Blockchain And The Energy Sector

Updated: Jan 8, 2019

We all know that cryptocurrencies mining needs a lot of energy due to the Proof-of-Work (PoW) algorithm that can function in ASIC devices only with electricity. Like any other industry that blockchain is improving, the blockchain can completely change the structure of the energy market, reduce the cost of tariffs and remove third parties in the network. So in this article, you will find out how blockchain can be helpful here and whether it’s reasonable at all.


The first energy transfer using blockchain was in 2016 when one Brooklyn resident sold excess renewable energy to his neighbor using an Ethereum smart contract. After that, many Western energy companies became interested in this technology. International energy companies are developing projects that in the future will unite all consumers into one network which will be represented by a decentralized system. With the help of smart contracts, the existing multi-level system consisting of electricity producers, distribution network operators, accounting operators, providers of payment banking services, traders and consumers themselves will be simplified. All transactions on receipt and payment of energy will be carried out directly in the network, uniting energy producers and consumers.

This will make electricity cheaper. In addition, all transactions will be open. People will not be able to delay the payment for energy consumption because a smart contract will monitor the execution of all transactions. The system will pay execute transactions itself by taking the number of tokens that will be needed for the energy transfer. Thanks to the blockchain technology, all energy transfers will be protected from outside interference. This will allow to certify electricity, check quotas for emissions regulated by law. The decentralized technology functions as a transaction database, built on the principle of a distributed registry, so using blockchain you can create a universal archive for storing all the data on billed electricity. Consumers will receive enhanced control over their electricity supply contracts, as well as their power consumption data. All entries will be kept in open access in the blockchain registry, which will handle all issues of property rights and the current state of assets.


It is wise to combine a new technological system with another innovative idea. Therefore, blockchain technology could be a great solution for the plants that generate green energy, that is ecologically clean such as the energy of the sun, wind, moon, water, geysers, and so on. To adapt RES to everyday life, automation of the system is required that can be achieved with the help of special equipment of a new type such as a smart home, smart electricity meter, and smartphone applications.

Smart home is a high-tech system that allows you to combine all the communications into one and put it under the control of artificial intelligence, programmable and customizable for all the needs and wishes of the owner.

Smart electricity meter is a device with remote data transmission function. All the parameters are automatically taken by the system itself, then the information is transmitted to the main server. After the introduction of the smart meter system, the blockchain will become a tool for reading meter information and providing information for preparing electricity bills. A key aspect here is the enhanced control options that consumers will receive in relation to their electricity supply contracts, as well as to the data on electricity consumption. In the EU, the goal to provide at least 80% of consumers with smart energy meters by 2020 has been set.

Obviously, the whole system needs sort of a solution where all these components will be managed. This can be easily achieved with the help of smartphone applications. They will control and transfer energy. Consumers need automated software solutions for easy management of the entire system.



The first project on the blockchain in the history of energy is Brooklyn Microgrid developed by LO3 Energy and ConsenSys. The goal of the project based on Ethereum is to test how smart contracts can be used in the solar energy transfers between neighbors. All buildings are combined into a traditional power grid, and the management of transactions and the storage of data about them is carried out using a centralized blockchain system.


Blockchain can help energy companies. When the Japanese government allowed retailers to sell excess green energy, the number of customers at Tokyo Electric Power energy company fell by 15%. Therefore, the largest supplier has invested in the Electron blockchain project, which has long advertised the benefits of using blockchain technology to modernize the infrastructure of the energy industry in order to effectively share power with big savings.


German companies and RWE have launched two projects aimed at simplifying the charging system for electric vehicles. This will allow introducing a simple billing model to adopt the concept of electromobility. If drivers will have access to electric vehicle recharging stations almost anywhere, the technology will become generally applicable. This will simplify the billing system at charging stations located in public places. The driver of the electric vehicle can park the electric vehicle and go around, at this time the car will independently register in the charging station system and start charging automatically. After the driver leaves the parking lot, the recharging station will bill you for the electricity consumed.


Despite the active and fast-growing market for the start-ups in the energy sector, there are still some problems in introducing the blockchain into the lives of consumers. Firstly, the lack of a technological base in the form of solar batteries, windmills, and other energy-generating devices will not allow the conversion of natural flows for the needs of ordinary people. When new technologies appear in every home, then people will be able to use the blockchain for their own purposes. Secondly, due to the uncertain legal status of the entire cryptocurrency industry, state-owned energy companies are not able to fully implement projects based on smart contracts due to increasing reputational risks, system failures, job guarantees and other aspects that may affect the operation of power grids. Thirdly, blockchain projects are still in their experimental stage, so the end use of the technology may differ from the current application experiments. No one can guarantee the implementation of projects exactly in the form in which they reflect. But if the steps to eliminate these issues are taken, then the entire energy system of the world will move to a new evolutionary level of its development.

© 2020 by Velmie

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