Blockchain has the potential to change the utilities sector as it could be a tool for managing complexities into the functioning of electric power systems and provide an easy solution to those who need to escape from centralization and switch to direct trading instead, according to a research of the Council on Foreign Relations (CFR) an influential US-based non-profit organization.
Blockchain’s transformative capacity comes from its ability to host secure, swift, frictionless, and transparent transactions and most energy firms plan to replace centralized power system with a decentralized, P2P energy trading. However, CFR believes ventures that combine blockchain with existing systems will do much better in the future.
“As utilities struggle to sustain reliable service, meet new policy objectives, and cope with rising complexity, innovators are peddling a putative solution: blockchain technology. Proponents of blockchain technology liken its potential to that of the internet three decades ago,” CFR noted in a blog on the research.
Peer-to-peer (P2P0 transactions seem the most useful of all functionalities allowed by the blockchain for companies trading with electricity as some startups are working on DLT initiatives to transform the mechanisms of the electric power market by developing a ledger to host virtual transactions and allow entities sell their electricity generated by solar panels or batteries.
However, although this application is popular today, CFR expects it to become among the least rewarding in the coming years, as it seeks to upend centralized electric power systems rather than managing the complexity of these systems in new and valuable ways.
Many ventures are using blockchain to raise crypto funds for projects, predominantly in the clean energy market, while others prefer using it to record and trade attributes of sustainability, such as those related to the emissions volume after electricity production or whether a unit of electricity is renewable.
Among those attracting significant attention are also electric vehicles as they are becoming trendy, but are still far from widespread customer adoption, mainly because of the scarcity and sophisticated procedures and infrastructure related to public charging. Blockchain seems the appropriate tool to improve charging infrastructures by streamlining and automating processes and cut costs.
However, no matter how willing these companies are to adopt blockchain, they need to be backed by proper regulation, according to CFR. The organization has issued some recommendations on what type of regulation this industry would need to apply blockchain easily. CFR noted that policymakers should support the development of technical standards and allow blockchain ventures to set up small-scale demonstration projects through regulatory sandboxes.
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