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Blockchain-Based Energy Trading: Can They Compete with Centralized Markets?

Blockchain Based Energy Trading Could Compete with Centralized Markets

The energy market is highly centralized, with people not having control over their consumption and production of electricity. All key decisions regarding electricity such as its pricing, utilization of excess electricity and other aspects of power supply are taken over by monopolies.

Today, many problems pertaining to the electrical sector are affecting the world. Amid an increasing need to migrate to renewable energy, there are consumers who want to undertake the paradigm shift but, more often than not, can’t do so due to cost concerns. At the same time, the ones who produce excess electricity have to provide it to a monopolistic public utility. The integration and utilization of blockchain technology in the electric sector solve many of these problems and have several other applications.

Blockchain technology has proven to be a great alternative to add value to the electricity market. The emerging technology has been embraced for various power utility applications such as credit management, green energy promotion, prepaid smart meters and asset optimization. A lot of startups have adopted blockchain as a foundational technology to meet the various utility needs such as bill settlements, charging and authentication of electric vehicles. Moreover, the technology has time and again established viability by delivering quality services to support utility business models.

Peer-to-peer energy trading

Possibly the biggest application of blockchain in the electricity sector is giving customers the ability to choose what they want to do with their power supply. Blockchain startups and projects are working towards coming up with a way in which the consumers get to control their power supply, which will simultaneously promote the use of renewable energy. The premise of blockchain technology, that is, its decentralized nature and the transparency it provides in terms of transaction data, will allow consumers to sell and buy renewable energy among each other without the need of an intermediary, as was the case before with public utilities. The reason behind not allowing consumers to buy and sell electricity was the surge of natural monopolies due to the intricate infrastructural nature of the electricity sector, which prevented new companies from entering it. However, in recent times, due to technological advancement, this ceases to be the case.

Blockchain technology allows consumers to buy renewable energy from their solar-powered neighbors. The growing portfolio of the transparent blockchain-based models is going a long way to make large scale peer-to-peer trading a reality. Decentralized ledger technology (DLT) would be used to securely record the buying and selling transaction data.  This has a two-fold effect. First, that the producers of excess renewable energy get the income due to them. Secondly, the people who cannot afford solar power can still get access. A blockchain-based smart grid would be used to compare energy providers and allow consumers to buy directly from them. Furthermore, smart contracts could also be used to instantaneously execute the transaction as soon as the action (in this case, the transfer of energy) is done.

Existing companies vested in the electrical market

Power Ledger – Being from one of the nations with ideal environmental conditions for renewable energy, this Australian-based startup has grabbed onto the opportunity to enhance the country’s renewable energy sector while attracting consumers with cheap prices. Power Ledger allows its consumers to trade excess energy among each other and pay for it in the real world. Consumers can also store the power in a battery which would fetch them more profits by selling it at their peak. The main function of Power Ledger is that it gives the customers assurance by storing all the transaction data in the decentralized ledger. The technology keeps the trade of environmental commodities more transparent, secure and efficient, and allows consumers to track any transactions. Furthermore, it incentivizes people to shift towards consumption of renewable energy with its renewable asset ownership model to boost the production of renewable energy.

WePower – WePower is an Estonia-based startup that uses a blockchain-based smart grid system to allow consumers to track and monitor energy prices. They are striving towards a democratic energy sector where the power lies with the people, by allowing small-scale producers and consumers to enter into the market. WePower uses smart contracts and the concept of energy tokenization that allows corporate buyers to directly obtain their energy from the generators. The positive results in Estonia have pushed WePower to consider global expansion, starting with Australia.

Clearway Energy Group – In June 2019, US-based firm Clearway Energy Group initiated a pilot program for renewable energy trading using blockchain technology, as reported by BitcoinNews.com.

As reported earlier, the companies Shell, Equinor and BP took to blockchain technology for energy trading with an expectancy of a massive 40% drop in costs with the implementation. Last year, South Korea’s largest energy provider, KEPCO, sought a modification of its energy infrastructure by integrating blockchain as a solution. More recently, the energy sector in the Middle East took to blockchain to push forth renewable energy.

Conclusion

Apart from providing customers with a greater sense of choice, the integration of blockchain technology in the electrical sector facilitates the sustainability of the environment by incentivizing people to shift towards renewable sources. All the existing startups are working steadily towards the betterment of the future, ultimately vesting more power in consumers’ hands. The unequivocal choice over power supply is surely indicating a revolutionary change in the electrical sector. This also endorses the perks of blockchain technology which has a major role to play in the everyday lives of the common man.

 

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Another Firm Trials Blockchain for Renewable Energy Trading

Another firm takes to Blockchain for renewable energy trading

Amidst an increasing need to migrate to renewable energy, a US-based firm, Clearway Energy Group is initiating a pilot program for renewable energy trading using Blockchain technology, as reported by Bloomberg.

The Clearway Energy Group has teamed up with Power Ledger, a company which uses Blockchain technology to achieve peer-to-peer energy trading from rooftop solar panels.

Per the report, the company’s initial projects include energy generation of about 1-5 megawatts in Massachusetts followed by a Midwest project for 20-megawatt energy generation.

