There’s a certain irony when the technology being tipped to transform the energy industry uses more power to run than some countries consume annually.
As you may have guessed, I’m talking about blockchain, which originated as the transaction network that underpins the cryptocurrency bitcoin.
According to an estimate by Digiconomist, using blockchain for the energy-intensive process of bitcoin mining and transactions is around 30.14 TWh a year.
That’s more than the annual consumption of 19 European countries.
Per bitcoin, it equates to almost 300KWh of electricity – enough to boil around 36,000 kettles full of water.
Scale is key
However, the big difference between the blockchain platform used for bitcoin and those the energy industry is looking at is scale.
Bitcoin uses a permissionless blockchain, which anyone can join. Participants are encouraged to compete with each other to verify transactions or ‘mine’ more bitcoins to add another ‘block’ in the chain. This is why it’s so energy intensive.
In the highly-regulated energy industry, however, only approved users would be allowed to participate in any blockchain platform.
So while data can be shared and verified, the scale – and therefore the energy required to operate such platforms – would be considerably smaller than permissionless blockchains.
Connecting generators and consumers
In the energy industry, blockchain is considered ideal because it can create automated, auditable and transparent records of generated power and its subsequent consumption.
This could work particularly well for localised microgrids. For example, with small-scale solar and wind energy generators supplying electricity direct to consumers, as well as selling any surplus power to the local grid.
The microgrid generators would then receive automated payment from consumers via distributed ledger technology, which would validate and record each transaction and share these with peer platform participants.
By trading direct, it cuts out the need for any middle man, so the overall cost is less.
Another potential benefit is that by utilising energy in the locality where it’s generated, you reduce transmission losses and possibly also the need for storage.
Greater requirement for DSR
As we see more decentralised and renewable power, plus the growth in power demand from electric vehicles, there will be an increased requirement to balance the grid.
This will drive greater requirement for flexibility services – and in particular, Demand Side Response (DSR).
DSR market participants already operate independently and in ‘baskets’ through DSR aggregators, receiving payment for responding to events of system stress, commonly through National Grid’s ancillary services.
Blockchain technology has the potential to make this more widespread and the payment process more straightforward.
As we see the UK’s local Distribution Network Operators (DNOs) transition to Distribution System Operators (DSO), buying local flexibility will also become more commonplace.
This will provide new opportunities for businesses to earn revenue from any flexibility they can offer.