The energy sector is both enthralled and terrified by blockchain technology, an innovative and potentially revolutionary way to process transactions such as power trades or financial flows. Some proponents claim it is the death knell for energy providers, while others believe power companies can use this technology to their advantage. So what is all the hype about, and is it justified? This factsheet gives a short introduction to blockchain.

Disruptive potential

Blockchain is best known as the technology behind the cryptocurrency bitcoin, but its uses go well beyond the digital currency. In a nutshell, blockchain enables the cheap, safe, and direct processing and recording of transactions, without the need for a trusted third party acting as a central mediator – such as a bank, a public authority, or a power supplier. By dispensing with intermediaries, blockchain technology can lower the costs of transactions, such as a power trade among neighbours. It could therefore enable a large number of applications in the energy sector, especially peer-to-peer deals on a small scale that have not been worthwile up to now because of high administration costs . Examples also include metering and billing; CO2 certificates; or e-mobility transactions. Utilities are keenly aware of blockchain’s disruptive potential.

European power industry association EURELECTRIC considers blockchain “a potential gamechanger for the industry,” while the German Energy Agency (dena) wonders whether blockchain “will revolutionise the energy industry”. Workshops, lectures, publications, and debates on blockchain have seemingly become an essential part of the industry’s numerous conferences. The technology is already used in pilot projects in the energy sector. For example, grid operator Tennet and solar battery maker Sonnen have said they will use blockchain to hook up thousands of household batteries to balance out intermittent renewable power production in what they describe as “the first step into […]