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The Energy Blockchain Wishlist For 2019

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Rakesh  Sharma's picture
Journalist Freelance Journalist

I am a New York-based freelance journalist interested in energy markets. I write about energy policy, trading markets, and energy management topics. You can see more of my writing...

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This item is part of the Special Issue - 2019-01 - Predictions & Trends, click here for more

With its promise of streamlining energy transactions and establishing peer-to-peer networks at the edge of an electric grid, blockchain has the potential to transform energy markets. Indeed, it has been heralded as the next Internet in its ability to alter our expectations of technology. 

This post deflates the blockchain hype. The technology is nascent and still has ways to go before it can make a substantial difference to grid operations or trading of energy credits. 

That, of course, is not to say that it does not hold promise. 

But the media seems to have put the cart before the horse and elevated blockchain to a status it does not currently deserve. “..This disconnect between the ambitions of what these (blockchain) companies are proposing and just the fundamental toolkit of what they are using to build it is going to continue to frustrate everyone involved,” says Scott Clavenna, co-founder of Greentech Media.  

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Here are three things that need to improve in blockchain technology during 2019 before it becomes a usable technology for the energy and utility industry. 

Scalability 

The number of transactions that can be handled by various blockchains is still pitifully slow. The blockchains for bitcoin and ethereum, which support the world’s first and third most valuable cryptocurrencies, can handle seven and 15 transactions per second currently. Mind you, these blockchains have aspirations to plumb an alternate financial infrastructure. Visa, the world’s biggest credit card processor, can handle 24,000 transactions per second on its network. 

An energy trading network seems like a pipe dream, given the current state of major networks. But new technological developments, such as Lightning Network in bitcoin and Plasma in ethereum, might prove to be potential gateways to scaling the number of transactions on blockchains. 

More Cross-chain Communication 

There are more than 1,000 cryptocurrencies listed in crypto markets currently. This means that there are around an equivalent number of blockchains. But those blockchains do not talk to each other. 

Why is this a problem? Applications that span multiple blockchains will be unable to communicate and pass on information relating to energy trading. Currently there are no data standards for passing information but there are multiple blockchains vying to become energy platforms for trading. The chances of a dominant energy platform emerging for blockchain are slim, especially as utilities are heavily-regulated under different geographies. Cross-chain communication is essential for success of blockchain platforms. To use a real-world parallel, this is the equivalent of cars driving along parallel highways. Or an energy grid network without interconnections. 

More Focus On Data Privacy  

Blockchain espouses itself as a transparent platform that for energy use. In effect, this means that transactions made on blockchains are available for everyone. Clavenna from Greentech says this might be a problem since not everyone would want their energy use and the terms of contract with their utility being made public. 

But he does not seem to have done his research since blockchains can be implemented in different flavors. For example, permissioned blockchains implement a permission hierarchy for access to data. From what I understand, the Energy Web Foundation is implementing a permissioned hierarchy for its energy trading platform. 

The problem, in this case, is the absence of a business model for consumer-focused energy trading platforms based on blockchain. Even as such platforms tout the benefits of blockchain, it is likely that they will establish an advertising-based platform to sustain their business. This means that consumer data will be definitely up for grabs. Hopefully, 2019 should see more discussion about privacy-related issues. 

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