Blockchain Technology in the Energy Industry
Blockchain technology is becoming more widespread and is already successfully implemented by many industries for diverse purposes. According to Statista, 45% of companies use the technology to ensure secure information exchange, 44% for digital currency, 40% for asset tracking and management and digital identification whereas 36% of companies use it for regulatory compliance.
Although various industries have been utilizing Blockchain for some time, the energy sector is only discovering a disruptive potential of the technology. The technology can enhance the industry in many ways from improving visibility and increasing operating efficiencies to helping organizations streamline regulatory reports.
In this article, we’ll look into how Blockchain technology can be used in the energy sector and why energy companies should consider utilizing Blockchain when developing their digital infrastructure.
How Does Blockchain Impact the Energy Industry?
The energy industry heavily relies on technology and the companies that operate in this sphere effectively deploy various tech innovations. This allows energy businesses to effectively streamline and automate many processes. Nevertheless, there is still much that can be done to improve them. In its recent survey, Deloitte states that the transactional ecosystem of the industry remains rather complex and costly and Blockchain can become one of the key game-changers in this sphere.
Here is how the energy industry can benefit from Blockchain:
- increased visibility and transparency – the technology helps to improve data transparency in supply chains and across various participants involved from major energy producers to government inspectors, to standalone service providers, to individual consumers; with Blockchain, companies can establish a unified platform that efficiently supports an end-to-end process of energy delivery and ensures real-time data access and its safety;
- enhanced security – with a distributed ledger, companies can achieve strict control over the data they share with other Blockchain participants due to strong encryption and decentralization; cyber-criminals can’t easily retrieve or replace any data in these networks; moreover, as digital ledger networks allow to trace the data origin they can build confidence in legitimate operations, eliminating any illegal or unethical market trading activities;
- removal of intermediaries in transactions – distributed digital ledgers can significantly decrease the electricity supply costs by removing third-parties from the supply chain, linking directly suppliers with consumers;
- regulatory reporting and compliance – increased data transparency allows various types of regulators to quickly access the needed data and detect any non-compliance and other regulatory issues; moreover, combined with the latest advanced data analytics tools, companies can provide clean and tamper-proof data at the source;
- sustainable resource management – with the Blockchain technology companies can launch a fundamental change in utility systems; by turning them into globally distributed networks, they could build more effective systems for resource management and better prevent any losses or leaks across the network, e.g. monitoring energy data from smart sensors to ensure its reasonable use.
Blockchain Use Cases in Energy and Utilities
Here is how energy companies can implement Blockchain technology in practice in various realms of the industry.
Blockchain in Energy Trading
With the development of battery storage technology, individual consumers have an opportunity to buy and store electricity for their households or entire companies. It means more flexibility in electricity buying and consumption, resulting in more sustainable use of resources as well as better electricity pricing policy.
Now, consumers can choose when to buy electricity for their households and can obtain it at much lower rates. Electricity providers can compete in price and sell their energy on digital peer-to-peer platforms. This also leads to removing any intermediaries from the selling process. For example, blockchain technology can assume the functions of billing and metering usage, removing retailers from the chain and allowing producers to sell energy directly to consumers in the needed amounts via these platforms.
Moreover, peer-to-peer energy markets allow individuals to sell and buy spare resources from other participants, reducing the control of electricity management from central authorities. According to the Blockchain for Energy survey by Wood Makenzie, there are 59% of blockchain in energy projects dedicated to peer-to-peer markets.
Companies involved in Oil&Gas production and processing can significantly benefit from the implementation of blockchain in the sector. The technology allows reducing silos among multiple participants and complex systems, facilitating Oil&Gas production, processing, and trading.
For example, for petroleum trade, companies have to build a supply chain that includes refiners, tankers, regulatory bodies, retailers, and much more. To organize this complex network into a smooth chain, they need to decrease data invisibility among infrastructures, processes, and actors. For this, large Oil&Gas businesses are seeking ways to invest in and implement blockchain technology, replacing legacy siloed and disjoined systems with highly transparent and traceable ones.
Another great advantage Oil&Gas companies can gain from blockchain is high-security standards. The technology allows companies to select the participants they want to share their data with as well as create private networks with selective data access features. It means that companies can decide who has the right to access their data and what kind of data to provide depending on the participants’ permission level.
There are various sources electric power providers can generate electricity from, including power plants, solar panels, wind farms, and others. Utility providers gather the energy and are interested to share as much data on its distribution as possible.
Blockchain shared ledger can gather all the critical for distribution data and share it with other participants in the network. It can collect all the necessary information from various devices at the grid edge before placing it into the blockchain. This way, the technology can quickly provide the latest information from utility companies while ensuring its accuracy.
Why the Energy Sector Must Embrace Blockchain
The interest in applying the distributed digital ledger in the energy industry is also rapidly growing. The fact is supported by a joint report released by the World Economic Forum, Stanford Woods Institute for the Environment, and PwC. The report presents more than 65 blockchain use-cases in the energy industry which include new business models for energy markets, real-time data management, movement of carbon credits, renewable energy certificates, and overall impact on green energy development.
Business leaders of energy-producing and processing companies and utility CIOs realize that to keep the competitive edge in the market and effectively solve rising business needs they should invest in blockchain development. It can work as a catalyst for business models and change processes across various enterprises, facilitating growing complexity, enhancing data security, and improving data visibility.
Using blockchain for improving their workflow, security, and data exchange is already a common thing for many businesses from diverse industry domains. Though, the energy industry is only discovering the power of the technology.
Blockchain technology can significantly improve business processes in rather complex energy systems and it has already found some practical application in oil&gas, and energy and utility spheres. In the future we’ll see more changes induced by blockchain, e.g. unified global platforms to trade and share energy, more transparent and resilient supply chains, or trading renewable energy for smart contracts.
Companies operating in this sphere should be well prepared for these changes and yet today consider how to update their processes with blockchain technology.