Traditionally, power systems have been supplied by large fossil fuel generation plants, with most people participating as passive consumers of electricity. But today, power systems are undergoing a fundamental transition, brought about by the rapid adoption of electric vehicles, roof-top solar, home batteries and other distributed energy resources.
As a result of the transition of power systems, technologies that create new business models in the energy sector have arisen. One specific technology is making headlines everyday as it continues to disrupt the way things have been done in energy for more than a century — and this is blockchain technology.
But is there really a case for blockchain in the energy sector?
There are many energy consumers who would like to have the ability to produce and consume renewable energy in their own capacities, but unfortunately cannot afford it.
Rather than requiring energy consumers to set up a solar power plant, they should have the option to purchase renewable energy from their solar/wind/hydro-powered neighbours who are producing more energy than they ultimately are consuming.
Under the current market arrangement, energy consumers need to either invest in the necessary production assets required, or they can purchase their renewable energy from an energy retailer that will typically hike the prices before selling to the end consumer. Consumers are also deprived of the option to support local producers of renewable energy in their social circles.
Distributed energy resources are allowing previously passive domestic producers of electricity to become prosumers — proactive consumers that actively manage their consumption, production and storage of energy.
However, the energy sector (as we mostly know it) requires energy retailers to play the role of the middleman — a third party intermediary who buys the producer’s surplus energy and sells it to an end consumer who wishes to purchase renewable energy.
Under this kind of market arrangement, prosumers are stuck on retail supply contracts that limit the potential value of their energy resources.
What’s with all the blockchain hype in energy?
What the blockchain does through its diverse range of business models and offerings, is that it creates a multitude of possibilities for both the energy producer and consumer, creating a more transparent, efficient, fair and competitive energy market that ceases its dependence on monopolies.
Take for example consumers on the SunContract platform:
They have the option to:
- Buy electricity at the initially agreed upon contract price OR
- They can also buy electricity on the Peer-to-Peer energy marketplace
In the above screen grab, you can see that since the reveal of our fully functional marketplace in April, the consumer has opted for more P2P marketplace deals. In April, 60.86% of his energy transactions were P2P deals. In May and June, this went up to about 70% of his transactions, and in July, 61.27% of his energy transactions were P2P.
Thanks to blockchain technology, energy consumers can lower their energy bills by taking advantage of P2P energy marketplace prices which tend to be a lot more cost efficient.
Producers on the SunContract platform also have similar possibilities:
They have the option to:
- Sell electricity at the initially agreed upon contract price OR
- They can also sell electricity on the Peer-to-Peer energy marketplace at a price that they define on their own.
In the below graph, we can see how one of our customers — Jernej, managed to increase his earning power on the marketplace. His story can be found here:
A key objective of blockchain based P2P energy markets is to provide a transparent mechanism that prosumers can trust to fairly balance their preferences and requirements.
The real opportunity for blockchain energy trading platforms like SunContract is to be the technology that aligns the interests of electricity consumers, prosumers and power system operators.
By incentivising the coordination and cooperation between potentially vast numbers of future energy prosumers, blockchain-based energy platforms have the potential to reduce energy costs, increase energy reliability and reduce pollution that is brought about through energy production.
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