The reason why blockchain isn’t catching on just yet in energy

August 28, 2019

 

See where Tilo is speaking at this year's ETOT on the programme here

 

Despite ruling the airwaves in recent years, finding a sound, practical, use case for blockchain in the energy trading space has been quite elusive.

 

Few entities are as synonymous with blockchain as Ponton and this is why their MD, Tilo Zimmerman, is speaking at ETOT on the topic of blockchain and other DLTs.

 

Ahead of this, we got the chance to pick his brains on the matter.

 

The general excitement surrounding blockchain has diminished in recent months - why is that?

 

I think part of it is overblown expectations and too many people jumping on the bandwagon -- and so no new technology can ever fulfill these expectations and certainly not so quickly.

 

Another reason, more specifically, in the nature of blockchain technology, is the success of Bitcoin (despite the negative connotations) as being the best use-case. Bitcoin has 2 properties which aren’t necessarily translatable to energy; one is that it works on a completely anonymous network and the other is that the fulfilment of Bitcoin is on the blockchain as well. And, of course, with energy, this is simply impossible. 

"From a commercial perspective, the most practical applications are still to come."

 

Can you give us a practical example of the application of BC and DLT in energy trading right now?

 

From a commercial perspective, the most practical applications are still to come. I’d expect this in an area where there isn’t already a well-established system where you have more of a green-field situation. For instance, in flexibility markets, or in transmission systems at TSO/DSO level. The other area where I can see this despite not being proven to the fullest extent yet, is blockchain being used as an immutable ledger for record keeping and such.

 

So far, however, none of these applications of the tech have gained much traction but this is more to do with the [European energy] sector rather than the technology as in anything which takes onboarding 100 companies won’t happen overnight.

 

How long do you think that’d take?

 

I think we’re gonna see maybe a couple more years of deflated expectations and then I think we’ll start to see real progress. I’m old enough to remember the “dot.com” bubble and remember the naysayers saying how “e-commerce will never work” but I do believe it’s inevitable that it will be a significant part of the fabric of modern life.

"Applying open-blockchain like the bitcoin concept to the consumer is something which I don’t believe in. I don’t think most people aren’t really bothered about how much they even pay for their utility bills."

 

 

That said, blockchain technology isn’t as important as the hype would suggest -- it’s more comparable to technology in general and certainly less important than having a relational database management systems.

 

If you go back to the past you’d think, with hindsight, that having a database system such as Oracle is so much superior to what we had back then - but this didn’t happen overnight; it took many years of gradual growth. With energy being so intertwined (so many APIs, document formats, feeding processes etc) any change would be gradual. But in terms of gaining a critical mass, I’d give it at least 2 or 3 years.

 

What’s standing in the way of progress?

 

I’m hoping that there will be some relaxation of financial market regulations which would allow for more experiments and more “getting things done”. The push in this area probably needs to come from the financial industry itself - whereas they have more to lose, they also have more to gain. Applying open-blockchain like the bitcoin concept to the consumer is something which I don’t believe in. I don’t think most people aren’t really bothered about how much they even pay for their utility bills. The technology might garner mass-appeal if it was driven, for example, by a climate change-related forces. For example, if we imagine that we find ourselves living in a barter economy, in such case, I can imagine blockchain technology taking off in the retail space.

 

WHAT DO YOU THINK?

 

Do you agree with Tilo? Do you think blockchain is a fad which has outlasted its welcome? Or is it just too advanced for its age?

 

For live discussion and debate on this topic and much more, join Tilo at ETOT 2019 this October - register here.

 

See where Tilo is speaking at this year's ETOT on the programme here

 

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