Blockchain adds a new link to EU energy-policy debate

21 June 2018 8:55am

31 May 2018. By Emily Waterfield.

Blockchain’s potential to streamline global energy politics is likely to start attracting regulators’ attention, with companies including IBM showing an interest.

Open to everybody yet incredibly hard to hack, the emerging digital-ledger technology could help small household power producers trade efficiently and safely on the same grid as big energy providers.

The European Commission is encouraging households to generate their own electricity through small-scale installations such as rooftop solar panels, in an effort to manage fluctuations created by the use of renewable sources.

But this has left customers struggling to sell surplus renewable energy generated with rooftop panels on a power grid designed to handle trade in huge amounts of fossil fuels, which have a steadier and more predictable output.

This is where blockchain — better known as the technology underpinning Bitcoin and other digital currencies — could help scale down the size of transactions without a loss of security.

Blockchain was so named because each transaction creates a block of code, which is appended to the chain of all existing blocks. The chain differs from a traditional database of information because the block is locked and can't be edited or deleted.

This removes the need for a central authority, such as a government or bank, and allows traders to deal directly with each other.

Lufthansa and British Airways have both carried out tests into using blockchain as a way of processing huge amounts of transaction data. Maersk, the world's largest shipping company, is also looking into using blockchain to manage cargo.

The companies trying out blockchain in energy markets are typically much smaller.

New York-based startup LO3 Energy is using blockchain to encourage the sale and use of electricity at a local level. In Europe, Spanish company Pylon Network is using it to promote renewable-energy trade between households. "Energy can now be traced and paid for instantaneously," its website says.

Emissions trading

Blockchain could also be used to improve the security and transparency of emissions-trading mechanisms. US technology company IBM is already working with China’s Energy-Blockchain Labs on a way to allow businesses to trade carbon emissions allowances directly between each other.

This could help address security concerns that have dogged the EU's Emissions Trading System since it was launched in 2005. Hackers have been able to steal millions of euros' worth of carbon permits from the national registries of many European countries. Germany, France and the UK have also seen the system used to cover up instances of tax fraud.

With blockchain, all transactions are linked, meaning that if anyone tried to change the record of one transaction, the entire system would collapse and show up the inconsistency. Because blockchain transactions simultaneously exist on every computer on the network, regulators and businesses — or members of the public — could monitor transactions at any stage.


There’s a catch, however: The “mining” of digital currencies, blockchain’s original and still principal application, requires extraordinary computing power that consumes huge amounts of energy.

Currently, computers mining for Bitcoin and other cryptocurrencies consume enough energy to power the Czech Republic, according to some estimates.

It’s not yet clear whether other applications of blockchain would necessarily consume such great quantities of power. But if they do, putting them into the energy equation could do more harm than good.