Blockchain For Energy & A Sustainable Future

Beyond Bitcoin’s Energy Controversy, Blockchain Enables Sustainable Energy Solutions

Table of Contents

  1. Introduction: Blockchain for Energy & A Sustainable Future
  2. Beyond Bitcoin: Energy-Efficient Blockchains Abound
  3. The Current State of the Energy Sector
  4. Blockchain’s Electrifying Energy Use Cases
  5. Blockchain For Energy: Navigating Challenges Towards a Sustainable Future

Introduction: Blockchain for Energy & A Sustainable Future

In the realm of digital innovation, blockchain often finds itself at the centre of heated debates. Critics often highlight the environmental footprint of blockchain, pointing fingers at the energy-intensive nature of cryptocurrencies like Bitcoin.

However, this perspective, while it can be valid, risks missing the broader potential of blockchain applications, including those within the energy sector. This article aims to illuminate how blockchain is not only addressing its own energy criticisms but how it is also pioneering a wave of new sustainable energy solutions.

Addressing the Elephant in the Room: Bitcoin’s Energy Consumption

Critics of blockchain point to its significant energy consumption, especially concerning popular cryptocurrencies like Bitcoin, which rely on energy-intensive mining processes.

A 2022 White House report found that crypto assets contributed 0.4% to 0.9% to the total annual global electricity usage and Bitcoin alone consumed around 110 Terawatt Hours per year — that’s about 0.55% of global electricity production, or roughly equivalent to the annual energy draw of a country like Malaysia.

This certainly does sound like a lot of energy but in the words of the Harvard Business Review: “How much energy should a monetary system consume?” While Bitcoin might be the most commonly known blockchain protocol, it would be unfair to use Bitcoin and it’s energy consumption as analogous for all blockchain implementations. It would also have us running the risk of missing out on some green opportunities.

Proof of What? Innovation Results in 99.99% Blockchain Energy Reduction

The blockchain community is acutely aware of environmental concerns and is actively working towards more sustainable practices. Innovations like the transition from energy-intensive Proof of Work (PoW) consensus mechanisms to more efficient alternatives like Proof of Stake (PoS) are already underway.

A couple years ago, Ethereum (the most popular blockchain network after Bitcoin) shifted to a Proof of Stake consensus mechanism, thereby reducing its energy consumption and carbon footprint by approximately 99.99%. This is just one innovation among many that is resulting in more efficient blockchain networks.

Ethereum scaling solutions like “Layer-2s” and alternative blockchain system designs like the ones used by competitors Solana and Cardano are already providing massive reductions in energy consumption and improved performance.

Beyond Bitcoin: Energy-Efficient Blockchains Abound

Key benefits of blockchain in energy

At its core, blockchain offers a decentralised, secure, and transparent way to record transactions. With the addition of smart contracts (a software layer that enables rules to be automatically executed when pre-defined conditions are met), blockchains start looking more like a global internet computer rather than just a form of digital gold.

The internet currently uses between 3.6 and 6.2 per cent of the global energy supply. When considering blockchain as another evolution of the internet, the Bitcoin energy saga starts fading into the distance, replaced with another narrative describing the next generation of the internet (aka Web3).

The Web3 era encompasses numerous blockchain implementations, each with novel value propositions and varied environmental footprints. Energy-efficient blockchains like Ethereum and the ever-evolving real-world applications demonstrate how blockchain can be harnessed with minimal environmental impact.

For example, blockchain startup mintBlue recently set a world record; processing over 50 million blockchain transactions in 24 hours and doing so whilst only using 0.4 - 1.6% of the energy of Bitcoin (BTC).

Furthermore, the integration of blockchain into the energy sector itself can be part of the solution. By optimising energy distribution and consumption, enhancing the efficiency of renewable energy markets, and facilitating the shift towards green energy sources, blockchain can play a pivotal role in reducing the overall carbon footprint of our energy systems.

The Current State of the Energy Sector

The energy world is kinda like a quirky old Morris Minor or Ford Model T: It gets you where you need to go, but it’s not exactly smooth or efficient and it definitely isn’t great for the planet. We’re still hooked on old-school, non-renewable energy sources like a bad habit we can’t quite shake.

Our energy distribution systems? Picture a spaghetti mess of wires and stations, losing bits of power here and there like loose change falling out of your pocket.

We love renewables like wind and solar, but trying to fit these into our old energy systems is a bit like trying to fit a square into a round hole. The power grid and energy markets aren’t quite ready to handle their fluctuations and inconsistency.

When it comes to understanding our energy bills and usage, most of us are left scratching our heads, wondering where all that power is going and why it costs as much as it does.

And for environmentally-conscious organisations and individuals eager to counterbalance their carbon footprint and champion green energy, the journey leads to the intricate maze of Carbon Credits and Renewable Energy Certificates (RECs).

