May 11, 2022 - 13 min read
The global energy industry impacts almost every area of our lives, from the electricity that powers our homes to the gas that powers the cars we drive. The multi-trillion dollar industry is still dominated by oil and gas, but an increased focus on renewables has led to a massive amount of research and development into technologies such as solar, wind, and new types of nuclear power, such as fusion.
Despite advances in renewables and other areas of the industry, the sector still suffers from a variety of problems, including supply chain issues, environmental concerns, and grid management issues.
While some areas produce an excess of energy, others simply don’t have enough, leading to massive waste. Energy storage issues are also a problem, especially in regards to renewables like solar and wind, which often do not perform well due to weather conditions.
While traditional oil and gas providers have tried to “green up” their image with ESG efforts, such efforts are quite difficult to track and confirm, leading many to believe that these efforts are simply empty PR campaigns with little substance. In addition, energy grids are notoriously insecure and have the potential to be easily disabled by hackers via cyberattacks.
Blockchain technology, with its high level of security and its promise of immutable data storage capabilities, has much to offer nearly every sector of the energy industry. From peer-to-peer electricity trading to increasing the safety and reducing the environmental impact of oil and gas exploration and nuclear power, blockchain tech can help improve and secure the way the energy sector processes data.
In this way, blockchain can provide important insights for both public and private actors, and has already inspired a variety of new solutions that can truly bring the energy sector into the 21st century.
As we just mentioned, some areas produce excess energy, while others lack sufficient energy resources. This is true on both the macro and micro levels, particularly with the increase in the popularity of solar power installations in private homes and businesses. Multiple P2P energy solutions have popped up in recent years to help excess producers sell their energy to those who need it. Some of the major players on the market today include Power Ledger, Greeneum, and Rowan Energy.
Power Ledger is perhaps the most prominent blockchain project in the P2P electricity trading space. Their blockchain-based platform allows households, institutions, and even public and private energy grids to trade energy by carefully tracking the amount of energy that each stakeholder produces and linking them together through a shared blockchain ledger. This is particularly helpful for areas that use a high amount of renewables and may face energy shortages due to weather issues, as they can simply purchase the needed energy from a nearby area with better weather conditions. All electricity trading is powered through smart contracts, which vastly increases the speed, efficiency, and accuracy at which electricity can be traded.
As of 2022, the technology has been successfully implemented in 11 countries, including the U.S., Chile, and India. Many of the projects are intended to help bring energy stability to low-income areas in developing countries, where energy is often expensive and blackouts are common. Power Ledger utilizes its native cryptocurrency (POWR), which, as of March 2022, had a market cap of more than $250 million.
Greeneum is a decentralized marketplace for renewable energy. Functioning as a software-as-a-service, Greeneum offers a variety of tools, including multiple application programming interfaces (APIs), as well as secure integration with internet-of-things (IoT) sensors. Their proprietary software also incorporates AI and machine learning to estimate future energy prices, making it easier for stakeholders to make better choices when purchasing, selling, or trading renewable energy. Stakeholders in the Greeneum network utilize its GREEN token to trade energy via smart contracts. According to Greeneum:
The Greeneum network also provides AI verified carbon certificates that help individuals and institutions prove that they have reduced their carbon footprint.
Rowan Energy is a blockchain-based initiative that provides cryptocurrency to individuals who generate home-based solar power. For each 1kWh (kilowatt-hour) a user produces, they earn 10p of Rowan coin, which can be held, exchanged, or sold. The process begins when a “SmartMiner” device is connected to an individual or business’s solar panels, which records the amount of energy generation and transmits it to the Rowan Energy blockchain via wifi.
Currently, Rowan Coin is only traded on LATOKEN and ProBit Global, and has an extremely small market cap of around $50,000, but, if the project grows, these numbers should expand significantly. Rowan claims that it can reduce the amount of time it takes for a solar system to replay itself from 25 years to 10, though this seems to be an unlikely claim at the current moment.
Like Greeneum, Rowan Energy uses the energy generated by participants to create renewable energy offset certificates for businesses in order to generate profit.
While blockchain technology has a lot of potential to improve the economics and expand the scope of P2P energy trading, it also has a lot of potential to help upgrade and improve energy transfers between existing grids and power plants. As previously mentioned, some areas experience an excess of energy production, while others may experience regular shortages. Since utilities generally operate on a monopoly basis, they are much more likely to be open to sharing data with other utility companies, which are generally not seen as direct competition. By enhancing data sharing between utilities, blockchain can help utilities improve in a variety of ways, including improving the safety, efficiency, and effectiveness of ESG initiatives.
Much like P2P energy trading, traditional power companies and grids can also utilize smart contracts to trade energy with each other in times of need. This may be particularly impactful when natural disasters affect energy production in a local area.
