Last updated on July 6th, 2023 at 11:52 am
Blockchain use cases have improved from merely being used in financial transactions and payments to other fields. The calls for the energy sector to embrace more sustainable energy sources like solar power, wind energy, and electric cars have increased. Blockchain technology, especially the Proof of Stake network that consumes little computing power can transform the energy sector. Smart contract technology is a crucial aspect of blockchain technology that will be put to good use in the industry to achieve the sustainability goals of this sector. With the immutable feature of this technology, it can be utilized in monitoring the switch of energy companies from fossil fuels to sustainable and renewable energy. The tenets of an agreement can be uploaded to the smart contract, which automatically reacts when an event occurs. Usually, the smart contract is fed with real-time data via oracles. Companies that are abiding by any energy standard mandate can prove beyond a reasonable doubt with the blockchain record since the data can’t be altered.
The energy sector is fast-moving with different participants researching ways to offer more sustainable energy sources to their clients. The quest for privacy is high, and the concept of the private blockchain network could help. Private blockchains only give access to authorized parties, and any party that signs in is recorded. Records of log-in or changes made to the network can’t be altered.
Why is it necessary to include blockchain in the energy sector?
The energy sector is delicate and it cuts across many fields from fossil fuel to nuclear energy. A poorly managed energy firm could mar both the economy and the infrastructure of the region that hosts it. An example is seen in the town of Chernobyl, and its history. The delicacy of this industry can’t be exaggerated, hence, there are a myriad of guidelines and laws steering their operations and activities. Blockchain’s impacts in this sector are revolutionary and can help in the following ways.
Keeping track of guidelines
Regularly, the laws change, as research into the field improves or as technology is altered. Countries are switching to more environmentally sustainable alternatives, and the governments make laws to reflect it. To ensure that the company is abreast with any changes in the field, there is a risk and policy team in most energy companies. Incorporating blockchain technology and smart contracts into the architecture of an energy company makes it easy to keep track of the changes and ensure that they are implemented. Flouting a guideline, no matter how minute, could come with dire consequences for the firm.
Cost-saving functionality
Blockchain technology may be expensive at the implementation stage, but when it is compared with previous infrastructures, it is cheaper. The potential fines and fees that accrue to a sloppy action of an employee could be more expensive than installing the technology into their operation. Cost-saving can also be linked to the efficiency that blockchain technology incorporates in daily activities. Its immutable features reduce the probability of fraud or unscrupulous elements within the firm. The records kept in the distributed ledger can’t be altered, thereby improving the confidence of the users in the quality. For example, when the regulatory authorities need to cross-check the records, they have confidence in the distributed ledger because it can’t be changed.
Transparency
A core feature of blockchain is transparency. For a public blockchain, everyone can view the records of transactions. In a private blockchain, only those with authorization are allowed to access the data and transactions. Once a change is made or the distributed ledger is updated, it is noticed by everyone that has access to it. There has been an increase in calls to improve transparency in the energy sector. Using blockchain technology improves transparency without sacrificing privacy or revealing trade secrets to unauthorized people.
What is Solar Coin
Solar Coin is one of the cryptocurrencies that are active in the energy sector. Its use case is focused on motivating people and companies to use more sustainable energy sources. According to its website, the solar coin is a cryptocurrency that incentivizes a solar-powered planet.’
Solar Coin is a token used in rewarding those that are involved in solar energy. The number of tokens given to a participant is dependent on the working capacity of their solar system. Is their solar system generating energy? What level of energy does it generate? These questions have to be answered before the solar coin is sent to the participant. Holders of Solar Coin do not have to mine, instead, they are given new tokens when their solar power systems transmit the energy generation information to the Solar Coin Foundation. Immediately the data is analyzed and verified, the token is sent by the foundation.
The aim of Solar Coin is to encourage people to opt for a more sustainable solar energy source instead of using fossil fuels. Solar coins can be traded in exchanges or used in regular transactions like Bilaxy, Huobi Global, and OKEx.
This is not financial advice to purchase the Solar Coin or trade it in exchanges. Please do your research.
Use cases of Blockchain Technology in the Energy Sector
The energy sector can benefit from the efficiency that blockchain technology offers in the following ways:
Improves the interaction between energy providers.
In the energy sector, companies tend to interact more with one another and share data when necessary. This means that the distributed ledger feature that blockchain offers can fill in the exchange and interaction gap observable in this industry. Companies can exchange data and information with one another in a safe and decentralized manner through blockchain.
Microgrids
The energy sector is embracing the concept of microgrid because of the efficiency that it offers. Monitoring the operations of the microgrid may not be easy, and that is where blockchain technology comes into the equation.
Distribution of electricity
Generally, electricity is distributed by retailers that take their cuts of the fees. Before the electricity gets to the final consumer, its price tag has increased. Wholesale electricity distribution companies can interact with the consumers by incorporating blockchain and IoT devices. This allows the end-users to buy electricity from the grid itself.
Renewable Energy Certificates (RECs)
Blockchain will ensure that Renewable Energy Certificates are not forged since the history can be traced on the network. Participants can verify the authenticity of a REC and prevent the duplication of energy credits.
Examples of energy companies that use blockchain
WePower
WePower is an Estonian blockchain company that is using the technology to create a haven for small clean energy producers to gain a market share while offering consumers access to more affordable electricity. Citizens can use the native token to purchase electricity.
Power Ledger
This is an Australian blockchain energy company that offers microgrids, thereby linking solar power producers to their consumers. It is solving the issues noticed in the Australian renewable power market.
The Brooklyn Microgrid
It is changing the way things are done in electricity distribution. The power companies take care of the power grid, the community stores and trades the energy, thereby offering sustainable and affordable energy.
What are the challenges?
Blockchain technology will improve the energy sector but it needs to scale through some obstacles before achieving it.
Erroneously linking it to crime
Blockchain and cryptocurrencies have been linked to illegal activities in the past since it is used by unscrupulous individuals because of their anonymity feature. People and brands are starting to see the opportunities that are linked to technology.
Energy consumption
The consensus mechanism used by Bitcoin is Proof of Work, which consumes large computing power. Before a transaction is verified and added to the blockchain, miners have to solve complex mathematical puzzles which need a massive amount of energy. This is quite unsustainable especially if the technology is to be utilized to improve sustainability in the energy sector. The coming of consensus mechanisms that need minute computing power like Proof of Stake seems to be solving this issue.
Energy companies will embrace this technology if it becomes more sustainable.
Resistance from status quo
Every new technology in an industry is met with resistance from those that have adapted to and benefited from the existing technology.
The peer-to-peer feature of blockchain will alter the operations of the traditional energy sector, meaning that if it is incorporated, there will be the need for an overhaul. For instance, decentralization will increase the self-consumption process in the energy sector, removing middlemen like the governmental bodies that tax energy consumption. This means that the government and other participants that will be affected by the technology will have to alter their operations, which may lead to resistance on their part.
In Conclusion,
- Blockchain can be used in the energy sector.
- It injects efficiency into the industry.
- Some energy companies are seeing the need to use blockchain and smart contract technology.
- Blockchain will improve sustainability and cut down on the price of electricity.
- Before blockchain technology can be used, some challenges have to be handled.
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