Dusseldorf More and more people are getting their electricity from suppliers with sustainability promises. However, this is not automatically green. For a long time it was impossible for consumers to find out whether they were actually being supplied with renewable energy. It’s different today – thanks to blockchain technology.
This is a chain of data records stored one after the other, known primarily as the basis of cryptocurrencies. For example, it can also contain information about the transport route of a kilowatt hour of electricity. The stations are transparent on the blockchain – encrypted but accessible to everyone involved. In this way, customers can not only see whether the electricity actually comes from renewable energy – it also cannot be sold twice on the market.
The potential of blockchain technologies is enormous. By 2028, the global market volume in the energy market is expected to increase to 4.2 billion dollars, according to figures from the market researcher Business Research Insights. In 2021 it was almost 498 million dollars. Experts believe that so-called distributed ledger technologies such as blockchain will revolutionize the entire market, especially when it comes to dealing with renewables.
“The energy market is becoming increasingly complex,” says Christian Sander, blockchain expert at utility EnBW. On the one hand, more and more electricity from renewable sources will come onto the market – according to a study by the International Energy Agency (IEA), total capacity worldwide will almost double in the next five years.
At the same time, every private household can now become a producer and consumer, whereas the supply used to be the responsibility of a few central electricity providers. How can blockchain technology be used in the energy market? Does it really contribute to climate protection? What weaknesses does the technology have? Examples show what could be possible.
Neighborhood trade via blockchain
Unlike nuclear power plants, for example, wind and solar power plants are distributed all over Germany. Blockchain technology can help bring suppliers and buyers together. If the owner of the solar system has a kilowatt hour of electricity left over but does not have a storage unit, he can pass it on to the neighbor who has a storage unit. When the sun isn’t shining, it sends the electricity back to the owner of the solar system.
The blockchain documents the transport route of the kilowatt hour. Some pilot projects are already underway. Handling such mini-transactions via central energy trading centers would be much more complex and expensive.
The advantages of the blockchain: once information has been stored here, it cannot be deleted. If the data of a block were changed, the validity of the entire chain would be affected. The recordings are no longer stored centrally in one place, but can be called up decentrally on any computer in the network.
Digital twin for green hydrogen
The blockchain could also be used to check whether and to what extent hydrogen is actually green, i.e. was produced exclusively using electricity from renewable sources. Proof is provided by certificates that acknowledge the green value-added process.
Klaus Schimmer, who is responsible for innovations in the field of hydrogen at the software group SAP, gives an example: A “green token”, i.e. a digital twin of this quantity, can be generated for one kilogram of hydrogen of a certain quality. The certificate information would be stored there in a forgery-proof manner,
This information would be updated each time the energy source was processed further along the value chain. If the hydrogen were to be converted into ammonia, the hydrogen token would become an ammonia token, which would still contain all the information about the production and storage of the hydrogen. Additional information such as the CO2 footprint of truck transport from the hydrogen factory to the ammonia factory can also be assigned to the token.
The “Green Token” is thus a kind of balancing tool for hydrogen and for all further steps in the value chain, says Schimmer. In this way, even a car can be proven to have been produced from steel made with green hydrogen.
protection of the rainforest
While blockchain is often used to make existing processes more efficient, the non-profit initiative Gainforest creates a “process that would not be possible without blockchain,” says EnBW expert Sander. Gainforest has developed software with which the deforestation of the rainforest can be automatically monitored and financial flows from donations can be processed digitally.
Two elements show the stock of trees: The yellow dots show the location of the trees based on photos of the local communities, the red rectangles show the location of the trees using satellite images.
(Photo: Gainforest)
The special feature: The payment is processed using digital currency on the blockchain. There, everyone involved can also access satellite images of the forest area threatened by deforestation.
The donation will be temporarily stored via blockchain technology like in a safe, says Gainforest co-founder David Dao. “Nobody has access until the algorithms say: After 30, 60 or 90 days we will still see forest there. Then the platform slowly lets the money flow through.” The initiative’s projects are running in Bhutan, Brazil, Paraguay, the Philippines and in the future in Rwanda.
Another advantage: The use of blockchain technology not only makes the documentation more credible. Thanks to digitized controls and automated transactions, more money is left for people, Sander says.
The Gainforest co-founder monitors the flow of digital donations on his computer.
(Photo: Gainforest)
Disadvantage of the blockchain: High energy requirement
The question of whether and to what extent blockchain technology makes the energy market greener also depends on its energy consumption. “Blockchain is one solution among many in the transition to the energy market,” says Peter Schniering, head of the think tank Future Cleantech Architects. Because so far, the technology – regardless of its field of application – has consumed a lot of energy, most of which still comes from fossil power plants.
Bitcoin, the most important blockchain-based cryptocurrency, consumes around 130 terawatt hours of electricity worldwide every year, according to figures from the University of Cambridge. That is more than the Netherlands consumes.
But Schniering is optimistic: “We are seeing promising progress in terms of energy consumption,” he says. Ether, the most important cryptocurrency alongside Bitcoin, has already drastically reduced consumption by converting the production of new units to a more energy-efficient process.
Whether the blockchain technology really triggers a sustainability revolution will also depend on its energy consumption. One thing is certain: Without the blockchain, it will be difficult to reliably process transactions in the increasingly complex energy market.
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