Blockchain can help reduce costs in rooftop solar, electric vehicles, and other energy applications, according to a report to be released July 18.
Blockchain ledgers that manage transactions securely could help some parts of the energy sector reduce risks and costs, according to the report from the nonprofit analysis and research organization Energy Futures Initiative.
Blockchain also may help the sector manage the rapid changes it is facing due to the need to greatly reduce greenhouse gases and keep the electric grid reliable, said the report.
“The fact that energy, which is always slow to innovate, is thinking about blockchain— we’re really excited about that,” Alex Kizer, lead author of report and director of strategic research at the Energy Futures Initiative, told Bloomberg Environment.
EFI, founded a year ago by former Obama administration Energy Secretary Ernest Moniz, gave an early copy of the report to Bloomberg Environment.
Blockchain is a secure electronic ledger system where transactions are recorded chronologically. It forms the foundation of cryptocurrencies such as bitcoin, and can verify tiny transactions between energy users and track how much electricity is generated by rooftop solar panels and other energy sources.
Blockchain can manage large volumes of transactions quickly, securely, and at a relatively low cost, the report said. The ledger system also dramatically reduces overhead costs of using intermediaries, such as clearinghouses, to enable leaner, more profitable businesses, the report said.
But Kevin Kelly, an equity strategy associate at Bloomberg Intelligence, questioned some of the cost-saving assertions in the report, although he agreed that blockchain can reduce transaction times.
“Blockchain technology in its current state is actually fairly expensive to implement, let alone maintain,” Kelly told Bloomberg Environment in an email.
The cryptocurrency behind Blockchain, known as bitcoin, is very energy intensive, but the report points to other less energy intensive, alternative cryptography that could be used.
“The cost may be outweighed by the benefits of truly decentralized, immutable ledgers of data for certain activities (most notably financial transactions),” Kelly added. “In many cases, however, companies or industries can replicate many of the benefits of blockchain through other means.”
Blockchain in Energy Today
The report said $100 million to $300 million has been invested in 100 energy-sector blockchain applications, with at least 60 energy blockchain-focused startups forming globally in the last few years.
One area where blockchain is used is in distributed energy, mainly rooftop solar, where peer-to-peer energy markets are forming. In these markets, a consumer can directly purchase energy, such as solar or wind, from a supplier.
Brooklyn Microgrid is doing just that. The $6 million project uses blockchain to manage and automate transactions between 60 producers, including households with solar rooftops, that sell energy to 500 households with smart meters.
The technology also can help with billing and payments for charging electric vehicles.
“We see that charging infrastructures are still going to be a big barrier, and blockchain can help out with that,” Kizer said.
For example, the European energy company Innogy SE has launched more than 1,200 electric vehicle charging stations supported by blockchain.
The report also covered the benefits and challenges of using blockchain in energy trading platforms, energy transactions for emerging markets, and emissions trading systems for greenhouse gases.
Kizer said that blockchain would also be particularly beneficial to carbon registries, because some of the limitations around them dealing with foreign markets are often difficult to verify.
“That’s something where really the core benefits of blockchain get really to the heart of some of the frictions in the carbon registries markets,” he said.
Blockchain could provide credibility in the exchange of information about carbon inventories and registries around the world, and could create a transparent record for the market data, the report said.