Blockchain technology promotes the arrival of the power revolution, and energy becomes the largest application of blockchain

Bitcoin technology has begun to penetrate into the power industry and is shaking up the management model of electricity payments.

From New York to Vienna, researchers and utilities are adapting cloud-based ledgers for tracking bitcoin as an alternative to existing slow management systems that require constant manual input and multiple spreadsheets. Once set up, the database, called a blockchain, automatically records every action within the system, formats it, and stores the results in a secure online list that can be accessed by anyone, anywhere.

Is that speed really needed? Utilities are transforming a system they’ve used for nearly a century that monopolized supply and distribution. Now, independent wind and solar farms are entering the grid at short, sometimes unpredictable intervals, requiring trading systems to become more flexible and decentralized. Utilities, including Germany’s RWE AG and Finland’s Fortum OYJ, are looking at blockchain technology to make the system more flexible and decentralized.

Lawrence Orsini, founder of New York-based blockchain developer LO3 Energy, said:

“There’s been a shift in business models around this, and these companies are trying to figure out how to participate in this new distributed energy space.”

Orsini said his company has approached 23 utilities about how they can modify their trading practices. In addition to handling increased renewable energy generation, utilities also want to track the use of new products, from rooftop solar panels to electric vehicle charging.

Blockchain has already made inroads into a wide range of industries, from finance and insurance to car rentals and music streaming. The technology has become a hot topic on Wall Street, with companies such as JPMorgan Chase, Wells Fargo and Barclays all looking into how to use blockchain technology for transactions. Energy is the next application on the horizon.

Michael Liebreich, Chairman of Bloomberg New Energy Finance, said:

“I think it’s free renewable energy. Some of the older systems at the big power plants and vertically integrated utilities don’t really need blockchain technology.”

In Germany, RWE has been testing blockchain technology for electric vehicle charging and developing a platform where consumers can trade green energy independently.

Carsten Stoecker, head of blockchain research at the RWE Innovation Center, said:

“Our hypothesis is that there will be a machine-to-machine economy — machines will be able to perform transactions between each other. Decentralized network technologies like blockchain will be the transaction layer for this economy.”

Creating the space where these deals can take place is bringing together a wide range of workers with expertise in energy, finance and information technology.

Juliane Schulze, who oversees business development at Vattenfall AB, the largest utility in the Nordic region, said:

“This can be described as a real-time exchange of goods and money. We have many of these transactions with our customers and within the company. In theory, these transactions can all be put on the blockchain.”

Vienna startup Grid Singularity is working on a decentralized digital platform that will allow people to buy and sell energy. It expects to test its blockchain technology with power plants by the end of the year, according to Tobias Federico, the company’s head of market design.

Federico said:

“We’re going to develop a kind of parallel market, and this blockchain-based energy market is going to have to slowly build up credibility. And then we’re going to slowly transition from the old world to the new world.”

Claus Wattendrup, Managing Director of Vattenfall Innovation Europe GmbH, said:

Some utilities are already preparing blockchain experiments. Vattenfall plans to test it on its Powerpeers online platform, which allows consumers to buy and sell electricity without going through the utility.

Demand Response

Fortum is also planning a pilot project for next year that could allow testing in so-called connected homes, in which users can manage appliances via an internet connection.

Heli Antila, CTO of Fortum, said:

“Blockchain could make it easier to get demand response for small loads, and it would also make it easier to accommodate more renewable energy sources like wind and solar.”

Axel von Perfall, senior manager at PwC, said that blockchain technology needs to prove itself in pilot projects over the next two years, while its main application areas will evolve. He expects that electricity consumers will save money from direct contact with producers, while many intermediaries, such as energy traders and sales companies, will be reduced or no longer needed.

von Perfall says:

“Blockchain does not mean the end of public utilities, but rather a shift in their roles. These companies have the opportunity to develop and operate the centralized energy market platforms of the future.”

LO3 Energy’s Orsini is weighing blockchain projects with utilities from Europe, the U.S., Australia and Africa, regions where he sees huge potential.

“Energy is the biggest use case for blockchain on the planet, bigger than financial services by some factors. The world runs on energy, not money.”