Blockchain and green energy
Simply put, blockchain technology allows a computer network to share information in a highly secure manner. It is often called a digital ledger technology, and you can think of it as a file that has been copied thousands of times and kept in a network - spread out over multiple locations. Alternatively, you could think of a blockchain as an Excel spread sheet on steroids…. This means that data can be shared by everyone in a network and that the information stored cannot be changed without the approval of all users. It also makes a network that updates the ledger regularly and quickly, no matter where it is. And since data is kept on a network of computers with no single person in charge of the system, you are left with a list of records that store information securely and cannot be changed or altered. Clearly this has huge advantages, but one needs to be careful not to add personal or confidential data to a blockchain that may need to be removed or amended in the future i.e., the need to pay attention to legislation such as GDPR.
New opportunity for communication among energy devices
Furthermore, a blockchain allows everyone in a network to carry out business directly with each other without needing an intermediary. This is called a peer-to-peer (P2P) transaction and, for example, is a key component for enabling those who create renewable energy (e.g. if they have solar panels or a wind turbine) to be producers and consumers - that is, a "prosumer", letting households sell electricity directly to each other.
The rise of the prosumer is helped by blockchain
Although most countries have centralised energy systems, this is beginning to change as traditional users learn to use, create and sell energy simultaneously. Blockchain technology makes it possible to sell energy directly and quickly in a way that historically required a central intermediary. This gives "prosumers" much greater freedom to make deals without agents’ or government oversight and so makes for a decentralised energy supply system. However, it comes at a cost since who pays for a country’s national grid, especially in many countries where there is a need for huge capital investment already? Consumers, prosumers, grid operators and even utilities can all gain from this P2P energy trading scheme; in 2019, the International Renewable Energy Agency found that individual users and prosumers could save money with a method which allowed them to share energy. In addition, the plan has made it easier for people to use green energy by allowing them make better use of the energy resources they already have. It also renders utilities and grid workers more efficient by balancing supply and demand in real time - that is, working directly with prosumers and, in doing so, potentially making the grid more stable. But blockchain technology does more than simply ensure everyone looks at the same verified information; it allows for parties to agree on deals regarding the data without worrying about whether or not the other party will settle and pay for the energy consumed. Furthermore, this helps solve the change in transferring ownership and makes a system safer and easier to track; it also eliminates the need for third parties to check that the energy being traded.
How can blockchain help the clean energy industry?
The clean energy business faces many problems, such as the high cost of producing renewable energy, the need for more facilities to support the distribution of renewable energy, and the difficulty of keeping track of the production and distribution of renewable energy. Blockchain technology makes it possible to set up an autonomous energy supply system that is cheaper and more efficient. Connecting energy providers and users directly will make the energy system as we know it today easier to use, by:
· improving energy trading
Blockchain could make peer-to-peer energy trading possible, letting people and businesses buy and sell clean energy directly to each other. This could make the energy market more efficient and less controlled, reducing the need for intermediaries and lowering energy costs.
· improving energy efficiency
Blockchain makes it possible to watch the use and production of energy in real time, which makes it easier to handle energy supplies. This can lead to less wasted energy and more efficient energy production, lowering prices and reducing carbon pollution.
· providing transparent energy data
Blockchain can provide clear and trustworthy data on how much and what kind of energy is produced and used. This lets people and businesses make smart energy decisions. This could make the energy market more open and trustworthy, leading to more people using clean energy.
· providing renewable energy certificates (RECs)
RECs are utilised to track how clean energy is made and distributed. Blockchain technology could provide a safe and straightforward way to track RECs, ensuring clean energy is counted correctly and making investors more confident in the clean energy market.
· using smart contracts
These run themselves and can be set up to function automatically when certain conditions are met. In the clean energy market, blockchain can make it possible to use smart contracts which make transfers faster and easier.
Benefits of making clean energy with blockchain
Some of the positive aspects of using blockchain for clean energy are:
increased efficiency - blockchain technology can make it easier to trade and control energy in a way that both wastes less energy and costs less.
greater transparency - blockchain can provide precise and reliable information about how energy is made and used, making the energy market more trustworthy and open.
· increased security - because blockchain is safe and ensures changing platforms is impossible, it lowers the risk of scams and ensures that energy data is correct.
increased adoption of clean energy - using blockchain can make clean energy cheaper whilst making the energy market more efficient and less controlled; this will lead to more people using clean energy.
increased sustainability - using clean energy can help make the future more sustainable by reducing carbon pollution whereby assisting in tackling the world's problem of climate change.
Challenges of using blockchain in clean energy
Some of the problems associated with using blockchain for clean energy are:
cost - using blockchain technology can be expensive, and for some energy companies the prices may be higher than the benefits.
scalability - blockchain technology is still in its early stages and may yet need to be ready to support the large-scale adoption of clean energy.
· education and awareness - there may be a need for more education and awareness among people and businesses about the benefits and uses of blockchain technology in the clean energy field.
compatibility - a lack of compatibility between different blockchain platforms and energy systems could make it harder for blockchain technology to be widely used in the clean energy business.
· regulation - the regulatory framework for using blockchain in the energy industry is still being developed, and there are legal and regulatory hurdles to overcome.
Blockchain technology offers the promise to significantly change the energy sector and improve its ESG credentials, which is good for consumers and society as a whole. There are many benefits to using blockchains for clean energy such as more efficiency, openness, better security, encouraging more people to use renewable energy, and therefore improved sustainability. But equally there are challenges such as scalability, cost, control, education and knowledge, and the ability to work with existing systems in the power sector. Blockchain technology could undoubtedly help make the clean energy industry more efficient, open and long-lasting if industry players continue to provide new ideas and work together. How prepared the energy sector is to embrace the change and invest - well, we will have to wait and see…..