Blockchain may be the ‘missing link' that could transform the electric power industry and leave traditional business models in the dust.
That's according to analyst firm GlobalData, which says that blockchain technology is one way to create a paradigm shift towards a more decentralised and transactional environment.
Currently electric utilities face challenges including high operational costs, aging grids, security, regulatory compliance, and personalised customer service.
GlobalData says that blockchain has potential to address many of these challenges, which is why many providers are experimenting with the technology.
“Blockchain could be the leading enabler of decentralisation, democratisation, and liberalisation in the power industry,” says GlobalData disruptive tech analyst Archi Dasgupta.
“Using smart contracts, the technology can empower bilateral settlements in real-time by eliminating midpoint delays steering to a significant reduction in the operational costs of utilities.
Already, businesses in the electricity domain are using blockchain in ‘interesting ways, according to GlobalData's Disruptor Tech Database.
One business is Australian-based crypto-startup Power Ledger, which develops decentralised energy trading platforms on blockchain. The company launched its first commercial deployment in the United States. Its distributed P2P blockchain network allows consumers and businesses to sell their surplus solar power in their neighbourhood without a middleman.
GlobalData adds that smart meters have also made a ‘buzz' in the power industry because of its benefits to consumers, but they have not offered desired results. This led to some companies experimenting with data on a decentralised network like blockchain.
Lithuanian startup, WePower, has been working around the same in partnership with Estonia's transmission system operator Elering. WePower uploaded 26,000 hours and 24TWh of energy production and consumption data from the smart meters of Estonia on to the Ethereum blockchain, which led to the creation of 39 billion smart energy tokens that are tradable.
GlobalData says P2P energy networks also capitalise on blockchain's potential by creating a decentralised marketplace. That marketplace connects owners of electric vehicles and owners of charging stations for ‘mutual benefits'.
German startup Motionwerk has launched a blockchain-based P2P energy sharing project Share-Charge, which enables users to share their private electric charging stations for money.
“Although blockchain technology started scaling from its incumbent phase in the power industry, it is still largely dominated by proof-of-concept projects and small-scale production deployments,” says Gupta.
Gupta believes mass-scale commercial adoption is still three-to-five years away.
“There are several challenges to be addressed including deployment costs, the requirement of power to run the setup, and more importantly, the need to develop common standards and regulations. Electric utilities are similar to banks in the way they are centralised and highly regulated, hence it is crucial to creating an ideal set up for the implementation of transformative technologies such as blockchain.