While the renewable energy sector has been growing rapidly, traditional energy sources like oil and gas still represent the vast majority of our planet’s energy consumption. The industry, which reached nearly $6 trillion in market size in 2021, faces a variety of issues, including concerns about carbon emissions, supply chain, logistics, and financial inefficiencies, as well as concerns about safety.
Supply chain and supply chain finance issues are one of the most important pain points for the oil and gas industry today, from the initial construction of drilling sites to the final distribution of oil and gas to power plants, gas stations, and other end-users. Pilot projects in the oil and gas industry have already been conducted to test the utility of blockchain technology in the industry;
For example, in 2020, a group of large oil conglomerates including Shell, ExxonMobil, and Chevron launched an industry blockchain consortium. Their first pilot project, conducted in mid-2021, led to the implementation of a blockchain-based platform to track and pay for water supply services to oil wells in North Dakota, which significantly decreased prices and delivery times.
In addition to supply chains, finance is a key element in the oil and gas industry, with many companies, including utilities, utilizing financial derivatives such as options and futures to help secure stable prices for the oil and gas that they plan to use in the near future. These forward contracts help both the end-users and the oil and gas companies themselves by allowing both parties to create accurate financial projections as well as helping to stabilize price levels by allowing companies to adjust production due to demand. Blockchain can also be a powerful tool to settle other types of financial and legal transactions, such as land leases for oil and gas drilling, which are often rife with fraud and misrepresentation.
While blockchain certainly has a strong role to play in oil and gas supply chain and financing, it can also improve safety and help oil and gas companies comply with government regulations. Currently, most oil and gas companies store and compile safety and regulatory documents and information over a wide array of systems, with much of it still being paper-based.
Via the ability to create an immutable ledger, blockchain tech can utilize smart contracts to have required individuals sign off on safety inspections and other essential regulatory paperwork. IoT technology can also interface with blockchain ledgers to increase safety and improve awareness. For example, pressure sensors can be attached to wells and other equipment while being connected to a shared blockchain ledger, which can help oil and gas companies compile essential data while getting real-time warnings before a potential malfunction or accident may occur.
Finally, it should be noted that blockchain can help the oil and gas industry truly demonstrate the effectiveness of any carbon credit or carbon offset program. IoT sensors and other technologies connected to blockchain ledgers can accurately record the carbon emissions created by end-users, such as power plants, which can be shared with oil and gas firms. These companies can then purchase tokenized or blockchain-based credits, including carbon offset certificates provided by some of the projects mentioned above, in order to quantify the exact amount of carbon offset.
While these types of initiatives will require a significant degree of industry cooperation, the increasing demand for ESG initiatives among investors and an increasing concern about climate change will likely keep leading to more innovation and greater adoption of both blockchain technology and data sharing among industry players, which will only help increase transparency and the proliferation of legitimate green initiatives.
While often maligned due to safety and waste issues, rising oil and gas prices and increasing concerns about global warming indicate that nuclear energy production will likely increase over the next decade. While it provides relatively inexpensive energy and produces very low carbon emissions, increased nuclear energy production does raise a variety of legitimate concerns, including the fact that the same uranium that’s used to power nuclear plants, can, in its refined version, be utilized as a core component in nuclear weapons.
Part of the problem is that the entire nuclear supply chain, starting with the mining of uranium and other essential materials, suffers from an extreme lack of transparency and effective tracking. For example, some reports indicate that it takes a month or more for reports of missing uranium supplies to reach the management of mines, leaving tons of room for theft and misappropriation of potentially dangerous materials. Blockchain, however, may be able to change this by creating an immutable ledger of all elements of the nuclear power supply chain, from raw materials to finalized energy production.
After uranium is mined, it must go through an enrichment process in order to be suitable for nuclear power generation. In general, uranium fuel for nuclear power must be enriched from 0.7% to 3-5%, and sometimes up to 20%. The same technology that can enrich uranium to this level, however, can be utilized to enrich uranium up to the 90% level that’s required for nuclear weapons. Blockchain can also track uranium enrichment in order to help ensure that uranium is not enriched beyond an energy-grade level.
Beyond uranium enrichment, blockchain tech can also play a role in the safety of nuclear power generation itself. Much like its potential role in the oil and gas industry, shared blockchain ledgers can interface with IoT sensors physically monitoring various elements of nuclear power generation, with the goal of increasing safety and preventing potential disasters like the Fukushima nuclear disaster of 2011, or the more historically famous disasters at Chornobyl and Three Mile Island.
