The Energy Industry Should Adopt Blockchain Technology

Challenges Of Blockchain Energy Start-Ups

The energy sector is looking at a wave of innovative start-ups as it begins to discover some of its first solutions to emerging challenges. But why are there so few blockchain energy start-ups, and why are so many start-ups failing? First, start-ups find it difficult to attract investment even with growing investor interest. This results from a lack of knowledge and uncertainty regarding blockchain technology regulations. Additionally, due to certain characteristics of blockchain technology (e.g., immutability), many potential investors are skeptical about investing in such projects because their contributions may become worthless.

So, before diving in headfirst, new entrepreneurs should remember that blockchain has yet to achieve widespread adoption. In fact, it’s still in its infancy—fewer than 15% of businesses have adopted it. As a result, it could be difficult for an energy blockchain start-up to obtain funding or partners. Moreover, since blockchain solutions rely on data integration and external networks to work effectively, they may not fit with some existing energy enterprise software or systems.

Benefits Of Blockchain Technology For Energy Production

With the advent of the blockchain, energy producers can trace the flow of renewable energy from its source to its consumption. These distributed ledgers can also track data related to energy production, including the carbon content and its source. As a result, consumers could take an active role in the energy supply chain and favor local, renewable sources. In addition, blockchain can provide energy companies with advanced metering infrastructure (AMI) by recording how much energy is going into each house or business and reporting that data to regulators and utilities.

In addition to its potential to revolutionize the electricity market, blockchain technology can help facilitate renewable energy certification. With this, renewable energy has a higher degree of traceability. Such traceability is crucial for long-term power purchase agreements, which require certified green energy. By using blockchain technology, such agreements can be easier to obtain. This, in turn, can help to spur renewable energy growth.

Let’s look at how existing energy industry players are adopting blockchain technology. A popular example is SolarCoin, which offers a blockchain-based incentive system to encourage people to invest in renewable energy projects. They give out tokens for every megawatt-hour of solar energy they generate. People can use them as a form of payment for their electricity bills or sell them on cryptocurrency exchanges for cash. Another example is Power Ledger, which uses its proprietary platform to offer peer-to-peer electricity trading in Australia. It allows users with solar panels on their roofs to sell excess power directly to their neighbors at market rates without going through an electric utility middleman.

Challenges For Regulatory Frameworks

While blockchain technology has many benefits for the energy industry, it is also likely to pose some challenges for regulatory frameworks. First of all, this new technology will open up energy management and automation opportunities for new entrants. In addition, there is an expectation of blockchain technology to generate IT revenues for blockchain solution providers. As a result, these new entrants must first present a compelling value proposition to their clients and then analyze and decompose possible economic value for those clients.

Secondly, current blockchain protocols do not provide policymakers with sufficient sovereignty. For instance, the location of “mining” activities may be relevant based on strategic concerns. To address these concerns, specific blockchain protocols may be needed. Although this is a significant concern, it should not prevent energy companies from exploring the technology. On the contrary, it is an essential part of the future “operating system” for decentralized electricity markets.