As energy markets evolve, blockchain powers up
Energy startups have been using blockchain to power electricity sharing in microgrid trials from Texas to Tasmania for a year or so. But now companies are moving beyond trials to commercial projects, leveraging the distributed ledger technology for payments and trading on a city-wide and even national scale. “What the Internet did for communications, blockchain will do for trusted transactions, and the energy and utilities industry is no exception,” said Stephen Callahan, Vice-President, Energy, Environment & Utilities, Global Strategy, at IBM.
The trend illustrates how blockchain is swiftly moving beyond financial services and cryptocurrencies, and offers a glimpse of a growing challenge to the $2 trillion energy market. Blockchain is a database of transactions distributed among multiple computers.
It solves two key problems in the online world: transacting without the need of a trusted intermediary, and making sure those transactions can’t later be altered, removed or reversed. This appeals to the energy industry in several ways. As the market liberalises and renewable energy grows, blockchain offers a way to better handle the increasingly complex and decentralised transactions between users, large- and smallscale producers, retailers and even traders and utilities.
Blockchain’s use of tokens also offers a way to reward users for saving energy, and for small-scale transactions between individual users with solar panels who are both producers and consumers - known as “prosumers”. Being able to add “smart contracts” onto a blockchain would also make it possible for actions to generate automatic transactions down to the smallest level, where meters and computers could autonomously reconcile supply and demand.
“The prospect of being able to track particular electrons via a blockchain as they move onto or off the energy grid has captured the imagination of many companies,” said Daniel Sieck of US law firm Pepper Hamilton.
A Singapore company called Electrify SG has been running a price comparison marketplace as the country liberalises its electricity market.
Electrify plans to launch a blockchain-based exchange for all consumers and producers next year, and is talking to one of Japan’s biggest utilities about doing something similar there.