How Can Blockchain Support the Energy Transition?
With such uses as tracking the source of renewable energy and changing the relationship between how energy is produced and consumed, blockchain has the potential to transform the way companies collaborate and interact to accelerate the development of low-carbon energy.
Digital technologies such as artificial intelligence, the Internet of things, and blockchain can play a key role in creating a more sustainable and resilient low-carbon energy system.
But first, what is blockchain exactly?
Blockchain provides a new way of sharing information. Think of it as a decentralized digital ledger that records transactions and stores information such as financial transactions, medical records, and assets.
Traditionally, transactional information is stored in one central ledger or database. A blockchain is a ledger, too, but one that stores data in encrypted blocks across a distributed network of computers. No single party controls the blockchain. Security comes from knowing that the computers on the network must validate any new transaction. This creates a transparent, tamper-proof record of transactions and data. Time and money can be saved by minimizing the need for verification of authenticity from third-party intermediaries and automating processes. When an asset is recorded on a blockchain, the audit trail shows where it came from and its full transaction history, helping to verify the authenticity. Because this record is shared between the parties within a blockchain, they don’t need to reconcile across systems to verify that the asset exists.
So, what does this mean for the energy transition?
Blockchain can make it possible to track low-carbon energy and certificates from their origin through every stage and transaction.
For example, this could bring an additional layer of certainty to customers that the electricity or green hydrogen they purchase is from renewable sources or that the carbon credit scheme they signed up for represents the removal of carbon from the atmosphere and is not double counted.
Because blockchain can track renewable energy from source to consumption, it can give customers additional insight into its low-carbon attributes. This is possible when the blockchain includes data such as the time, location, and carbon intensity of the energy production. For example, a smart solar panel could directly provide this data to a blockchain ledger.
As well as being a source of trust, blockchain has the potential to transform the way parties across a value chain interact, making new collaborations possible.
There is a clear shift going on in the energy industry. The traditional, linear flow of energy from producers to consumers is becoming increasingly fragmented and decentralized. A web of renewable-energy-generating assets are joining the energy system. Blockchain is one of the digital technologies that can bring more direct engagement between the energy producer and consumer. Blockchain could enable individuals, companies, and even smart devices such as solar panels and battery systems to interact and transact directly. With this, blockchain can play a key role in the energy transition; but blockchain alone will not be enough. A digital infrastructure would be needed that is made up of a suite of technologies, including blockchain, that enables digital orchestration at scale.