderson, Emily Knoll, Matt Rogers/ via McKinsey