It should be noted, however, that the nuclear energy process doesn’t stop at energy generation; unfortunately, nuclear power does generate a substantial amount of waste that must be kept contained and secured, often for centuries. This is one area where blockchain has already been implemented. SLAFKA, a blockchain pilot program for securing nuclear waste, began running in March 2020. The pilot program, which is sponsored by Finland’s Radiation and Nuclear Safety Authority (STUK), the University of New South Wales in Australia, and the Stimson’s Center’s Blockchain in Practice program, has begun tracking used nuclear fuel rods secured in underground storage, with the goal of sharing information between necessary players while maintaining locational privacy.
In recent years, the global energy industry has increasingly come under attack from hackers and cybercriminals, both independent and state-sponsored. For example, in March 2020, The European Network of Transmission System Operators for Electricity (ENTSO-E), which represents 42 transmission operators in 35 countries, fell victim to a major cyberattack, which stole vital information from the organization’s systems that could be used later to attack grids themselves. Likewise, in Taiwan, the government has reported that their state-owned power company has come under cyberattack nearly every day for the last 5 years, though little damage has been done.
Many energy-related cyberattacks have gone far beyond information theft and minor incursions, and have actually resulted in temporary blackouts and major damage to power grids. In 2015 and 2017, major cyberattacks completely disabled major parts of the Ukrainian power grid, leading to nationwide blackouts. The U.S. Justice Department later charged six agents of the Russian GRU intelligence agency with cybercrimes related to the attack. In May 2021, the Colonial Pipeline, a large pipeline carrying gasoline and jet fuel to the Southeastern U.S., was hacked, disabling key electronic equipment necessary for the pipeline’s operation. The company operating the pipeline was forced to pay a $4.4 million ransom in Bitcoin to DarkSide, an international hacking and cybercrime syndicate.
These examples are just a few of thousands of cyberattacks that have impacted critical energy infrastructure around the world in recent years. Fortunately, as with other areas of the energy industry, blockchain may be able to make a positive impact. One area of vulnerability is website domains themselves. The current domain name system (DNS) is highly centralized and thus vulnerable to cyberattacks. By utilizing blockchain domain names, energy firms and utilities may be able to better secure their websites from hackers.
Another area of vulnerability is user passwords to secure company data and messaging systems, which can easily be guessed by hackers using brute force attacks or guesses based on an employee’s personal information, such as their birthday, address, or name. By changing company data and messaging systems to blockchain-based platforms, individual employees can be given secure private keys which are nearly impossible for hackers to guess.
Yet another area of vulnerability is IoT sensors, which are essential to many energy infrastructure projects, yet can easily be penetrated by hackers. Recent news stories have shown how hackers can easily hack into “baby cams,” refrigerators, and other IoT integrated devices in people’s homes, but unfortunately, many enterprise-grade IoT devices are similarly insecure. Such hacking can make it easy for cybercriminals to fully disable energy-related hardware or create inaccurate sensor readings, but fortunately, blockchain can also help in this regard. By connecting IoT sensors and devices to secure blockchain networks instead of traditional internet or intranet networks, energy companies and utilities can significantly reduce the ability of hackers to penetrate or manipulate IoT-connected hardware.
While blockchain has the potential to disrupt and transform nearly every industry, the energy industry is perhaps one of the ripest for disruption. The current structure of power grids, both in the U.S. and abroad, is highly inefficient and is not particularly compatible with the increasing proliferation of home solar panels, which often means there are significant hurdles to overcome when individuals attempt to sell energy back to the grid. Blockchain-based P2P energy trading platforms, which address many of these issues, are perhaps the most exciting application of blockchain in the energy industry and may encourage significantly more individuals and businesses to generate their own energy.
On an institutional level, blockchain tech’s ability to provide secure information sharing provides it the ability to disrupt almost all areas of traditional energy generation, including traditional energy grids, the oil and gas industry, and the nuclear power industry. For these industries, which often rely on traditional outdated computer systems and even paperwork, blockchain can help save money and time by improving the efficiency and security of supply chains, from raw materials to the end energy user. This is particularly relevant to nuclear supply chains, in which materials like uranium can be utilized for nefarious purposes.
In addition to improving supply chain management, IoT sensors, when integrated with blockchain platforms, have tremendous potential to improve the safety of our energy infrastructure by improving real-time, secure data sharing among relevant parties. This can help prevent disasters involving oil drilling pipelines, nuclear, gas, and coal power plants, and other types of critical energy infrastructure.
Finally, blockchain also has significant potential to improve the cybersecurity of critical energy infrastructure via more secure data sharing, blockchain domains, and other types of blockchain-based cybersecurity protocols.
With all of this being said, blockchain’s applications in the energy industry are only beginning to be fully explored. While exciting pilot projects proliferate, only time will determine exactly how blockchain will impact this incredibly important industry.
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