Offering a way to prove eco-commitments by purchasing credits that fund carbon reduction projects or by buying RECs to guarantee their energy comes from renewable sources, this opaque space is shrouded in complexity, leaving well-intentioned eco-warriors wondering about the real impact of their choices.

While we have done a great job bringing power to over 90% of the world's people, it’s clear the energy sector can do with some help. With blockchain, the energy sector could go from being an old clunky cassette player to a sleek new streaming service. It’s game-changing, wallet-friendly, and planet-loving all in one.

Blockchain’s Electrifying Energy Use Cases

Peer-to-peer energy trading

Far from merely consuming energy and moving beyond digital assets and get-rich-quick schemes, blockchain is finding fertile ground in the energy sector. Championing efficiency, sustainability, and transparency, blockchain can help facilitate new and improved energy systems, transform energy markets, and encourage sustainable energy adoption.

Power to the People! (Decentralised P2P Energy Trading)

One of the most exciting prospects of blockchain in energy is its potential to decentralise power distribution. Imagine a world where households can generate their own renewable energy and directly sell excess power back to the grid.

The sun is shining and you find yourself with some extra solar power? Share it with the neighbour and get credited for it. This is not a distant utopia but a tangible reality made possible by blockchain’s ability to securely and efficiently manage peer-to-peer (p2p) energy transactions.

Grid Singularity, Powerledger, and the Brooklyn Microgrid exemplify how blockchain can enable decentralised energy trading within communities. These projects not only empower consumers but also pave the way for a more resilient and sustainable energy grid.

Enhancing Grid Management: A Smarter Approach

Blockchain’s ability to handle vast amounts of data in real time can revolutionise how we manage energy grids. By tracking energy production, consumption, and distribution on a blockchain, we can gain unprecedented insights into grid operations.

These insights can lead to optimised energy flows, reduced transmission losses, and the ability to better handle peak demand times, ensuring a more stable and efficient energy supply for all.

A 2023 study on blockchain and smart grids found that:

“Solutions based on blockchain can implement effective management of electrical energy. They not only improve the security of smart grids, reduce energy consumption and manpower, but also achieve higher scalability and decentralized design.”

Powerledger Chain is a leading public blockchain dedicated to addressing issues such as intermittency and grid congestion resulting from integrating renewable energy into the power grid. With over 30 projects in 10 countries, Powerledger is proving itself a leader in harnessing blockchain to enable smarter grid management and empowering stable and efficient energy supplies.

Renewable Energy Tracking & Certification

Renewable Energy Tracking and Certification systems play a crucial role in the green energy ecosystem by ensuring that the energy claimed as renewable is genuinely sourced from renewable resources.

The transparent and immutable nature of blockchain can help address the lack of standardisation, costly overheads and risk of fraud and double counting. By providing a verifiable and tamper-proof platform for tracking the production and trading of renewable energy certificates (RECs), blockchain can bring trust and transparency to the murky green energy market.

International powerhouse IBM, up-starts like Restart Energy Democracy (RED), and the aforementioned Powerledger are all pioneering solutions to tokenise renewable energy certificates on a blockchain, enabling them to be seamlessly traded (and tracked).

These verifiable and tamper-proof certificates can help to incentivise renewable energy production and also allow energy consumers to make more informed choices about their energy sources.

Carbon Trading & Emissions Tracking

Similarly to tokenised renewable energy certificates, blockchain offers a robust platform for carbon credit trading and emissions tracking too. By ensuring transparency and reducing the potential for fraud, blockchain can enhance the integrity of carbon markets, making it easier for companies to offset their carbon footprint credibly.

The World Economic Forum has even gone as far as claiming the digitisation of the voluntary carbon market as “the leading use case for blockchain innovations in the climate space.”

There is no shortage of activity in the space too, with projects like KlimaDAO, Toucan, Regen, and Moss all attempting to increase transparency and accessibility to carbon credit markets. These projects support the global drive towards carbon neutrality and help meet the rising consumer demand for ESG-responsible products.

From improving grid management through better data handling and visibility, facilitating peer-to-peer energy trading, and ensuring transparent tracking of RECs and Carbon Credits, blockchain is helping to pave new ground in the energy sector.

Blockchain may have gotten its fame (or infamy) from the crypto era and with it, ample criticism for it’s energy consumption. Yet, reducing blockchain to a simple appetite for power misses the forest for the trees. Beyond the Bitcoin buzz and the blockchain skeptics, there’s a groundswell of innovation that aims at a more efficient, transparent, and sustainable energy future.

As we navigate this uncharted territory, developers, regulators, and the energy community must work together to address environmental concerns and harness blockchain’s potential responsibly. The journey towards greener blockchain practices is already underway, marked by technological advancements and a shared commitment to sustainability across the blockchain community.

While blockchain started on the periphery of the internet, its potential to electrify our energy landscape is real and growing. From smarter grids that balance our energy needs to transparent markets for green creds and carbon offsets, blockchain is proving it can be a key player in our sustainable future.