“Blockchain will stay for good” (Part 2/2)

October 3, 2017

 

Read part 1/2 here

 

Dr. Jens Bartenschlager is Head of Energy Consulting at PwC. He will speak at ETOT 2017. Download the agenda here!

 

…In contrast, the blockchain technology is not yet fully mature in increasing transaction speed and in managing growing data volumes. Further, the regulatory status remains uncertain and there are still cyber security concerns that need to be addressed. Another challenge is the fact that blockchain applications offer solutions that sometimes require significant changes to, or complete replacement of, existing systems. Representing a complete shift to a distributed network, which requires the buy-in of its users and operators, the cultural adoption is also a major challenge. Finally, even given the fact that blockchain offers remarkable cost and time savings, the high initial capital costs and required knowledge could be a challenge for many potential participants.

 

 

4. If an energy trading company wants to get to grips with Blockchain, what are the first steps of this process?

 

Firstly, they would need to create a vision by figuring out how the energy trading company can leverage the blockchain in a unique way to create and capture value. By focusing on real business problems to be solved instead of starting at the solution by potentially creating artificial problems, the probability to succeed increases manifold. Therefore, the business potential needs to be understood. Early adopters can act as an inspiration before an individual strategy is defined.
 

(First steps to get to grips with Blockchain:) create a vision by figuring out how the energy trading company can leverage the blockchain in a unique way to create and capture value.

The fastest and most successful way to get on the right track is by bringing the teams up to speed on the blockchain technology, associated use cases and then workshop. The teams should ideally consist of individuals representing the full value chain discussing the following points: 1) Is the organisation currently using intermediaries that could be replaced in favour of reducing costs and/or improving direct relationships without compromising quality? 2) Is the company leveraging a central actor situation causing friction and latency? 3) Where in the value chain are trust and transparency particularly relevant and driving results? 4) Where do cryptocurrencies fit into the value chain?

 

It is important that not to limit thinking about these questions to an internal view but consider how potential market disruptors could leverage blockchain in the future to cut into the market share of established players and develop response strategies.

 

The workshop/s as mentioned above ideally result in a list of activities (e.g. further research in particular areas, exploring concrete opportunities) that should be prioritised. At least one pilot project should be selected for immediate kick-off. Choosing low-risk projects provides profound exposure to the technology with a positive business impact. An iterative project approach including prototyping and appropriate monitoring KPIs to validate the vision early is recommended. Review and decision on additional funding should be conducted after three months. Once a blockchain project is started, it is crucial to decide between external versus internal build. This heavily depends on the technical sophistication of the organisation’s team and willingness to bring in external knowledge.

 

Lastly, continuous monitoring of the blockchain space for new business potentials from early adopters needs to be ensured to develop an individual vision on the latest state of the technology.

Speaking about energy trading, a rather mature blockchain for OTC trading of products could potentially be achieved in the short term. This could save transaction costs and time but would most likely come with some limitations.

5.  Blockchain and cutting costs: could that be achieved in the short term?

 

Speaking about energy trading, a rather mature blockchain for OTC trading of products could potentially be achieved in the short term. This could save transaction costs and time but would most likely come with some limitations. The overall system landscapes of energy trading companies cannot be adjusted in the short term. Nor can all traders be convinced to use new or alternative front ends. In addition, particularly master data and rules required to be applied across the industry will take time to be rolled out. Nevertheless, we will probably see a number of new trading solutions in the next 2 to 5 years. The increasing competition created by this will push costs down, no matter what technology is going to be used.

 

 

Read part 1/2 here

 

 

Register for the 9th Energy Trading Operations & Technology Summit – ETOT here!

 

 

 

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