With the continuous growth of digital innovations, blockchain technology is poised to play a pivotal role in the transformation of several industries, including the energy sector. According to IBM Corporation, blockchain technology functions as a shared and immutable ledger that simplifies the transaction recording process and management of both tangible and intangible assets in a business network. As per Amazon Web Services, blockchain technology is an intricate database that facilitates the transparent sharing of information within a business network. In such a system, data is stored in blocks that are linked together to form a chain of blockchain databases. The World Economic Forum highlights that blockchain technology has the potential to revolutionise the energy sector by enabling more efficient and secure transactions. It can further foster decentralisation in other industries and promote the utilisation of renewable energy sources.
According to the UK-based Renewable Energy Institute, energy producers can generate more revenue with blockchain technology by issuing energy tokens that can be consumed or resold, resulting in a clean and multifunctional grid. In addition, the literature suggests that blockchain technology can be a major breakthrough for the decentralised renewable energy sector by facilitating the scale-up of innovations and increasing energy availability for individuals lacking reliable sources of power. This can include establishing cost-effective management and operation systems for renewable energy platforms that serve off-grid rural areas. It also promotes the adoption of technology for other industry advancements, such as electric mobility and smart batteries for energy storage.
Key opportunities
Blockchain technology holds the potential to significantly influence the renewable energy industry by providing innovative solutions. These solutions can help in automating various processes involved in the generation and transmission of renewable power. According to several cited sources, the ways in which blockchain technology can be deployed and proven useful for the renewable energy sector are as follows:
- Decentralised energy trading: Blockchain enables peer-to-peer energy trading, allowing renewable energy providers to sell excess power directly to customers without the need for intermediaries. Blockchain smart contracts enable secure and automatic transactions, ensuring transparency and efficiency in energy trade.
- Carbon credit management: Blockchain technology can help companies participate in carbon markets and contribute to global climate goals by streamlining the management of carbon credits and emission reduction programmes. By enabling decentralised tracking and verification of carbon credits, blockchain can enhance the transparency and efficiency of the carbon credit market. To increase green energy output and minimise greenhouse gas emissions, renewable energy certificates (RECs) and carbon credits must be recorded and sold. Block chain technology can bring much-needed transparency, security, and efficiency to these markets.
- Energy certificates: Blockchain technology can generate immutable renewable energy generation and consumption records. RECs can be produced on the blockchain to validate the source and environmental attributes of green energy, thereby increasing trust and stimulating investment in renewable projects.
- Microgrid management: Blockchain technology can enhance microgrid operations by orchestrating renewable energy generation, storage, and distribution within localised systems. Smart contracts can automate energy flows and real-time supply and demand balancing, ensuring energy efficiency and resilience.
- Grid stability and management: Renewable energy sources such as solar and wind face intermittency issues. Implementing blockchain-based energy management systems can mitigate issues of variability of generated power through forecasting and load balancing. This can contribute to grid stability by efficiently managing energy supply and demand.
- Tokenisation: Through tokenisation, blockchain technology provides fractional ownership of renewable energy enterprises. Investors can purchase tokens representing a portion of a project and receive returns based on the project’s performance, boosting crowdfunding and democratising investment in green energy efforts.
- Data security and privacy: The decentralised nature of blockchain technology can help in improving data security and privacy, thereby reducing the risk of data breaches and unauthorised access.
- Incentives for using clean energy: Blockchain-based reward systems can encourage individuals and organisations to utilise green energy. Users may be rewarded with tokens for employing energy-efficient equipment or generating renewable energy.
- Transparency in the supply chain: Blockchain technology can be used to trace the components and materials utilised in renewable energy projects. Transparency ensures the responsible sourcing of all inputs, and the ethical and streamlined production of products and services.
Key challenges
While blockchain technology holds significant promise in the renewable energy industry, there are also several challenges that need to be addressed. Despite its potential, implementing blockchain applications in renewable energy is not without challenges, which are as follows:
- Scalability: A major challenge of deploying blockchain technology in renewable energy is scalability. The proper functioning of blockchain technology requires a significant amount of computational power. This means that with the addition of more nodes to the network, complexity and computational loads also rise. As a result, blockchain can become slow, congested and inefficient, leading to delays and high transaction fees.
- Cost: Another significant challenge is the high cost associated with its implementation. Establishing and maintaining a blockchain network requires a significant amount of investment in terms of hardware, software and infrastructure. The high cost of implementation can pose an entry barrier for smaller companies and projects, making it challenging to utilise blockchain technology to manage energy transactions and renewable energy certificates.
