What is blockchain?
Blockchain is a distributed ledger of data entries. The entries are processed and managed by a series of different computers, or ‘nodes’, which can be running on different servers. Every computer connected to the system keeps a copy of this ledger, meaning that different parties can view and manage the same information in real time. It also makes it exceptionally safe and secure.
The energy sector has been relatively slow to adopt blockchain technology.
However, it is clear that an increasing number of transactions will involve blockchain in some shape or form. A novel example of its usage is the recent blockchain-powered digital trading platform used by EDF Energy to transfer its Capacity Market Obligation, or ‘CMO’, to UK Power Reserve.
Rather than the trade taking the usual five working days, the platform automatically checked that the trade complied with the relevant trading rules, streamlining the trading process as well as maintaining a secure, decentralised audit trail of all such trades.
Following on from the successful use of blockchain by EDF, it should become more common for energy companies to use similar blockchain-powered platforms to trade CMOs. Indeed, the technology is ideally suited to processes which involve dealing with a clearly defined set of rules that can easily be entered into the ledger.
In the short term, we are also likely to see increased use of ‘smart contracts’, where blockchain technology is used to automate a number of steps in the transaction, such as payments being made once conditions have been satisfied, saving businesses significant time and money.
Looking further into the future, blockchain technology and smart contracts could be used to power decentralised energy networks, where the emphasis is on ‘prosumers’ selling their surplus energy to local communities. For example, the Brooklyn Microgrid being developed in Brooklyn, New York, makes use of the blockchain-powered ‘Exergy’ platform.
The electricity grid is maintained by the conventional utility provider, but all of the electricity is produced by the residents, and can be traded between them and other neighbouring customers via the platform.
Smart meters and smart contracts track the quantity of electricity being produced, and automate the transactions between the residents. Vattenfall also launched a similar project in the Netherlands in 2016, ‘powerpeers’.
This platform allows customers to purchase electricity from both local prosumers and major renewable energy suppliers, providing more choice for consumers, and more opportunities for large-scale producers to market and sell energy directly to the customer.
For more information on the use of blockchain and how it could benefit your business, contact a member of our technology team.