A few days ago, IOST partnered with Fujimi Town Japan to deploy blockchain in Japan energy market. This article focuses on areas Blockchain Technology can be deployed to help decentralize, digitalize and foster growth in the energy sector.

First, we need to understand that the introduction of blockchain technology is not only limited to cryptocurrency and financial issues, the technology can also be deployed in other areas to improve and solve underlining problems. Cryptocurrencies use blockchain as its technological base. It is, therefore, one of the numerous applications of blockchain technology, but by far not the only conceivable application scenario.

With the energy sector digitalization gaining momentum, there is a need to incorporate blockchain technology which can bring far-reaching changes and rapid development to the energy sector.

Blockchains are shared and distributed data structures or ledgers that can securely store digital transactions without using a central point of authority. More importantly, blockchains allow for the automated execution of smart contracts in peer-to-peer (P2P) networks. They can alternatively be seen as databases that permit multiple users to make changes in the ledger simultaneously, which can result in multiple chain versions. Instead of managing the ledger by a single trusted centre, each individual network member holds a copy of the records’ chain and reach an agreement on the valid state of the ledger with consensus. The exact methodology of how consensus is reached is an ongoing area of research and might differ to suit a wide range of application domains. New transactions are linked to previous transactions by cryptography which makes blockchain networks resilient and secure. Every network user can check for themselves if transactions are valid, which provides transparency and trustable, tamper-proof records.

Energy systems are undergoing rapid changes to accommodate the increasing volumes of embedded renewable generation, such as wind and solar PV. Renewable energy sources have undergone massive development in recent years, enabled by privatization, unbundling of the energy sector and boosted by financial incentives and energy policy initiatives. Blockchain Technology has the potential to optimize energy management processes in almost all stages of the value chain and at the same time help to cope with the growing complexity in the increasingly decentralized energy system.

Potential and notable Blockchain use cases in Energy Application

Ongoing researches suggest that blockchain technologies have the potential to improve the efficiency of current energy practices and processes, can accelerate the development of IoT platforms and digital applications and can provide innovation in P2P(Peer-to-Peer) energy trading and decentralized generation. In addition, they report that blockchain technologies have the potential to significantly improve current practices of energy enterprises and utility companies by improving internal processes, customer services and costs. Due to their inherent nature blockchains could provide a promising solution to control and manage increasingly decentralized complex energy systems and microgrids.

By virtue of advantages offered, blockchains could potentially provide solutions across the energy trilemma: they could reduce costs by optimizing energy processes, improve energy security in terms of cybersecurity, but also act as a supporting technology that could improve the security of supply, and finally promote sustainability by facilitating renewable generation and low-carbon solutions.

More significantly Blockchain technology could help solve problems in the energy sector by its use in the following areas and aspect of in sector:

Billing: Blockchains, smart contracts and smart metering can realize automated billing for consumers and distributed generators. Utility companies might benefit from the potential for energy micro-payments, pay-as-you-go solutions or payment platforms for pre-paid meters.

Sales and marketing: Sales practices may change according to consumers’ energy profile, individual preferences and environmental concerns. Blockchains, in combination with artificial intelligence (AI) techniques such as machine learning (ML), can identify consumer energy patterns and therefore enable tailored and value-added energy products provision.

Trading and markets: Blockchain-enabled distributed trading platforms might disrupt market operations such as wholesale market management, commodity trading transactions and risk management. Blockchains systems are currently being developed also for green certificates trading.

Automation: Blockchains could improve the control of decentralized energy systems and microgrids. Adoption of local energy marketplaces enabled by localized P2P energy trading or distributed platforms can significantly increase energy self-production and self-consumption, also known as behind the meter activities, which can potentially affect revenues and tariffs.

Smart grid applications and data transfer: Blockchains can potentially be used for communication of smart devices, data transmission or storage. Intelligent devices in the smart grid include smart meters, advanced sensors, network monitoring equipment, control and energy management systems, but also smart home energy controllers and building monitoring systems. In addition to providing secure data transfer, smart grid applications can further benefit from data standardization enabled by blockchain technology.

Grid management: Blockchains could assist in network management of decentralized networks, flexibility services or asset management. Blockchains could achieve integrated flexibility trading platforms and optimize flexible resources, which might otherwise lead to expensive network upgrades. As a result, blockchains might also affect revenues and tariffs for network use.

Security and identity management: Protection of transactions and security can benefit from cryptographic techniques. Blockchain could safeguard privacy, data confidentiality and identity management.

Sharing of resources: Blockchains could offer charging solutions for sharing resources between multiple users, such as sharing EV charging infrastructure, data or common centralized community storage.

Competition: Smart contracts could potentially simplify and speed up the switching of energy suppliers. Enhanced mobility in the market could increase competition and potentially reduce energy tariffs.

Transparency: Immutable records and transparent processes can significantly improve auditing and regulatory compliance.

It is excepted that some of these use cases will be fully implemented as the technology finds more ground as it get adopted for improvement and development in the energy sector.

IOST recently partnered with EverySystem(one of IOST node) and ElDesign to launch a P2P electricity trading project on IOST, and to empower the energy industry in Fujimi City, Nagano Prefecture, Japan.

On 14th November 2019, along with over 5 media, the mayor of Fujimi Town, CEO of elDesign, Dr. Wada from EverSystem and IOST Co-founder and CTO, Terry Wang announced the launch of this project at a press conference in Fujimi Town.