The electric power industry is beginning to explore applications for blockchain that include managing the grid that helps power homes and businesses. The results could be transformative.
“Blockchain technology could provide the infrastructure for sophisticated networks that manage payments, sales, trading and distribution,” according to a recent report from global management consulting firm McKinsey. “Given their potential to streamline transactions and cut costs, blockchains and smart contracts could help to remove pain points and friction throughout the power value chain.”
Emerging Blockchain Applications for Power Companies
According to the report, emerging blockchain technology applications for the power industry include giving solar producers renewable energy certificates based on actual generation rather than estimates and forecasts, and allowing small electricity producers to sell excess energy in peer-to-peer transactions.
Combined with smart financing, mobile applications and digital sensors, blockchain can also help distribute electricity in regions around the globe with limited access to power.
In renewable energy markets, where the amount of electricity produced varies with available wind and sunshine, blockchain technology can help balance supply and demand with real-time transactions.
“Blockchain technologies are still in their infancy, and questions remain about security, scalability and governance,” McKinsey said.
The technology can make monitoring and maintenance of power-industry infrastructure more efficient with real-time data communicated by sensors.
It can also facilitate a larger and more-efficient electric-vehicle charging station network where drivers can pay securely and instantly.
Players involved in the emerging flirtation of blockchain technology and the electric power industry include Volt Markets, LO3 Energy and Electron.
Widespread Blockchain Adoption Faces Hurdles
However, blockchain adds uncertainty to an industry already being transformed by renewable energy sources, distributed markets, strides in energy efficiency and storage as well as digitization, the report said.
“Blockchain technologies are still in their infancy, and questions remain about security, scalability and governance,” McKinsey said.
For one thing, while blockchains themselves have never been hacked, networks employing them can still be manipulated if not properly guarded. Also, a dearth of blockchain procedures and global regulation means there is a lack of consistency and legal certainty when dealing with disputes, wrongdoing and transaction reversals.
In the United States, potential government regulatory hurdles lie with blockchain-backed peer-to-peer electricity sales because they would require changes to existing state-level market rules, notes Christine Hertzog, a senior technical adviser with the Electric Power Research Institute. Also, the utilities industry is in wait-and-see mode for blockchain guidance from federal regulators, she says.
While Hertzog sees potential in peer-to-peer transactions such as neighbors selling extra solar-generated electricity to each other or supply-chain security risk management and business-to-business contract management, she knows that “utilities are very risk averse in terms of adopting new technology.”
Electric power companies, including utilities, need time to assess where blockchain technology could help and will want to see technology that reduces costs and improves productivity, she says.
