Decentralized Blockchain: Key Enabler in the Emerging Diverse Energy Market

Disruptive digital technologies change the world, altering fundamental aspects of how we work and live. A new generation of digital technologies, enabled by blockchain, could make processes faster and create opportunities both for businesses and individuals. Blockchain-based technology could also help accelerate the energy transition.

Blockchain on technology background.Digital visualization of the token with lines and digital icons. The glowing lines of the included working servers, united in a single network.
Ignatiev/Getty Images/iStockphoto

Society is being shaped by two key mega trends: firstly, the energy transition and the urgent need for the world to decarbonize and reach a net zero economy; secondly, digitalization, where foundational technologies such as blockchain, artificial intelligence (AI), and the internet of things (IOT) will play a crucial role. Both trends could have a profound impact on our lives.

Deep decarbonization of energy infrastructure and consumption would not be possible without a comprehensive digital transformation through the entire energy value chain. This transformation could cover all aspects from how, where, and what energy is generated, to how it is transferred and ultimately how it is used. Standard energy supply chains of the past could be seen as complex but were usually linear arrangements with energy being produced centrally and distributed to consumers who had little or no choice over where their energy came from. Central authorities ensured that a tightly regulated system “kept the lights on” by creating the right balance of energy production and consumption on a national, regional, or global scale.

But that picture of energy generation, supply, and consumption is changing fundamentally.

Increasingly, the world is switching to distributed energy systems. Energy is produced by many different sources and technologies such as solar panels, offshore wind, and low-carbon fuels. These energy sources are introduced to complement or completely replace traditional energy supply structures. Coordinating these diverse elements of the new energy landscape on a large scale could be a key enabler to reduce emissions. The complexity of the evolving energy market could make it increasingly difficult for centralized authorities to coordinate.

Decentralized Systems

In natural ecosystems, organized behaviors can emerge from decentralized and cooperative actions. For example, the murmuration of starlings involves hundreds of birds moving through the air together in an organized fashion. Murmurations are huge groups of starlings that twist, turn, swoop, and swirl across the sky in beautiful shape-shifting clouds. Just before dusk, small groups of starlings from the same area come together above a communal roosting site, but their elaborate shifting patterns are not the result of a centralized command structure.

Flight of the Starlings
A natural example of decentralized organization.
Getty Images

The murmuration has no leader or central coordinator. Each bird responds to the movements of the birds around it, acting on that accumulated information to decide on course changes.
The murmuration is a cohesive but decentralized system, and this is the essence of what blockchain offers in the digital world—an orchestrated, decentralized system with no “leader” that can nevertheless generate substantial business value.

Sharing Trusted Information and Data With New and Existing Partners

Today, business data are often kept in silos. Blockchain enables a shift to seamless information sharing where companies own their data and can transfer them easily across boundaries without an intermediary. This leads to two important things: the first is digital scarcity, having a unique digital identity that is used to trace both digital and physical assets and the second is dis-intermediation—the removal of external bodies that manage data transfers on behalf of others. Blockchain makes it easier to distribute and verify data across boundaries.

Blockchain could have a profound effect on areas like the freight transport, where much of the documentation relating to movement of ships and their cargo is still manual with stacks of PDF/paper contracts that require stamps and signatures to proceed. If any of these documents are missing necessary authorization, then the shipment will not be allowed to enter its port of unloading, which results in a huge inefficiency. A blockchain-based ecosystem enables the transfer of the necessary digital signatures in real time, reducing such issues.

More Changes To Come in the Digital World

There was a surge of interest in the area of cryptocurrency 4 or 5 years ago. Much of this was dismissed as a hype, but the reality today is that many governments around the world are working on legislation that relates to digital assets like cryptocurrency. Decentralized technologies are maturing fast, and the expectation is that in the coming years there will be large-scale implementation happening right across the world as new businesses are formed and new markets established.

Shell is building capability in blockchain. We already have multiple blockchain proof-of-concepts and pilot projects in areas ranging from proving the origin of energy to equipment source verification. These are some key blockchain initiatives by Shell:

Digital Passports for Equipment. In collaboration with industry parties, Shell has completed a pilot project that creates digital passports for equipment and allows these to be tracked throughout its life cycle. This solution reduces the mass of paperwork that would be needed in conventional audit trails, increase productivity, and help ensure safer operations for every party within the ecosystem. On top of that, engineers can conduct component inspections remotely, thereby reducing travel requirements.

The Energy Web Foundation. Shell is a founding member of the Energy Web Foundation, which aims to accelerate a low-carbon, customer-centric electricity system. As part of this drive, the foundation has published open-source toolkits enabling any energy asset owned by any customer to participate in any energy market. Together with the foundation, Shell is working to bring 24/7 carbon-free energy one step closer through demonstrating how blockchain helps customers track generation and delivery of renewable power in real time.

Low-Carbon Energy Sources. Shell is exploring the potential for using blockchain to encourage wider adoption of sustainable fuels in the transport sector. We are also looking at blockchain as a way of verifying that hydrogen comes from sustainable sources. Shell, Accenture, and Amex GBT recently launched one of the world’s first blockchain-powered digital book-and-claim solutions for scaling sustainable aviation fuel.

Validating Carbon Credits. Shell is exploring blockchain as a way to ensure the validity of carbon-credit programs. By tracking the progress and effectiveness of nature-based solutions for carbon capture or avoided emissions, blockchain could identify and avoid double counting of carbon credits and help to maintain the quality of re-/afforestation or conservation projects.

Changes in how the internet works, and in what can be achieved through online environments, have paved the way for this blockchain transformation. Around the world, work, consumers, and recreational activities have become increasingly digital. Driven, in part, by the COVID-19 pandemic, people can now do more through digital technologies and have come to rely on them as essential tools for work and leisure. This deeply digitalized world is about to change again.

Collaboration Is Key

The development and widespread adoption of digital technologies such as blockchain can only happen through collaboration. Organizations need to work together to break down traditional intercompany boundaries. Shell is engaging with industry-leading partners of all sizes to ensure that effective partnerships and good communication channels can be established across the energy sector and beyond.

The next few years will see radical changes in the energy sector. This will be driven by a wide range of new technologies, but among them, blockchain will be a key enabler.

Further Reading:

[The article was sourced from the author by TWA editor Abhinandan Kohli.]