Blockchain technology is a very advanced record-keeping system. It is a virtual fortress and it is elegant in its design. The system works as a decentralized ledger. Transactions are verified, logged and disseminated among the peers in the network who have access to this ledger. There’s a lot of hype in the financial sector about potential applications of the blockchain, but can it transform the energy industry?
We hear about transactions costs a lot in energy. It is a general sign that a market is behaving efficiently if transactions costs are low. We care about this efficiency when it comes to the electricity markets. Whenever you have a system that is dependent on trading, this type of disruption in transaction costs may greatly aid the overall health of the market, and thus, the system.
Certain applications for the blockchain will transform what PwC calls “documentation of ownership”. For example, we can use blockchain technology to certify renewable energy credits (RECs), ensuring that there is total transparency in how those credits can be applied to the appropriate holders and alleviating the issue of double-counting and other types of fraud.
Most interestingly, overall energy transactions can be decentralized. For instance, there is a company in Brooklyn, N.Y. that has been able to bring blockchain technology on as part of its trading platform where residential solar producers can trade energy on a distribution network. Think of your average millennial harnessing the power of sun and being able to trade energy on the market without the utility being the middleman.
Electron, a company based in the United Kingdom is working to gather information using the blockchain for energy efficiency purposes. If the technology were to be integrated with smart thermostats and the like, one could feasibly optimize energy consumption to match supply without having to go through a utility or another type of centralized hub.
It will be interesting to see how blockchain technology plays out in the long run. As utilities and other major stakeholders bump up against advances in technology, it is crucial for students to be on the lookout for innovative pathways to integrate new technological solutions into our electricity grid.
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