The future is fundamentally uncertain, so it can be hard to make a good plan. There’s no guarantees on anyone’s coming days, weeks, and months. But the energy sector faces uncertainty of a type that can hamper funding and innovation.
The energy industry’s startups face an obvious challenge in the lack of clear regulations on blockchain technology. Energy has traditionally been controlled by few gatekeepers. They tend to be well-established in a particular region, have control over essential infrastructure, and are often slow to adapt, unless their hands are forced. The industry’s lack of innovation has yielded stale rules and regulations.
There are blockchain startups working to upend the way people buy and sell energy. Regulatory murkiness threatens that vision.
Even with forward-looking regulation in place, are the industry mainstays going to embrace blockchain technology? Will they enter partnerships with smaller, newer startups to realize the potential of this technology?
Along with issues of scalability and security, these questions pose the greatest challenges blockchain applications in the energy sector.
1. Peter Bronski, Director of Marketing & Communications of The Energy Web Foundation
“Many of the technical challenges—such as scalability, data privacy where needed, and energy efficiency of the network—either have already been or are actively being addressed. The biggest challenge is largely non-technical: the global energy sector is one of the most highly regulated industries in the world. Designing a blockchain architecture that can find favor (and thus, adoption) among conservative industry players and energy-sector regulators is critical. You're not going to see blockchain technology scale in the energy sector if we follow the pathway of Bitcoin, where you have anonymous miners consolidated in a few of the world's countries.”
2. Dr. Michael Yuan, Co-founder and Chief Scientist of The CyberMiles Foundation
“Households need to trade frequently in order to establish an efficient-energy market. As the trading volume grows geometrically with the number of households in the network, the frequency of trading (maybe millions of transactions per second in a typical country) could exceed the capacity of any blockchain. Fortunately, most of the energy trading also is limited within microgrids; that is, most trading happens between stable groups of households in the same neighborhood or community. That allows for network scalability by building side chains, each representing a microgrid.”
3. François Le Scornet, President of Carbonexit Consulting
“The main challenge is regulation. Most startups in the blockchain energy sphere are less than three years old and the regulation is not adapted to proposed use cases. The energy sector is extremely regulated and as long as you don’t have a clear regulation on the potential roles and responsibilities of the different stakeholders and the associated financial impacts of a more blockchain oriented energy world, key players from investors to utilities, transmission and distribution operators etc., will continue to have many question marks in relation to deployment of blockchain activities. The RGPD law on private data management can also be a challenge for the development of some ethereum-based B2C use cases.”
4. Dr. Mervyn Maistry, CEO and Founder of Konfidio
“Privacy preserving systems and secure IoT-to-blockchain interfaces are crucial. Consumers should grant data access rights to third parties only when necessary. Regulators need access to reports on the activities and economic performance on different levels of the market. D33P.org has co-developed software modules with multiple stakeholders to solve these problems, while keeping an eye on a long-term vision. For any blockchain solution, these rules need to be discussed and co-designed in order to develop smart contracts that automate these data privacy preserving processes.”
5. Amanda Hagen, Head of Marketing of FutureFuel Technology
“The number one challenge to blockchain adoption in the energy industry is the breaking of habits. As we’re in an industry where the market share is concentrated amongst a few large conglomerates who have established infrastructure and systems in place, there has been less pressure for these organisations to innovate. For this reason, we have started to see the smaller more agile energy companies adopting blockchain first and they will need to lead the way before the industry as a whole is ready to embrace this technology.”
6. Vincent Manier, CFO of ENGIE Insight
“Most of blockchain projects in energy are at a proof of concept stage with major challenges around scalability, interoperability, regulatory, security, standards and governance. Initiatives, like EWF (Energy Web Foundation), aim at developing a foundational infrastructure to build and run blockchain solutions in the energy market.”
7. Buck B. Endemann, Partner, K&L Gates
“Finding a problem or realizing an efficiency that is best solved by blockchain and not by another type of enterprise software, and ensuring that the desired outcome fits within often complex energy regulatory and legal regimes [are challenges to blockchain adoption]. In many cases, companies have already invested significant capital in enterprise software products that do a “good enough” job, and there are uncertainties associated with rolling out new technologies operating in highly regulated markets and industries, particularly technologies that many associate with speculative cryptocurrencies.”
8. Josef Kulovany, CEO and Founder of WECHARG
“Legacy banking and big oil don't want a decentralized model of energy to replace their revenue streams. They will at first do everything in their power to destroy the hydra that is the distributed energy ledger, but this will only delay adoption. A decentralized energy marketplace means that adoption by the masses doesn't need to happen all at once for a crowdsourced and distributed energy model to flourish. Expect the grassroots, freelancer-based shareconomy arising from the distributed energy ledger to peacefully disrupt legacy banking and big oil in profoundly unorthodox ways.”
9. Binu Parthan, Principal Consultant at Sustainable Energy Associates
“Number one challenge is the inertia in the energy industry and their slow rate of adoption due to limited interest and perception of benefits. This is also compounded by energy regulation and policy which also lags behind other infrastructure regulatory frameworks such as telecom – which have done much better.”
10. Assaf Ben-Or, CEO and Founder of Greeneum
“The energy market has not changed significantly like the communication and data sectors in the last few decades. Large utilities and centralized organizations are running this market and are responsible for the energy supply chain from the production to the distribution and billings.
Even though there is a need to keep developing the blockchain technology to have higher transactions per second, scalable and stronger validation, these challenges can be overcome and needed also for other sectors.
Therefore, when it comes to energy, the #1 challenge to blockchain adoption nowadays is to surpass the centralised market legislations and monopolies. In addition, in some parts of the world, there's a high cost for renewable energy and clean power implementation and there is a need for education process to communicate the benefits of this new technology for the stakeholders.”
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