Rhythima Shinde

PhD Student at ETH Zurich, Co-Founder of Energy Bazaar

Student Energy


What is Blockchain?


Imagine life before we could edit documents in a shared online cloud, where approval for a change in a document for a project had to be done sequentially i.e. passed from one team to another for a long time. Now, cloud applications allow everyone to make these changes in a document – parallelly, i.e. involving many people at the same time. Now imagine thousands of documents including large databases, with multiple entries, which need to be changed and approved by hundreds of stakeholders in a project. Moreover, if this is not done within time, the entire project fails.

This is the story of the current supply chain database process, where many goods’ quality inspections or transmissions are delayed/ affected due to the lack of parallelizing the process of approval of transactions/ exchanges. The energy sector remains one of the affected industries of this problem (especially with the boom of the renewable energy mix in the market), where the information on the generation capacities to demands need to be communicated and approved with multiple stakeholders. For example, in the electricity sector from generation to transmission sector and again from the transmission to distribution. This problem is very well explained by Seyi Fabode, working in a power station, 2 as follows: 

Before … supply.., the plant had to get into long term financial contracts with gas and diesel suppliers. Running Excel spreadsheets, we calculated how much gas was needed ..the spreadsheet was copied and pasted into a Word document which we then sent to the gas company …The idea was that we had to contract for enough gas and diesel to ensure that, while the power plant was working, we had enough fuel to run the place. The same spreadsheet was then sent to the control room team, ..was also sent to Merrill Lynch Commodities exchange who sold the electricity on the wholesale market on our behalf.

A solution here would be the one, which not just parallelizes the database sharing, but also can be trusted by everyone involved. This is where blockchain technology comes in: it allows the stakeholders involved in the project to access/ collaborate as well as ‘proofread’ any change in database entry e.g. a record of the transaction. Additionally, it is a distributed ledger, which means it is decentralized and allows the dataset to be owned by not a single entity, but all the collaborators. This makes the database more secure and trusted. Thus, it has been widely being explored as a digital system for recording the transaction of assets in the financial sector, where the transactions and their details are recorded in multiple places at the same time 1. Bitcoin and the cryptocurrencies are just one of the example usage of blockchain technology. In the supply chain industry e.g. in the case of diamond trading (which is generally a very closed-up industry in terms of information sharing 3), blockchain technologies, as deployed by Everledger, have already helped the traders and retailers to assess not just the quality of the goods, but if they are traded fairly. For further details on how blockchain parallelizes databases, see 4 and 5).  

However, the question remains – how is this technology exactly deployed or rather, deployable for the future in the energy sector? There are many cases in the electricity market, which already have shown the potential of blockchain for efficient electricity trading, not just enabling the local and small producers of renewable energy, but also making the trade market much more efficient. These examples exist in the peer-to-peer energy sharing platforms e.g. the solutions provided by Powerledger, Brooklyn Microgrid, and Solshare. If there is a household that has an excess of solar energy stored in their batteries from their rooftop PV, then these solutions enable the household to put this excess electricity on the market, allowing any consumer to buy it off. 

Why is this solution only possible via blockchain? Technically, it is possible to implement this solution without blockchain, but blockchain allows not just a more secure and verified transaction (including verification of the producer), but it allows the implementation of the trading platform in a more decentral way – increasing the efficiency of the platform as well. This was one of the major motivations behind Energy bazaar, where optimization algorithms on the trading platform for the pricing and battery storage could help in an optimized trade in a p2p network 6. The solutions like electron project have allowed even utilities to tap into the possibilities for a more transparent and efficient trading platform. 

As blockchain is a new technology, it still needs many developers (Computer Science experts) and  Embedded engineering experts (e.g. smart meter designs) to develop robust solutions. But incorporating blockchain solutions in industries requires a significant societal shift, for approaching a sustainable future with a less or no hierarchy in the industry: with equal power to consumers. It demands stakeholders like grid regulators, legal experts, and policymakers to agree and design a new definition of transaction policies e.g. flexible purchase power agreements. 

Most importantly, the introduction of blockchain in energy is disruptive because it demands a strong change in the way financial structures in the energy sectors and energy economy dynamics are already built-in worldwide. It will not be limited to accepting cryptocurrency for energy bills, but enabling transparent payments for distributors to transmitters (especially necessary for developing countries with huge financial losses for distributors).

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