Blockchain — a threat to traditional energy providers?

Blockchain — a threat to traditional energy providers?

Is peer-to-peer energy trading an opportunity or threat?

Some companies in the energy industry are sold on blockchain technology, but others (and more specifically utilities) — well, not so much. It can be difficult to understand why utilities should be interested in blockchain since they are often the middleman between electricity producers and consumers. So most retailers are not fascinated by the notion of disintermediation.

Blockchain is redefining digital trust, forming a new paradigm of management that can potentially disrupt traditional forms of governance. The disruptive nature lies on the potential of replacing top-down control with consensus and also in the underlying philosophy of distributed consensus, transparency and community based decision-making.

Peer-to-Peer(P2P) energy trading

With the rise of the energy prosumer, there is increasing interest in energy sharing. Pioneering Blockchain-based companies are creating a world where customers with behind-the-meter generation capacity can sell their surplus electricity to neighbours in a local energy marketplace. Consumers can also buy locally produced renewable energy that is likely cheaper than buying from their utility.

Blockchain’s relatively low transaction costs allow smaller energy producers to participate, right down to the individual solar household. Smart contracts facilitate the real-time coordination of production data from solar panels and other installations and execute sales contracts that allow for two-way energy flows throughout the network.

But this kind of innovation mustn’t threaten utilities. Here’s why:

Blockchain could help align the incentives of stakeholders along the entire energy value chain

Blockchain does not have to pit startups against utilities, or suppliers against consumers and prosumers. In fact, blockchain is one of the only technologies with the potential to support a platform that aligns the incentives of the various stakeholders in the energy system.

Balancing supply and demand through real-time transactions

As solar and wind energy scale, energy markets are increasingly challenged to balance supply and demand. There is a desire for flexibility services, which either adjust demand to better match supply or can provide supply at short notice to meet increasing demand.

Demand response and other flexibility services can be a valuable resource for power providers — in some cases substituting for investments in new generation capacity to meet peak demand.

Consumers could opt in to receive some compensation in exchange for, say, allowing utilities to dim their lights by 5 percent during peak periods or pull a few kilowatt-hours from their home battery storage, all automated by smart contracts and supported by the same blockchain-based network that enables transactive energy.

Conclusion

By applying blockchain to the vast stores of data of utilites, they can create value not only for the energy customer, but also for themselves. Utilities can unlock new revenue streams from better-coordinated markets, smarter hardware, and wider, more efficient electrification.

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