Why Do We Urgently Need Blockchain in Energy Market?

Nuclear, coil, gas, and oil power prevails in the energy market today. Yet, more and more young companies appear in the market to advance it. These startups acknowledge the transformative power of blockchain in energy market. How can a synergy of blockchain and energy revolutionize the current situation? 

In this article, we will explore why blockchain is a necessary improvement for the energy market. You will learn how exactly blockchain technology can advance energy market along with its successful applications and main challenges. We will also discuss the impressive potential of decentralised electricity sector. Let’s learn about the innovative blockchain technology in energy market together!

The current energy market struggles a lot with the several acute issues. Blockchain technology in energy market has the potential to resolve a great deal of them. Some of the most severe challenges include daily growing requests for energy, the following planet destruction, and an extreme price volatility.

As the world's population grows, so does the need for energy. The demand for electricity grows even more with the technology development. Although the innovation can potentially lower the toxic emissions, the current rapid digitalization requires more energy than ever.

Environmentalist global organizations shout incessantly about the frightening ecological condition. Switching rapidly to environmental sustainability is a challenge for many rising economies that primarily rely on fossil fuels. It makes the adverse effect persistent and worsening.

The majority of the current power supply comes from state-owned companies or private monopolies, which are also “under the government”. This makes the prices of energy highly dependent on the geopolitical situation. Each tiny fluctuation in the geopolitical arena can cause prices to jump significantly.

Renewable energy, distributed energy resources (DERs) and an increased blockchain in energy market share can deprive us of these problems. By connecting blockchain and energy we can handle several challenges at once.

Everyone is used to associating blockchain with cryptocurrencies and money transfers. Blockchain companies develop unique financial platforms, often utilizing Solidity smart contracts to automate and secure money transactions. Though, it can go far beyond this area. Startups actively experiment with applying blockchain for energy distribution. Specific applications of blockchain in energy involve:

This approach enables the transport of power from the source directly to the consumer. One can choose to buy energy produced with any of the existent power plants - wind power, hydropower, solar panels etc.

Blockchain technology has long been providing secure data transportation. Similarly, it offers a safe kilowatts transfer from the seller to the buyer.

Consumers can trade and purchase energy directly from the grid rather than purchasing it from retailers. Such service is a top concern for companies utilizing blockchain technology for the provision of wholesale power.

Demand response schemes within blockchain technology can provide consumers incentives to use less energy, thus contributing to ecology maintenance.

Blockchain renewable energy companies can trade tamper-proof records by logging each unit of produced renewable energy on a blockchain.

Blockchain projects grasp the attention of entrepreneurs worldwide. Blockchain energy is growing rapidly in popularity among those interested in innovative and highly transformative startups.

This startup from New York made a shift in the energy paradigm. The technology enabled homeowners to use a blockchain network to exchange extra solar energy with their neighbors. The project started in early 2015. In 2016, three President Street residents participated in the first-ever P2P energy transaction. Their dedicated Exergy data platform allows for the creation of localized energy marketplaces across the grid.

Elering, an Estonian grid operator, and WePower, a blockchain-based green energy trading platform, teamed to implement blockchain energy throughout Europe. In October 2017, WePower and Elering inked a memorandum of intent to begin the nationwide conversion of energy data into blockchain. Today, producers can sell their energy directly to consumers through the platform's tokenization of energy production.

It is an Australian start-up founded in 2016 that actively advocates for energy democratization and 24/7 access to clean energy. Power Ledger uses blockchain technology to create decentralized energy marketplaces in Australia where anyone can purchase and sell excess renewable energy. The P2P energy trading technology based on blockchain by Powerledger has even provoked revolutionary regulatory reforms in India. 

If the blockchain allowed humanity to transfer money without a mediator, why not do the same with the energy? That is why blockchain in energy market trends are growing in popularity. 

Many countries designed their energetic systems decades ago. The result is that the majority of energy supply is centralized today. Such established worldwide leaders prevent the energy market from becoming more eco-friendly. Why? Because governments either regulate the whole energy system of the state, or the private monopolies. 

And today it is more convenient to serve the growing population’s need for electricity by employing the old methods. Apart from assisting in producing high toxic emissions, the centralized energy grid implies other issues. 

