The blockchain boom—driving efficiency in the energy sector

The blockchain boom—driving efficiency in the energy sector

Energy analysis: As part of a series exploring the ‘blockchain boom’, Adam Brown, managing practice development lawyer in the energy, transport and infrastructure practice at Dentons, considers the potential for blockchain technology in the energy sector.

What opportunities can blockchain technology promise the energy sector? What are some issues in the market right now that will benefit from such technology?

At a high level, blockchain offers the energy sector what it offers many other sectors:

  • a means of improving the efficiency of existing systems and processes
  • a tool for developing new markets

In the financial sector, there is a great deal of interest around the potential for blockchain to be used to reduce processing costs in securities transactions. Similarly, in the energy sector, a number of banks, oil and gas companies and trading houses are working on platforms that could be used to trade cargoes of oil products or liquefied natural gas (LNG) and carry out the post-transaction processing of trades in a rapid, secure and paperless way.

This is because blockchain can maintain an immutable record of transactions and other information that is visible to all relevant parties, and so solve some of the problems inherent in current commodity trading, which is often based on bills of lading. These paper instruments exist in multiple copies that can easily be lost or falsified, and the need for them to be transmitted physically from one party to another creates a drag on commercial activity.

At the other end of the scale, in terms of individual transaction values, blockchain and the associated technology of smart contracts are perceived as key enablers of ‘peer-to-peer’ electricity trading networks. In theory, households with renewable energy generation or electricity storage facilities could become ‘prosumers’, taking advantage of movements in electricity prices to sell surplus power to chosen buyers (rather than just spilling it onto the grid or automatically selling it all to one utility). In practice, most people will not want to

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