- Integration with existing systems: Integrating blockchain technology with existing renewable energy systems can also be challenging. Renewable energy systems, such as solar and wind farms, often use different technologies and protocols to manage energy transactions and data. Integrating blockchain technology with these systems requires significant changes to the existing infrastructure and may result in compatibility issues.
- Regulatory challenges: The renewable energy sector is highly regulated, and the implementation of blockchain technology must comply with various regulations and standards. Regulatory challenges can be a significant hurdle for the adoption of blockchain technology in renewable energy, especially when it comes to managing energy transactions and renewable energy certificates.
- Security and privacy: Blockchain technology is known for its data security and transparency. However, there are concerns about the security and privacy of sensitive data related to renewable energy transactions. For instance, energy usage data and personal information linked to renewable energy certificates can be vulnerable to cyberattacks and data breaches.
Recent industry developments
In September 2022, Pune-based Voltreum launched Volt-X, a blockchain-based peer-to-peer (P2P) energy trading application. The company designed this P2P platform to enable transparent energy trading between producers and consumers.
In March 2021, Tata Power Delhi Distribution Limited (TPDDL) announced a partnership with Powerledger and the India Smart Grid Forum. This initiative leverages Powerledger’s blockchain-enabled technology to facilitate P2P trading of electricity, encompassing over 2 MW of solar PV across different clients in its licenced area of North Delhi, India. Under the project, approximately 150 sites, including TPDDL locations and actual customers with solar generation, will use the platform to sell excess energy to other residential and commercial sites within a dynamic pricing environment, enabling them to benefit from P2P energy trades. Tata Power has partnered with Contour, leveraging a blockchain-based digital trade finance network to enhance the reliability, transparency, and effectiveness of its financial management system. As a result, power utilities are now efficiently expanding the use of blockchain technologies to multiple functions and processes.
In November 2019, BSES Rajdhani Power Limited announced its adoption of Powerledger technology for P2P solar trading. The project includes 300 kW of existing solar equipment that will serve a cluster of gated residences in Delhi’s Dwarka district. Residents with rooftop solar technology were able to swap excess energy with their neighbours as well as higher tariff consumers throughout the trial, reducing the amount of energy spilled back to the grid.
The technology has been gaining traction with several power distributors and developers collaborating to adopt blockchain technology. In December 2020, Uttar Pradesh Power Corporation Limited partnered with Powerledger to establish a solar rooftop energy trading platform, with the goal of providing access to energy for the region’s underprivileged households. The technology is gradually evolving and has extended its application to the management of supply chain logistics for renewable energy-powered projects. For instance, ImpactPPA established a blockchain platform for the Ministry of Micro, Small and Medium Enterprises to manage the supply chain logistics of renewable energy-powered textile looms known as Harit Khadi.
The way forward
The white paper titled “Re-Engineering the Carbon Supply Chain with Blockchain Technology” by Infosys Limited emphasises the significance of blockchain as a compelling tool for assisting businesses in obtaining accurate and standardised information for carbon emission calculations. Blockchain technology’s design and architecture provide instant authentication, immutable data records and smart contracts. These attributes make it an ideal option for integrating suppliers, manufacturers, logistics service providers, and stocking locations into a unified network for rule-based interactions and value creation. Blockchain technology can easily transform individual company efforts into a collaborative network with the primary purpose of reducing the overall carbon footprint of the end product.
Going forward, blockchain technology is also expected to find application in the e-mobility space in India. Several constraints hinder the widespread adoption and deployment of electric vehicles (EVs) in the country. The majority of these roadblocks are primarily due to consumer-driven factors such as the high up-front cost of EVs in comparison to the internal combustion engine vehicles and the lack of battery charging infrastructure. In its draft discussion paper titled “Blockchain: The India Strategy”, NITI Aayog proposes a methodology to overcome issues pertaining to the charging of EVs. The proposal involves establishing battery-sharing networks that would allow users to swap batteries when they run out of charge. Blockchain can permanently retain information such as the age of the battery and its past handling. This can eliminate the possibility of misrepresentation to increase prices or decrease the cost of usage.
Additionally, blockchain technology can be used to store data about the energy sources utilised for battery charging. By enabling the “smart contract” feature of blockchain applications, there can be more efficient battery switching at charging stations, as basic cost regulations can be implemented based on battery properties and performed on exchange. Deploying this technology would aid in addressing challenges such as accurately costing battery usage and addressing the difficulty in energy source attribution.
While blockchain technology can provide cost-saving options, incorporating the technology may entail early costs of development, integration, and training. The reduction in costs is also determined by the volume of adoption, regulatory issues, and the complexity of the energy market in a certain region. Nonetheless, ongoing innovations and collaboration in the field will overcome these obstacles and accelerate the adoption of blockchain technology in the renewable energy sector.
By Nikita Choubey