The US Renewable Energy Certificates (RECs) are valued at over USD 3 billion with an additional 3-10% transaction cost to top it. Addressing this, the Co-founder and Chairman of Power Ledger, Dr. Jemma Green said that despite the availability of a digital alternative to keep a track on the certificates, it gives a pathway for escalated costs with the involvement of brokers or bilateral contracts across state lines. The new platform has been built to meet these challenges in terms of cost and efficiency and after adequate testing, the company has decided to extend its services in early 2020, said Green.

On June 18, 2019, Power Ledger announced the launch of its peer-to-peer network to bring energy trading to Austria.

An overview of Blockchain’s potential in the energy industry

Blockchain Technology has been embraced for various power utility applications such as energy credit management, green energy promotion, prepaid smart meters, asset optimization, etc. This emerging technology has proven to be a great alternative to add value to the energy market as opposed to the traditional methods to break through the existing limitations. A lot of start-ups have adopted Blockchain as a foundation technology to meet the various utility needs such as bill settlements, charging and authentication of electric vehicles. Moreover, the technology has time and again established viability by delivering quality services to support utility business models.

As reported earlier, the companies, Shell, Equinor and BP took to Blockchain technology for energy trading with an expectancy of a massive 40% drop in costs with the implementation. Last year, South Korea’s largest energy provider, KEPCO sought a modification of its energy infrastructure by integrating Blockchain as a solution. More recently, the energy sector in the Middle East took to Blockchain to push forth a renewable energy dependent life form.

BitcoinNews.com is committed to unbiased news and upholding journalistic codes of ethics. For more information please read our Editorial Policy here.

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Chevron, Total, Reliance Join Commodities Trade Blockchain Platform

Chevron, Total, Reliance Join Commodities Trade Blockchain Platform

Reuters reports that Chevron, Total and Reliance have joined a growing list of mainstream energy bigshots eyeing blockchain technology to streamline the commodities trading industry. This adds to BP, Royal Dutch Shell, Equinor, Gunvor, Mercuria and Koch Supply & Trading, who are also backers of the same platform called Vakt.

Historically, the logistics involved in commodities trading lacked elegance; with tons of paperwork that has to be managed by the individual parties involved in the transactions. However, sights set on the distributed ledger technology by a growing number of stakeholders within the oil and gas sector reveal an opportunity to scale processes involved in the value chain.

According to the article, blockchain is described as a technology that provides a “solution to trade and settlement inefficiencies… improve transparency and reduce the risk of fraud”.

A report in 2016 reflected on the summit held by the Group of Eight (G8) highly industrialized nations to include Canada, France, Germany, Italy, Japan, Russia, the United Kingdom, and the United States who drew on the conclusion on the necessity to establish transparency in order to fight corruption in the sector at the political, social and economic level. The report further noted that “as noble as the concept may be, when it comes to implementation, the political commitment to transparency seems to fall short of its aspirations”.

Blockchain has the ability to cut through the political inefficiencies thereby stem the tide of corruption that impedes transparency in the oil and gas sector – across borders – and reconstitute stakeholder commitment to a wholesome economy.

In adopting emerging technologies to address some of the problems plaguing the industry, Total’s head of trading and shipping Thomas Waymel said, “Total has been supporting industry initiatives to digitize cargo post-trade processes for some time… [we] view them as a major step forward towards safer, faster and cheaper logistical operations.”

Last month, Abu Dhabi National Oil Company (ADNOC) revealed that it is exploring the use of blockchain in its oil supply chain. Digital Unit Manager Abdul Nasser Al Mughairbi said that it could be “the first application of blockchain in oil and gas production accounting anywhere in the world”.

This year may see more industrial scale application of the distributed ledger, especially in areas desperately in need for better data coordination/validation, transparency and “dumping of paperwork” processes among inter-dependent systems across organizations in a value chain.

 

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Shell, Equinor, BP to Use Blockchain for Energy Trading

Shell, Equinor and BP will be using the blockchain-based platform Vakt for energy trading, with operations on the platform to go live by the end of November 2018 in the North Sea oil fields. The purpose of using Vakt is to move energy trading from cumbersome paper contracts to digital smart contracts. Cryptocurrency will not be used for the trades but the deal recap, contract, confirmation, logistics, and invoicing will be recorded on the blockchain.

Shell is based in the Netherlands and has an annual revenue of USD 300 billion. Norway-based Equinor records annual revenues of USD 60 billion and BP USD 245 billion. Combined, these energy companies have assets of nearly USD 800 billion, approximately eight times the Bitcoin market cap.

Blockchain is known to shorten and strengthen supply chains, by providing a cryptographically secure, immutable, and transparent ledger. Inefficiencies and errors in the energy trading process will be easy to spot and correct, and fraud will be reduced due to the transparency. Overall, energy trading on the blockchain will be more reliable and efficient than with paper. It is expected that energy trading fees will drop 40% once the blockchain platform is implemented.

Vakt is a post-trade management platform that is meant to digitize the commodities trading industry. Aside from the major oil companies backing Vakt, the banks ING, Societe Generale, and ABN AMRO are on board, as well as the independent traders Koch, Mercuria, and Gunvor.

After the integration of energy trading in the North Sea oil fields in late 2018, Vakt will look to integrate barges, waterborne energy markets, and United States crude pipelines in 2019. Additionally, in 2019 Vakt expects its first licensees and shareholders, implicitly indicating the door is open for other energy trading firms to join Vakt.

 

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