Blockchain is developing like any other exciting new technology: It is being applied to all industries and markets to see what works best. In the past two years and after hundreds of projects, it has gradually become clear which industries can benefit the most from the use of distributed ledgers. And energy is definitely one such industry.
What qualities should an industry have to be a perfect match for blockchain?
First of all, it should suffer from inefficiencies: a large numbers of intermediaries, difficulty exchanging data, quality control problems, and so on. Yet, another sign is high prices, usually as a result of excessive transaction fees. Next is the risk of hacker attacks and data theft, as well as a lack of transparency in pricing.
Finally, we should mention the high barriers of entry for small market players.
A perfect synergy
The energy market fits all these boxes. Indeed, prices have been growing year after year without any visible cause simply because large energy providers tend to transfer their expenses onto consumers. Intermediaries are also rife in this business, ranging from energy brokers who sell contracts to large companies who purchase energy from smaller producers and distribute it across the grid. Attacks on the network are also becoming a more serious risk, especially with the spread of Internet of Things, which could produce a domino effect in the case of an attack on a single power plant.
Blockchain technology – when applied correctly – could lead to a number of benefits for the energy industry:
- Better prices: The elimination of middlemen and tokenized payments with near-zero commissions will allow companies to offer energy prices that are up to 40% lower.
- More competition: in a blockchain network, companies of all sizes find themselves in the same position, dealing directly with consumers.
- Easier access to information: Consumers will know how much it costs to produce energy and how much they consume, which will also help them develop better energy habits and save up to 20% in energy costs.
-Improved security: Information about each transaction is stored in multiple copies, making it impossible to remove or alter transactions without the consensus of the whole network. At the same time, the data is encrypted, so only the sender and the receiver know the details of their transaction.
Toward a renewable future
The implementation of blockchain technology can provide the necessary impetus for the adoption of renewable energy sources – especially when used together with such technology as smart grids. In a smart grid, a special intelligent meter is installed in each home or enterprise, providing real-time information on energy consumption as well as the costs of production. Once customers learn how much electricity they use and how much a power plant spends producing it, they can make more informed decisions, such as investing in solar or wind energy, which incur relatively high installation expenditure but boast very low maintenance costs. Instead of paying intermediaries and big plants, customers can thus support the energy sources of the future.
It is not surprising that some of the most promising projects in the field were developed by companies specializing in smart grids. For instance, LCG Energy is currently developing a full-fledged ecosystem where tokens backed by real energy can be used to both pay for electricity and fund projects in the segment of renewable energy. Investing in high-potential energy projects will effectively create a full-cycle ecosystem where users can both pay their electricity bills using tokens and fund projects that provide them with even cheaper energy later.
The prospects of distributed ledgers in the energy industry are vast and exciting, and this is definitely a field to watch closely.