Four possible ways that “blockchain” will revolutionize the energy market

The magic of block chains: a decentralized point-to-point trading system

First, we will get to know the definition of block chains. Basically, it is a type of “decentralized, distributed ledger”: It is a digital, giant ledger that can be added to indefinitely and it is time stamped so it cannot be edited.

The CEO of Digital Treasury Corporation, Jacob Lee, introduces the ways to develop a local energy market through green energy tokens

Why is this technology necessary? In the past, financial transactions require a third party to verify the identity of the two traders, and all transaction records and ledgers are stored in a centralized system. This means banks have to invest large sums into data security resources and management costs to prevent hackers from stealing or changing the information.

Bitcoin, developed from the concept of blockchain, has formed an infinitely long digital ledger through mathematical principles and encryptions. A copy of this ledger is stored at every node; that is, a computer or server utilizing the block chain. This drastically lowers the possibility of unauthorized changes to the trades to near zero. Information will not disappear once it is written into the block chain; records will continue to be made. When block chains are applied to digital currencies such as bitcoin, there is no need for a traditional third-party institution or broker management system. This allows users to establish direct trades from point to point (P2P).

Therefore, block chains can dramatically reduce personnel costs and errors. The safeguard utilized is called “Smart Contract”; it uses algorithms to automatically execute set contract terms. It can be applied to electronic payments, proof of identity, digital medical records, voting, and other identity-related fields. It can even be used for stock listing, insurance, roaming charges for telecommunication, charity donations, food distribution, and numerous other fields. Lastly, block chains can lower verification costs or solve problems with information asymmetry.

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The 4 prospects of block chain: revolutionizing the futureof the energy market

The current discussion for block chains is mostly focused on digital finance and electronic payments but whether this technology be applied to the energy sector.

A traditional power grid is managed by a large electrical company. People who want to utilize new power sources (e.g. renewable energy sources) cannot clearly tell what percentage of the electricity they use is generated through renewable sources. When and from which power plant did the power come from? How can they sell their excess power to their neighbor? If we study the characteristics of the block chain technology and integrate expert opinions, in the future, block chains can be applied to the energy sector in the following 4 ways:

1.Certification transaction: Renewable Energy Certificate (REC), currently promoted by the government, can produce green energy tokens through block chains. This allows a clear division of costs between different power generation methods, releasing the potential of renewable energy in trading. Domestically, there is a solar power inverter company, Kiwi Energy, ready to introduce block chain technologies.

2.Crowdfunding: The energy industry has, in the past, shown signs of clear monopolies and consolidated capitalistic characteristics. This causes it to be very difficult for small investors and innovators to join the industry. Jacob Lee, CEO of the Digital Treasury Corporation, thinks that the focus of renewable energy has been on solar and wind power in recent years. In fact, Taiwan is rich in geothermal resources and an energy cooperative ICO platform should be developed using block chains.

3.Promoting energy storage: As everyone knows, intermittent power generation, solar and wind, needs to be coupled with energy storage equipment to reduce the risk of unstable energy production. Through blockchain technologies, low cost power stored during off-peak hours can be sold during peak hours more easily. In Germany, companies are using IoT (Internet of Things) technologies to manage charging conditions of EV Chagers, and selling the power to users in need through Ethereum.

4.Power grid management: The cool-sounding blockchain, when combined with Internet of Things, big data, and other digital technologies, will push the power grid towards intelligent controls, demand response, and harmony of distributed power operation. For example, when power generation fails in a certain place, the Internet of Things can immediately detect the faulty equipment. A smart contract will send a message and report to the repair teams. This will reduce the maintenance cost and malfunction losses for the power grid.

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The energy market will transform from a traditional centralized management system to a distributed form where “everyone is a power company”. At this point in time, blockchain can be a critical driving force for the ideal future of the democratization of energy and free trade. Of course, risks exist behind the apparently endless potential. It is definitely an area to watch.