Blockchain in Energy Market

Market Overview

The global blockchain in energy market was valued at USD 283.10 million in 2017 and is projected to reach USD 11,110.1 million by 2026, at a CAGR of 78.32% during the forecast period.

A digitally shared transaction ledger, with identical copies maintained on the network’s members’ computers, is known as a blockchain. Members can make new entries and review previous ones. Transactions are grouped in blocks and recorded simultaneously, which represents a chain of blocks — the ‘blockchain.’ Cryptography protects the content of the connected blocks and is immune to forgery. The information entered into a blockchain cannot be altered and contains a precise time-stamped and verifiable record of each transaction, without the need of a central regulatory authority.

Blockchain technology imposes mutual trust between all parties in a transaction due to a decentralized process. In the energy sector, it enables the implication of a system wherein energy prosumers, from homes or the commercial sector, can trade electricity without the interference of a third party(regulatory bodies/governments). For instance, blockchain is portrayed to provide adequate public charging infrastructure for the increasing number of electric vehicles, which tackles the lack of charging facilities. This is possible by the participation of individuals in making their private EV charging stations available for use at a pre-determined fee.

Market Dynamics

According to Diar, a blockchain research group, the initial three quarters of 2018 saw blockchain and crypto-based start-ups raise around USD 3.9 billion in venture capital funding, nearly 280% more than the entire 2017. Blockchain can potentially be implemented in almost every industry, from education to financial institutions, manufacturing, and power. This is proved by a recent Gartner study, which estimates that a business value of USD 3.1 trillion will be added by blockchain by 2030. According to a forecast by Statista (2018), global revenues of blockchain technology are expected to reach more than USD 23 billion by 2023 and set to register significant growth in the coming years. The financial sector will hold the largest share, closely followed by the energy sector.

Blockchain Potential in the Energy Market

Over 100 blockchain use cases have been identified. Most projects across the energy value chain are in the early stages. The peer-to-peer energy trading area, specifically, is not explored to its full extent, where owners of small-scale generation can sell their generated excess directly to other consumers. These projects range from microgrids and solar systems to e-mobility and EV-charging.

In the next few years, blockchain technology deployment will note rapid growth in the energy sector due to an increase in the generation of renewable power to support sustainable initiatives and enhance operational efficiency and security. With support from global energy and technology organizations, a significant number of start-ups are taking a keen interest in this lucrative segment, at both enterprise and consumer levels.

Transparency

Transparency of all transactions is guaranteed, thereby allowing settlement speeds close to real-time and building a base for trust and traceability between the concerned parties.

Trust

The shared reading of the blockchain fosters trust and reduces the number of intermediaries, which in turn reduces the cost of compliance, reconciliation, and transactions, by making available a marketplace with lower entry barriers and enabling smaller quantity trade.

Efficiency

As blockchain requires fewer intermediaries and simplifies processes, it ultimately increases operational efficiency. Incentives can be provided for ‘good behavior’ throughout the value chain, thus improving efficiency by the digitization of assets.

Control and Security

The blockchain design inherently provides control and security. Improved encryption levels for transactions, enhanced data protection, and limited settlement and fraud risk are key characteristics of a blockchain system. Decentralization provides uninterrupted control and prevents market abuse through monopolies.

Segmental Analysis

Based on type, in the private category, blockchain in the energy market is set to grow over 45% by 2025. The provision of simple governance structures, faster transactions, and lower cost of operations are key features that influence technology growth. In December 2018, Jean-Michel Mis and Laure de La Raudière, two French members of Parliament, submitted a report recommending the Government of France to invest EUR 500 million over the next three years on public blockchain endeavors so as to build a ‘blockchain nation.’

Based on component, the services segment is projected to witness notable growth in the market. Several prominent players from multiple regions are utilizing various growth strategies such as coalitions with multiple blockchain start-ups to implement blockchain operations such as supply chain management, energy trading, and grid management, which is expected to promote the growth of the services segment further.

The first blockchain transaction in the energy sector was recorded in April 2016. Since then, a significant number of energy blockchain start-ups have commenced business, and are supported by large investments. Currently, start-ups in the energy blockchain sector are focusing on use cases that may be apt for energy. In effect, blockchain provides efficient tracking of energy usage and generation and identifies network anomalies, which enhance response time in case of failures or blackouts. In France, blockchain technology is explored by way of utilization in monitoring water, natural gas, and energy flow.

Based on application, according to experts and a Navigant Research report, ‘peer-to-peer’ energy trading, electric vehicle charging, and charging station sharing are the applications that look promising for the coming years. Other applications that show potential include authenticating renewables at the point of origin, keeping a record of emission’s permits, and as a grid management tool that records energy flows to highlight anomalies in the network, among others. Energy generating assets can be tracked using tokens by a method known as tokenizing. It enables people to share the ownership or output of renewable projects and can potentially increase liquidity in the renewable project finance market. For instance, a community wind or solar project, wherein the project is sold in parts to multiple customers around the globe, is a model that is already functioning in various regions without blockchain. However, blockchain can make this structure even more widespread and facilitate borderless transactions.

