Blockchain: a new tool to accelerate the global energy transformation

Blockchain: a new tool to accelerate the global energy transformation

Few technological innovations have captured the public interest in recent years as much as blockchain. Most of the attention has focused on the meteoric rise of the cryptocurrency Bitcoin, part of a total cryptocurrency market that, at its peak in January, rose to over USD 800 billion and then almost as rapidly fell to a quarter of its size.

But cryptocurrencies are only one application of blockchain, and for many, the Bitcoin hype is merely a distraction from the transformative potential that blockchain technology could offer to a wide range of industries, including energy.

Blockchain was one of the big topics of conversation in September 2018 at IRENA Innovation Week, where more than 400 corporate leaders, government officials and experts at the forefront of energy gathered to discuss the innovations driving the energy transformation forward.

To understand the disruptive potential of blockchain to the energy sector, consider how electricity is generated. By and large, most countries rely on large, centralised power plants that generate electricity and then send it across long distances over power grids that were built as a one-way street, sending electricity from the producer to your home. Moreover, the markets in which grids operate are complex multi-party interactions involving grid operators, energy companies, and energy producers that run on a country-wide level.

Today, grids have become increasingly complex, with increasing shares of variable distributed generation (such as rooftop solar), increasing numbers of internet-connected devices (such as smart appliances), and increased loads from the influx of electric vehicles. Blockchain can help operate power grids with high penetration of variable distributed generation and flexible demand-side resources in a more efficient, automated way, all with lower transaction costs.

Blockchain can allow system operators of distributed generation to optimise grid operation by managing all connected devices through automated smart contracts, enabling flexibility and real-time pricing.

Increased digitalization and interconnection have led to increased risks with regards to security. Blockchain, due to its distributed nature, can greatly increase the security of a network if implemented correctly. In coordination with burgeoning technologies such as AI, blockchain can play an important role is securing networks and grids.

The real relevance and impact of blockchain in the energy sector remains to be seen. How technology and its application matures in the coming years is going to be an exciting part of the story of the global energy transformation.

Original source: IRENA
Published on 7 November 2018