Blockchain, an immutable distributed ledger of transactions, has already built up a portfolio of use cases in the energy industry, but its full potential can be realized only if there are new regulatory frameworks and a willingness for consumers to engage, finds a new paper presented at World Energy Week in Milan last week.
Through a series of 39 interviews with key global leaders across the energy sector, regulators and think tanks actively engaged in the blockchain space, the 2018 World Energy Blockchain Insights Brief, developed in partnership between the World Energy Council and PricewaterhouseCoopers (PwC), posed two key questions: How far along is blockchain technology; and is regulation an impediment to its progress?
Respondents agreed that while blockchain has spurred great efforts in the innovation space from a great number of organizations across the energy sector, much is yet to be done to realize its full economic and technological potential.
In addition, blockchain is believed to be accelerating the transition from energy as a commodity to a service and is fuelling a re-evaluation of the energy value chain.
“Energy blockchain is hailed by many as a game changer that will entirely transform the energy value chain, support new business models and stimulate a shift from consumers to prosumers,” says Angela Wilkinson, Senior Director, Scenarios and Business Insights.
“The open question we find is: can it revolutionize the way residential consumers receive and consume energy without a restructuring of today’s regulatory framework and without large scale consumer engagement?” she adds.
Challenges & preconditions
The respondents also identified two main hindrances to full adoption of blockchain within the energy sector: regulation and customer engagement.
They also suggested that a fully scaled P2P market is dependent on residential customers becoming prosumers, while a total of 85% of the interviewees agreed that blockchain had not yet attained commercial impact.
The majority of interviewees believe that market participants need to design a new energy blockchain-enabled market before regulators could intervene, but they do not see the technology as an essential requisite for decentralization and democratization of energy.
”The further role of regulation with regards to blockchain applications in energy sector remains unclear. Certain degree of regulation, particularly in P2P, is warranted and should provide balance between innovation and customer protection,’’ says Jeroen van Hoof, PwC Global Power & Utilities Leader.
“The big question remains open – at what point regulation should be updated to allow the full potential of blockchain technology to transform the electricity grid. Regulators, for their part, are by-and-large of a mind that regulation should wait until blockchain technology reaches maturity,” he adds.
In the near term, without addressing the two obstacles of customer engagement and regulatory reform, a full transformation may not be feasible, the paper finds.