21 percent of decision-makers in Germany’s energy sector believe blockchain will disrupt the industry, according to a Handelsblatt survey.
A study by Deutsche Energie-Agentur (dena) in early 2019 went further and investigated 11 concrete use cases. The result: blockchain technology can lead to significant improvements across the board.
Germany’s energy sector includes a large number of distributed entities – a prime blockchain use case
Blockchain technology is particularly useful in industries where many siloed actors need to cooperate and execute transactions with each other. That’s why logistics, payments, and mobility are promising blockchain use cases.
Germany’s energy industry faces similar challenges. Energy networks consist of a large number of distributed actors such as energy providers, brokers, consumers, payment providers, energy traders, and wholesalers who all transact with each other. Blockchain can streamline these transactions by decentralizing information and automating consensus decisions.
Philipp Richard, blockchain expert at dena, says, “Blockchain technology is not only hype but could really help to drive change in the energy sector.”
In Germany, more and more energy is produced via renewable energy sources. Compared to traditional coal-powered or nuclear power plants, renewable energy generation happens much more distributed, on rooftops or through the use of wind turbines. Blockchain could provide a solution to how these distributed datasets can be stored and transacted more efficiently.
P2P energy trading promising in theory but challenging to put into practice
According to the dena study, P2P energy trading is one of the most promising use cases of blockchain technology in the energy sector. Energy producers and consumers can execute transactions directly without the need for energy exchanges or other brokers. Cutting out the middlemen will reduce costs and speed up transactions.
On the other hand, the idea of a decentralized P2P energy marketplace is not that easy to accomplish with state-of-the-art technology. Today, blockchain is still hard to scale to support massive transaction levels. Also, P2P energy transactions would only be worth a few cents in most cases. Blockchain trading is still expensive today, so trading small amounts of energy won’t be economically feasible – at least at this point.
Renewable energy tracking already possible today
While it will probably take many more years until blockchain technology is ripe to facilitate P2P energy trading, other use cases are already possible today. Renewable energy-tracking, for example, is seen as a major use case by the participants of the dena study.
Today, consumers hardly know where their energy comes from and how it was produced. “Green energy” has somewhat become a buzzword but no more.
Startups like StromDao and FlexiDao are working on energy certification systems where are blockchain records the origin of energy in real-time. Consumers can log in to the system and check where the energy was produced and whether or not it was produced sustainably.
Lack of regulations a significant roadblock
There are many use cases, but also many roadblocks. One question is if blockchain technology and energy hardware are compatible to build an end-to-end information flow.
Another issue is the lack of regulations. According to dena, regulations in Germany are not yet supporting the use of crypto-assets, which makes it challenging to implement the technology. Dena recommends launching a registry that regiments smart contracts in the energy sector and provides legal certainty.
Moreover, dena suggests clarifying questions on data privacy, data security, ownership rights, the transmission of ownership, and generally the legal status of blockchain technology, including the use of ICOs and STOs. Something the government might address in its upcoming blockchain strategy.