While blockchain technology is most closely associated with the cryptocurrency Bitcoin and more recently the financial industry, there is a new category of tech companies that are focused on using blockchain technology to reshape the energy industry. These companies are using blockchain in order to help utility companies track renewable energy credits, facilitate metering and billing, manage energy data such as market prices and cut out intermediaries such as retailers.
Last year, over 320 million dollars was invested in 120 start-up companies that are using blockchain to transform the way the energy industry conducts business. Blockchain is a relatively new technology which uses digital blocks of transactions to permit an individual party to conduct and bill a transaction directly with another party. All transactions that take place on the blockchain are verified by a decentralized network of computers and are recorded on a distributed ledger. Blockchain provides a secure way to do anything from executing smart contracts to tracking supply chain data. Robert Hacket, a writer for Fortune.com, defines blockchain in one of his recent articles:
“Though it sounds like a series of defensive maneuvers ripped out of an NFL playbook, the blockchain is actually a way to structure data…This coding breakthrough—which consists of concatenated blocks of transactions—allows competitors to share a digital ledger across a network of computers without need for a central authority. No single party has the power to tamper with the records: the math keeps everyone honest. Forty of the world’s top financial firms are experimenting with the tech.”
PHOTO CREDIT: McKinsey & Company Electric Power & Natural Gas
In New York, utility companies Avangrid, Con Edison, National Grid, the New York Power Authority and Indigo Advisory Group have come together to explore different use cases for blockchain within their businesses. In a recent article by the group, they determined that the best use cases for blockchain within utility companies include automating customer management, automating clearing and settlement, tracking renewable energy credits, increasing cybersecurity, and connecting electric vehicles to the grid. The New York consortium and other companies within the energy industry have determined that the above use cases for blockchain in the industry will increase efficiency by streamlining data management, metering, and billing. Furthermore, they have determined that the use of blockchain within the industry would decrease overhead for utilities and lower costs to consumers by facilitating the metering and billing process between the utility and the consumer instead of involving intermediary retailers and brokers.
Although blockchain technology is still in its infancy, it is only a matter of time before the technology revolutionizes the way the energy industry operates. Stephen Callahan, Vice President of Energy, Environment & Utilities, Global Strategy, at IBM boldly predicts, “What the internet did for communications, blockchain will do for trusted transactions, and the energy and utilities industry is no exception.”