What is blockchain and will it transform the energy industry?
If you’ve heard of blockchain technology, but don’t really get it, you’re not alone.
If you’ve heard of blockchain technology, but don’t really get it, you’re not alone. And breaking it down into blocks and chains won’t help. Instead, picture a decentralised digital ledger for peer-to-peer transactions. Where all information is shared and totally transparent. With each transaction verified by all participants. So there’s no need for an intermediary. That’s blockchain in brief.
This revolutionary concept has fueled the crusade for a decentralised power grid full of smart devices, where everyone can contribute, or trade, power. This puts pressure on the energy industry which has an obligation to offer an essential service to every Australian. The Clean Energy Council and the Monash Energy Materials and Systems Institute recently held a forum probing the impact of blockchain technology on the energy market.
Out of this discussion, a thorny question arose: Can blockchain keep our lights on?
Dr Lawrence Jones, Vice President International Programs at Edison Electric Institute in the US and an Honorary Industry Fellow within Monash’s Department of Electrical and Computer Systems Engineering, responded with a shrug. "Until you get the physical kilowatt hours in your house, it’s just a financial transaction between two people. Electricity needs wires, it needs infrastructure, to get the physical product from point A to point B… So do we not need someone to orchestrate this infrastructure to make sure it’s there?”
Lawrence felt that the average person has no interest in blockchain and just wants certainty that power will flow when they flick a switch. Elisabeth Brinton, Executive General Manager of New Energy for AGL Energy Limited, on the other hand, insisted that many people would like to share electricity. She gave a real-life example from AGL’s peer-to-peer pilot in South Australia, where some have the full battery solar kit and others have no kit at all:
One of our participants has a young niece in the area who is just starting out and has a lower income. So when that aunt says, ‘I want to provide when I have extra from my system – I want to designate, essentially trade, to that family member,’ we can enable her to do that.
The AGL pilot looked at peer-to-peer transactions without blockchain because security protocols were not yet robust enough at scale. Blockchain is not particularly good in privacy because you can keep track of transactions and everybody can see who’s doing what explained Carsten Rudolph, Associate Professor at Monash University. Most of the blockchains that are on the market don’t encrypt any data because they would be less efficient if they do.
Hurdles notwithstanding, the energy industry continues to evolve. Bruce Thompson, General Manager Product Strategy at GreenSynch, revealed that by 2027, about 40% of households in Australia will have some type of distributed energy resource that is in some way intelligent. This led Kane Thornton, CEO of the Clean Energy Council, to wrap up the panel discussion with one last question: In 20 years’ time, what portion of transactions on the energy market will be blockchain transactions?
Most hedged, but Lawrence predicted 5%.
Yet we often scoff at technologies when they first emerge. After all, we found it hard to imagine a personal computer in every home. And even harder to imagine one that could communicate wirelessly. Who knows for sure what lies ahead for blockchain. Let’s come back in a decade or two.