Centralized energy grid’s implications include:

• Low error tolerance: Any failure in a key part of a centralized grid can lead to widespread blackouts or significant energy losses. For instance, a disruption in a power plant, transmission line, or substation can leave the entire network unpowered.
• Power loss in long-range communications: In a centralized grid, electricity must be transmitted over long distances from power plants to consumers. The longer the distance, the greater the energy loss, which reduces overall efficiency and increases the cost of delivering power to end-users. 
• Taxes opacity: A centralized system implies more complex and less transparent tax procedures than a decentralized market. It reduces corruption risks and complicates tax administration.

Decentralization of the energy market will allow for:

• Decarbonization: Decentralization of the energy market encourages the integration of renewable energy sources like solar, wind, and hydropower. If consumers and small-scale producers can trade clean energy locally, it will significantly lower total carbon emissions.
• Democratization: Decentralization enables more supplies to participate in the energy market by generating their own electricity. Furthermore, it allows people to decide which type of energy they want to consume, thus shaping market demand. 
• Digitization: Decentralized energy systems use digital technology such as blockchain and smart meters to optimize and manage energy production, distribution, and consumption. Digitization also supports the development of smart grids, which adapt more quickly to changes in energy market demand and supply.

Now, there is a need for an absolutely novel energy trading system to promote secure blockchain energy trading. A novel system presupposes a marketplace with separate blockchain projects and suppliers who claim their own blockchain energy supply options. The whole thing revolves around the voluntary exchange between the producer and the consumer. Within such a marketplace, every buyer can choose which energy power plant they want to “feed” from. 

The energy industry can expedite the deployment of smart meters and grids by utilizing blockchain in energy market. Conventional grid management depends on a centralized system. This implies a relatively slow reaction to dynamic shifts in the demand and supply of power. 

Contrarily, smart contracts allow for decentralized energy resources, such as wind turbines, battery storage, and solar panels on rooftops. Smart contracts optimize flows and balance energy by conducting automatic transactions based on current conditions—all without the need for middlemen. Any type of energy can connect to the grid autonomously using blockchain technology. The technology can also facilitate end users' direct grid access.

Blockchain energy trading platform development presupposes the jump-up in power provision efficiency. For instance, solar and wind plants are among the most popular and affordable distributed energy resources (DERs). P2P energy trading with blockchain technology allows those without such plants to buy electricity from their neighbor suppliers directly. Such a localized microgrid can react more quickly to local needs, reducing the inefficiencies of a monolithic centralized power generation system. 

Buying energy from a local producer prevents great energy loss during transmission, cuts expenses, manufactures less waste and promotes sustainability. Increasing the number of such connections on Earth will notably improve the ecological situation.

Though blockchain technology is famous for its security and safety, the energy sector can not usually boast this feature. The energy sector's centralized structure may presuppose ventures and hidden deals on the supplier's side. According to Statista, the amount of fossil fuel stolen from Mexico increased to 12,600 barrels per day in 2022. It is nearly four times more than the previous year. 

During that year, the Latin American nation saw the theft of 21,000 barrels of fossil fuel on a daily average. Overall, the theft of fossil fuels caused tax losses totalling 20 billion pesos in Mexico in 2022. 

That is why the union of blockchain and the energy market will benefit society and increase people’s satisfaction with receiving energy from reliable sources. Thus, the blockchain energy sector can transform people’s perception of the energy market’s transparency. This, in turn, will favorably affect the market’s democratization.

In this section, we will consider the critical legal and compliance issues that blockchain energy startups might face. We’ll discuss the possibly stunting energy trading regulations as well as the effects of securities legislation on tokenization.

Blockchain in energy market growth gained the attention of regulators due to its rapid development and a vast space for freedom. Regulators ask power companies to provide them with exhaustive reports regarding their energy production and transmissions. Thus, the blockchain energy industry gradually gets under governmental suspicion as any other private area. 

The past year has not been simple for anybody working with blockchain and digital assets legally. Europe, the UK, the US, Hong Kong, and Australia started implementing trial rules for blockchain energy exchange in 2023. Global regulators intended to control companies and applications that use digital assets. 

Although blockchain energy trading is transparent and aims to benefit the society, important data may get into the wrong hands. This, in turn, can disclose private company information and hurt a business's capacity to compete.

Energy trading regulations

Though blockchain trade finance does not include such many parties as usual trade finance, it has to align with common rules. Energy trading platforms built on blockchain technology must comply with the same legal regulations and trading rules as conventional exchanges. 

