Dr. Jens Bartenschlager is Head of Energy Consulting at PwC. He will speak at ETOT 2017. Download the agenda here!
1. Blockchain: is it just a buzzword, or will it stay for good?
Blockchain is currently two things at the same time: a buzzword and a very powerful technology. Many players in the market speak about it or develop promising use cases. However, only few have started implementing, even fewer have finished implementing and even fewer have rolled out applications to achieve real business value.
According to Gartner, blockchain is at its peak of inflated expectations. For the time being, this allows for tremendous investments in start-ups, in foundations as well as in research and development. The Perth based start-up Power Ledger, for instance, has launched its first initial coin offering (ICO) and successfully raised AUD 17 million so far. This unregulated way of raising capital will rapidly accelerate the company’s expansion. Even though it is still considered a pilot in Australia and New Zealand, Power Ledger facilitates electricity trading across the meter and manages settlements without going through an electricity retailer. Many other start-ups across the globe follow similar approaches in the energy trading space (e.g. Conjoule, Drift, Electron). Once Gartner’s so-called trough of disillusionment is overcome, the technology will be so mature that we would not even notice its application. It will change a lot of today’s “order”, even aspects we haven’t thought about yet. In any case, it will stay for good.
Blockchain is currently two things at the same time: a buzzword and a very powerful technology.
2. A few energy trading companies have already started adopting Blockchain, do you consider this a leap of faith?
In my view, this is a very promising sign for the entire industry as it shows acceptance of the fact that innovation does not stop at anyone’s doorstep. Instead, innovation can and will change everything. In this case, it will be a matter of participating early to influence development or racing to catch up later. The few utilities already adopting blockchain either want to improve their understanding of how the blockchain really works or to find out about potential benefits (e.g. lower transaction costs). Others want to develop it on their own. This raises questions around the trading companies’ strategy. Why investing in a start-up or third party instead of doing it together through a foundation or a cooperation?
Many questions remain unanswered: To make blockchain in its energy trading application purposeful, some work still needs to be done around communication standards, rules and smart interfaces to the existing system landscape. This is a task the energy trading industry can and should master together. The more trading companies collaborate, the higher the efficiencies and the success probability would be.
To make blockchain in its energy trading application purposeful, some work still needs to be done around communication standards, rules and smart interfaces to the existing system landscape.
3. Could you please summarise the main benefits and the main challenges of using Blockchain in the context of energy trading?
The main benefit considered by most is first and fore mostly about disintermediation and trustworthy exchange reducing or even eliminating counterparty risk. This is closely aligned with the benefit of lower transaction costs by eliminating third party intermediaries and overhead costs for exchanging assets. In addition, the process integrity is allowing for trust that transactions will be executed exactly as the protocol commands removing the need for a trusted third party to control said transactions. Also, due to the distributed approach, the blockchain does not have a central point of failure and is, therefore, better equipped to withstand malicious attacks.
Trading companies could use the distributed, publicly verified, and nearly real-time ledger of transactions for bookkeeping, data mining, and records verification, while reducing the effort spent on reconciling information between various computer systems. Last but not least, a central immutable ledger of transactions would allow auditors and regulators to rapidly monitor the data flow avoiding ex-post verification.
Read Challenges of Blockchain and more here (Part 2/2)
Register for the 9th Energy Trading Operations & Technology Summit – ETOT here!