Based on end-user, the power segment has a hold over a substantial share of the blockchain in energy market. Blockchain technology plays a crucial role in managing distributed energy resources in power generation and enables significant players with cost-effective and efficient solutions to process and record transactional data.

The oil and gas blockchain in energy market is expected to witness tremendous growth owing to limited overhead costs, fewer intermediaries, and minimized cash recycle times. Increasing focus on the implementation of technology to streamline trading in a non-digital crude oil industry, plans to improve security, and efficiency of transactions by industry giants will alter the industry landscape. For instance, BP and Shell declared the launch of a blockchain oil trading platform that will digitize and automate oilfield services. The enhanced accuracy in freight rates, shipment routing, and invoice generation will reduce discrepancies in operations and propel industry growth.

Regional Analysis

Government Investments in North America Provide Scope for Blockchain in Energy Market Growth

North America is expected to note significant growth in the blockchain in energy market in the near future as government initiatives support the existing momentum. For instance, an investment of around USD 22 million was made by the government in emerging technologies of different products and services. The involvement of prominent players such as Drift and WePower in technological innovations of the region’s blockchain in energy market is set to propel market growth.

Europe Dominates the Blockchain in Energy Market

EWF (Energy Web Foundation), a non-profit organization, was established in order to bring together the energy and blockchain community. The EWF provides a scalable and open-source blockchain platform that is specifically designed for regulatory, operational, and market requirements of the energy industry.

As of today, almost 100 affiliates have partnered with the EWF that will enable the development of relevant applications and serve the role of influencers to propel this emerging sector. Energy giants such as Iberdrola, German utility EnBW, and Total are some of the affiliates of EWF. This initiative is projected to propel the growth of inter-trading between energy companies and also between consumers at microgrid levels.

In 2018, Europe dominated the global blockchain in energy market, and this is expected to remain constant during the forecast period, owing to investments by the private sector and governments as well. For instance, the EU Blockchain Observatory and Forum was launched by the European Union in order to better understand significant developments in blockchain technology and promote investment by European players in the energy and power sector.

Asia-Pacific Countries are Way Ahead of the U.S. in Blockchain in Energy Market

Asia-Pacific is expected to witness notable development in the blockchain in energy market. For instance, one of the earliest adopters of blockchain technology in the region was Australia. Origin Energy, an Australian energy provider, has partnered with Power Ledger to implement new energy trading platforms to stay updated with the record of selling or buying energy. The Australian government is also planning to commence investments in blockchain technology to reap its benefits in the energy and power sector. China and other APAC countries are way ahead of the U.S. when it comes to blockchain adoption.

According to a Washington Post article from March 2019, China has invested an enormous sum of money in the formation of blockchain partnerships with Chinese firms and was a leading country in blockchain-related patent filings in 2017. China has also included blockchain development as a vital part of its 13th Five-Year Plan.

Multiple Opportunities for Blockchain in Energy Market in the Middle East and Africa

The presence of multiple oil and gas companies in the Middle East and Africa positively influences the demand for blockchain solutions to streamline and simplify processes in the oil and gas sector. Currently, several manual steps and procedures are involved in the physical trading of refined products, where the same information is required to be input in different systems for data reconciliation. The deployment of a distributed ledger on a blockchain platform will enable input data to be accessible to all parties in real-time, thereby reducing volume reconciliation time and price differences.

Africa is gradually developing in the blockchain in energy market, backed by massive investments and funding from the World Bank, Overseas Private Investment Corporation, and African Development Bank (AFDB) in solar photovoltaic and wind energy applications. Many regions of Africa have communities that are not connected to their respective national grids and depend upon solar panel projects, which often remain unfunded. Crow-funding initiatives based on a blockchain platform can close this funding gap, enabling individuals from around the world to remotely purchase the required photovoltaic cells that are used within solar panels. The solar panels are only constructed once the required number of solar cells are pre-purchased. Once implemented, the households pay rent in crypto-currency to the actual owners of the solar cells. For instance, The Sun Exchange is a solar energy financing blockchain-based platform in Africa that operates in a similar way. Anyone around the world is allowed welcome to purchase solar panels in Africa and earn revenue from them.

Blockchain in Energy Market Segmentation

By Type

• Private
• Public

By Component

• Platform
• Services

By Application

• Trading
• Grid Management
• Payment Schemes
• Supply Chain Management

By End-User

• Power
• Oil and Gas

By Region

North America

• U.S.
• Canada
• Mexico

Europe

• U.K.
• Germany
• France
• Italy
• Spain
• Russia
• Poland
• Rest of Europe

Asia-Pacific

• China
• India
• Japan
• South Korea
• Australia
• Vietnam
• Indonesia
• Malaysia
• Singapore
• Rest of Asia-Pacific

LATAM

• Brazil
• Argentina
• Columbia
• Rest of LATAM

Middle East

• Saudi Arabia
• Oman
• Qatar
• Bahrain
• UAE
• Rest of Middle East

Africa

• Nigeria
• Tanzania
• South Africa
• Ghana
• Rest of Africa