Since the development of Bitcoin in 2008, the interest in blockchain technology has expanded into many different industries, with its global market predicted to grow to US$2.3bn by 2021. However, despite the impact blockchain may have on different industries and its clear potential to disintermediate and shorten entire value chains, the technology is still young.
Organisations are now starting to explore its application to traditional business models and processes, and players in the energy space, including start-ups and large-scale utilities, are starting to engage with this technology to explore its real potential.
Dr Adham Sleiman, vice president at Booz Allen Hamilton, MENA, said, “Many digital services are already possible today without blockchain, and energy players should avoid adopting this technology for the sake of it or for fear of missing out. Early adopters should conduct a holistic assessment to understand their own role in the energy value chain, identify the business need and define a clear direction of where and with what economic benefits blockchain-based applications could be used.”
Renewable energy is a good candidate for blockchain use since it operates in a system of economic and financial transactions (electricity and fares), currently operated by a central authority (utility). This is gradually becoming more decentralised thanks to the role that distributed energy resources are playing.
In this context, energy players are increasing their efforts to develop blockchain-based applications and processes in order to solve some of today’s challenges, while also integrating renewable energy in traditional grids.
With electricity demand in the GCC expected to continue growing rapidly, renewable energy has become a key asset in government strategies to diversify the domestic energy mix.
Booz Allen Hamilton has outlined three specific use cases in which blockchain can facilitate the integration of renewable energy in electricity grids across the GCC. These include Enabling peer-to-peer (P2P) Energy Trading; Tracking Renewable Energy Certificates; and Articulating Smart Contracts.
According to the International Energy Agency, by 2040, 1bn households and 11bn smart appliances could actively participate in interconnected electricity systems. Transactive energy, enabled by distributed energy resources is the major disruptive change that the electricity industry may face in the coming ten years. Several pilots have already illustrated the ability of a blockchain ecosystem to monitor flows of both value and energy as multiple parties transact.
Smart contracts are self-executing programmes that respond to a pre-defined trigger event. Once the action is done, it is added to the blockchain as a permanent record. Successful pilots based on blockchain have been tested in the operation of electric vehicles charging stations, enabling a fully automated, worldwide authenticated, charging and billing solution with no middleman involved.
Dr Sleiman added, “Looking ahead, scalability is the biggest challenge for industry-wide applications based on blockchain. Therefore, planning and investing in blockchain proof of concept is the only reliable way to understand the effectiveness of the technology in a real business scenario.”