Securities laws and tokenization

Securities regulations apply to blockchain applications that tokenize energy assets or sell renewable energy certificates (RECs). More, tokens and digital assets are subject to requirements from regulatory organizations pertaining to financial rules. Those such as know-your-customer (KYC) and anti-money laundering (AML) procedures.

Despite the huge worldwide companies’ desire to implement blockchain in energy ASAP, they face some hurdles. Among the most acute obstacles, there are:

Public blockchains by nature need large energy consumption for each transaction. Transmissions containing energy will need even more power to process the operations. Bitcoin transactions still take a lot of time and energy. For instance, data by Statista show that while 100,000 VISA transactions require 148,63 kWh, a single Bitcoin transfer needs 703,25 kWh.

There is a risk that a majority control attacker will be able to stop new block recording and prevent transaction execution. Small networks are more vulnerable to this kind of attack because it would take a significant amount of processing power to take over 51% of huge blockchains.

A key regulatory obstacle is balancing the legal framework's stability with the need to respond quickly to the rate of innovation. The launch of several trial government regulations in 2023 is a great sign of the blockchain energy sector global embracement.

Despite many innovative technologies such as blockchain in energy sector, it is just the beginning. Technology advances and energy systems get increasingly decentralized and digitalized. This makes blockchain's future in the energy sector look promising and long-term.

Renewable energy power plants face a lot of criticism due to the high dependency on particular natural factors. It has to be windy for the wind plants to produce power, and sunny for the solar panels to perform their function. Nevertheless, the synergy of blockchain and renewable energy offers a solution. 

There are other renewable energy sources apart from wind and sun, though they are the most common DERs. We mean hydropower, geothermal, and biomass. Microgrid clients may simply buy energy from these sources during the night or on a day without wind.

Customers will be able to personalize their energy use with Energy-as-a-Service (EaaS) models driven by blockchain. Such a trend will revolve around cost-effectiveness, carbon footprints, and renewable sources, all securely managed through blockchain. Blockchain will handle agreements between vendors and customers, automate payments, and facilitate transparency.

An active development of clear regulations for blockchain in energy market has already started. As blockchain in energy market size grows, governments will create unified regulatory frameworks. Hopefully, they will guarantee customer safety, cybersecurity, and compliance with environmental goals while avoiding restricting blockchain energy industry initiatives.

At Peiko, we are committed to leveraging our expertise in blockchain to help our clients lead this dynamic market. We have a vast experience in developing Web3 solutions, such as cryptocurrency exchanges and wallets, blockchain consultation, and smart contracts. 

Among our projects, there is a noteworthy case that we want to highlight. Bitcoin Addition is a handy and efficient mobile wallet for cryptocurrencies. The wallet offers an offline payment feature and runs with multiple kinds of coins to satisfy the unique needs of different users. We also added the synchronization of contact books to the wallet to improve connectivity within the app.

To enhance the app’s usability, we incorporated several innovative features. These include a distinctive "Shake-to-pay" option for discovering nearby users and QR code generation for quick and easy wallet address sharing. 

Bitcoin Addition involves strict security measures to ensure the safety of its users and pleasurable experience. The app development comprised both ongoing source code security monitoring and extensive steps to identify and mitigate any insufficiencies.

Our team also chose as a priority to make Bitcoin Addition user-friendly for both beginners and experienced cryptocurrency users. We succeeded in creating an inherently intuitive interface which prevents newcomers from confusion. 

Peiko is always willing to create the most challenging and technically intricate web projects. We appreciate our clients’ feedback and strive to propose the best IT solutions for our clients daily. Contact us to discuss all the details and create the best blockchain plan for your company!

To conclude, we gradually but confidently enter the future with DERs, renewable energy sources, and blockchain technology in energy market. Blockchain technology integration is a revolutionary opportunity for both existing firms and start-ups in the energy sector. Its features such as efficiency, security, and transparency can satisfy the increasing need for sustainable and decentralized energy. 

The shift to blockchain in energy market will enable new business models and consumer choices. For start-ups, this represents a chance to innovate along with an imperative to be embrace flexibility and adopt innovative technologies. The global adoption of blockchain in energy market will transform the energy landscape and bring positive changes to planet ecology. 

If you need an effective blockchain solution for your project, get in touch with the Peiko team to set a start for great achievements. We look forward to hearing your idea and exceeding your expectations regarding upcoming developmental results.