How Blockchain Can Benefit the Energy Industry

There’s no denying that the development of blockchain technology has ushered in a new era for transactions. It is the backbone for the world of cryptocurrencies, which never would have reached the level of popularity it has without this revolutionary way of validating deals.

Now, quite a few companies are trying to take on the energy industry with blockchain. Can they do it?

Bringing Balance

At its core, blockchain is a digital database that acts as a trustless, tamper-proof transaction ledger. Blockchain itself is decentralized, meaning there is no single “authority” copy floating around. When a transaction is validated, it’s recorded to each network user’s copy of the blockchain.

Transactions are verified and recorded into a blockchain by network users called miners. They maintain the integrity of the blockchain in exchange for new cryptocurrency tokens. This is essentially how new tokens are created. Everything about this workflow is ideal, except for one factor — the act of mining has a voracious appetite for energy.

As a cryptocurrency like Bitcoin becomes worth more, the mining process for that coin becomes even more energy-consuming. Mining has drawn heavy criticism, especially since it’s for something like cryptocurrency that’s “not even real money,” according to traditional thought. But now, a plethora of startups are trying to leverage blockchain’s very real advantages to not only undo the damage from crypto mining but also optimize the energy industry as a whole.

A Global Movement

Consulting company Solarplaza recently analyzed 90 companies working with blockchain and energy. As a testament to how young the technology behind blockchain is, more than 70 percent of these startups began between 2016 and 2017. The three most popular countries for these initiatives were the United States, Germany, and the Netherlands.

But contrary to what you probably assumed, most of the projects are not from San Francisco developers; over half of these blockchain-energy hybrids are based in Europe. While each venture tackles a unique aspect of energy like electric vehicles, conservation, and data analysis, most fall into the categories of peer-to-peer trading and utilities.

New Innovation in the Energy Space

Quite a few of the companies are focusing on introducing a platform that allows strangers to “trade” energy with one another. This is a natural fit for blockchain, given its defining characteristics. Perhaps the most well-known company doing this is LO3 Energy, the NYC developers behind the Brooklyn Microgrid.

Basically, the Brooklyn Microgrid allows solar panel owners to sell excess energy to their neighbors through an auction-style app. The pilot program in Brooklyn was immensely successful, and LO3 plans on introducing the idea to other communities during this year. Similarly, energy titans like Shell, Statoil, and BP are in the process of launching an energy commodities trading consortium using blockchain. Besides this, a whole slew of companies surveyed by Solarplaza are trying to automate the process of finding the cheapest energy for your residence, so LO3 may have some competition on its way.

On the other side of the spectrum, numerous organizations are trying to revamp the traditional functions of utilities. Electron is a company focused on creating blockchain platforms for the energy sector. While also offering trading capabilities, Electron hopes to simplify the process of registering your meter and ensuring your data stays private. Another company called TenneT has partnered with IBM to balance the supply and demand of electricity to ensure that continuous power is seamless.

A common theme among all of these new blockchain-energy companies is the emphasis on communication. Blockchain itself cannot optimize energy use, but it can create a more open dialogue between communities and utilities. And so far, this strategy seems to be paying off for some of the aforementioned companies. Who would have guessed that all that was needed to restore faith in the energy industry was a trustless system?