There are numerous studies which have concluded that better access to energy is closely correlated to economic growth; the World Bank has confirmed this correlation.
Different dimensions of energy are closely associated with rising per capita incomes
As the recent price increases in energy prices due to the war in Ukraine have demonstrated, the world is still very reliant on fossil fuels - which is not only impacting on climate change but leads to a reliance on OPEC. By restricting the amount of oil they produce, these select number of jurisdictions alter the price of energy for the world thus having an impact on inflation and economic growth. This is no different from the oil crisis in the 1970s. Therefore, any way that can make energy more decentralised and give the world and even individual communities access to their own energy holds many attractions - even for the OPEC countries which will, one day, run out of oil themselves. There is a growing realisation that the historic way in which to power national grids via a handful of huge power stations can be changed so turning consumers into prosumers (people who produce as well as consume energy). This new decentralised energy production has been fuelled, largely by renewable energy projects and increasingly by using blockchain-powered platforms.
Blockchain technology opens up novel possibilities for verifying, securing and automatically improving energy flows between generators and users (suppliers) when used in the power industry. With this change in perspective, blockchains can now be a useful tool to control localised electricity consumption and trade. Blockchain technology has the potential to significantly alter the power industry as it is enabling renewable energy production from solar and wind turbines to be sold on a Peer2Peer basis. Meanwhile, as we see more electric vehicles being sold, there is a growing demand to be able to buy small amounts of power on a highly distributed basis. A considerable impact on the energy sector is the demand for green energy from both retail and commercial consumers meaning that utility companies will need to be capable of providing evidence of how and where electricity has been generated. New energy market business models, real-time data management and the transfer of renewable energy certificates (REC)s and carbon credits are all examples of how blockchain technology can be harnessed in the energy sector.
Emerging energy blockchain use cases
Examples of where blockchains can be used in the energy sector
Blockchain in a P2P energy trading system
Using IoT devices and blockchain technology, customers can trade and buy energy directly from smaller distributed energy suppliers. This gives consumers more choice as to where they buy electricity from, who creates the electricity (state owned and operated or private suppliers) and
even the type of power - renewable, nuclear, fossil fuel, etc. By using smart contracts, it would be possible for buyers to switch between energy suppliers automatically at different parts of the day so making the buying of energy more efficient and cheaper - and also without the need for third parties which currently offer energy broking services. According to a Wood Makenzie analysis: “59% of blockchain energy initiatives develop peer-to-peer energy marketplaces".
Development of microgrids
Microgrids now sit on top of national grids. According to Research and Markets.com: “The global microgrid market size is estimated to be USD 26.9 billion in 2022 and is projected to reach USD 63.2 billion by 2027, at a CAGR of 18.6%.” An example of connecting communities to microgrids is
A blockchain-based energy distribution system
Blockchain technology can improve energy efficiency and control. Energy data includes market pricing, fuel prices and energy law compliance. Since 2018, the Chilean National Energy Commission (CNEC) has been researching as to how blockchain technology can be used. More recently in 2021, the
CNEC launched “RENOVA” (Registro Nacional de Energías Renovables) on the blockchain to provide a traceable and unalterable record of each megawatt hour of renewable energies to enable generators and users to verify its origin and delivery.
Shell claims: “Blockchain has the potential to transform the way companies collaborate and interact to accelerate the development of low-carbon energy”. This link gives a list of just 15 new clean energy start-ups. These types of firms will be required to produce a record and verification of the green energy they produce before it is then sold to individual users or sold back into their respective national grids. Along with the use of smart contracts, blockchains have the ability to automate a lot of what these types of small-scale producers require. With blockchains being used across the energy sector in a variety of ways, Digital Bytes has previously highlighted examples of how they have been used by petrochemical firms in the North Sea. The Vakt blockchain platform has signed up two-thirds of the crude oil dealers in the North Sea and is now looking to be used in other areas around the globe.
Role of blockchain in the oil and gas industry
Using blockchain technology to trade oil and gas can cut down on the costs of keeping up with multiple trading systems. Blockchain technology can also cut costs for labour, data management, data visibility, settlement delays and communication between systems. Enterprise Ethereum lets new
commodities be added quickly by reprogramming the original smart contract instead of creating a new method for each commodity. In the oil and gas industry, thousands of businesses can be put into three groups: upstream, midstream and downstream. The journey of a single drop of
resource may involve hundreds of distinct entities, companies, procedures and legal contracts.
‘Upstream’ refers to the industry segment concerned with discovering and exploiting resources. The upstream oil and gas market is dominated by) national oil corporations (NOCs), independents and oilfield services. Major oil and gas firms operate or own oilfield and well operations. Upstream demands the participation of hundreds of parties, many of whom rely on data from other businesses. Blockchain technology optimises large-scale data coordination amongst several parties.
In the midstream segment
‘Midstream’ refers to the industry segment responsible for storing and transporting extracted resources. Additionally, midstream manages large transportation networks and significant regulation. The midstream part of the oil and gas business can benefit from preventing disasters and keeping infrastructure in good shape. Heavy regulation and asset concentration require oil and gas companies to prioritise risk management. So, these businesses have a unique way of gaining from sharing information with others in their field. Blockchain technology facilitates data sharing among multiple parties, especially asset tracking.
In the downstream segment
‘Downstream’ refers to businesses that turn raw materials into finished goods, or sell goods directly to consumers. For example, fuel stations are a type of downstream business. Additionally, downstream involves the management of dozens of different products. These goods are marketed to a distinct
clientele, are subject to distinct environmental regulations, and necessitate diverse modes of transport. Blockchain-enabled supply chains optimise the coordination of large-scale, multi-product operations such as these.
Greater use of renewable energy is desperately required, given the impact that fossil fuels have on climate change. However, for the foreseeable future there will still be a requirement to use fossil fuels (in particular gas) as the sun is not always guaranteed to shine, nor does the wind always blow and there is still a reticence to substantially increase our dependency on nuclear power. There are a variety of ways that blockchain technology is being used in the renewable energy sector as well as by energy producers using fossil fuel but given the transparency and other benefits this technology
offers, we are likely to see blockchains being used further in the energy sector.