Read Part 2/2 here
Fundamentally, blockchain is a record book that everyone can see, and no one can alter. Therefore, blockchain enables trust through visibility.
Blockchain is widely seen as one of the most interesting and disruptive technologies for the coming years; with blockchain, one party can tradepass a good, such as money, securely to another party, without a third party intermediary involved, such as a bank. In the energy trading context, it means that trading firms can buy and sell energy without going through a centralized energy market place, thus saving money.
Give me details
The blockchain and similar distributed ledgers are databases that are not maintained by a single entity, such as a bank or government agency, but collectively by a number of their users. All changes are encrypted in such a way that they cannot be altered or deleted without leaving a record of the data’s earlier state. In theory, all sorts of information, from birth records to business transactions, can be baked into a blockchain, creating permanent and secure records which cannot be tampered with.
Fans argue that, if properly implemented, distributed ledgers can bring improvements in transparency, efficiency and trust. Naysayers respond that wider adoption may reveal security flaws.
“Blockchain can be used to reduce the cost of utility bills or the need for working capital in wholesale gas market or electricity transactions.”
Who will drive its adoption?
Brian Forde, a blockchain expert at the Massachusetts Institute of Technology, argues that governments will drive its adoption—an ironic twist for something that began as a libertarian counter model to centralised authority.
So, Blockchain and Energy Trading..?
Blockchain technology can be used to reduce the cost of utility bills or the need for working capital in wholesale gas market or electricity transactions. More significantly, however, blockchain can allow millions of energy devices (heating, ventilation and air conditioning systems, water heaters, electric vehicles, batteries, solar PV installations) to transact with each other at the distribution edge, while providing support to utilities and grid operators to integrate more utility-scale variable renewable energy capacity at much lower cost.
A portion of post-trade communications between trading offices are currently managed manually, meaning that counterparties verify and reconcile any discrepancies in their data by emails and fax. Blockchain proposes to change that, by implementing shared ledgers between trading houses. Instead of sending trade details via email, the back-office logs a trade into a blockchain, which the counterpart can verify in real-time. With this system, traders do not store their data individually anymore, but share a secure medium in which information can be transparently actualized and validated.
Read Part 2/2 here
Learn more about Blockchain at ETOT, taking place on the 7-9 November 2017 in London, UK