Blockchain is, in simple terms, a public database that records transactions – or in other words, a public ledger. It was created back in 2008 as the technology behind Bitcoin, the first digital currency. Unlike existing currency that is issued and controlled by a government, Bitcoin is completely decentralised and its scarcity is dictated by mathematics rather than law. Blockchain is what makes the digital currency possible – coming back to the public ledger point, every bitcoin transaction that takes place is recorded on the network, with every participant able to see and verify each transaction. This makes fraud incredibly difficult, and means the network itself is completely transparent, and very robust.
The financial world has unsurprisingly been heavily interested in bitcoin and blockchain right from the get go, but experts are now starting to realise the potential applications it could have in a much wider context, not least of all – energy.
For anyone that’s spent some time in the energy industry, it can actually be quite hard to pin down why certain processes or practices are difficult, or to even realise there’s a problem in the first place. Given the complexity of the industry, this is typically a case of ‘can’t see the woods for the trees’.
A good example of this is revenue leakage (the gap between purchase and sales), which is a common problem for all energy suppliers, and can account for 2-4% of turnover. The reason for the gap is that it’s very difficult to account for usage at a meter level, so when it comes to paying the aggregate industry invoices, if things don’t tally up it’s nigh on impossible to explain why, and ultimately that unaccountable variance has to be written off.
At ENSEK we’ve managed to get to the root of this problem, and it all comes down to data.
Put simply, there isn’t a single, publicly available ledger of all energy transactions that take place in the industry. The data is there, but it’s disjointed, hard to interpret, and largely underused as a result.
So you can see then that an energy blockchain – that is, a publicly available ledger of every transaction and change in the industry – could be transformational.
There’s a lot of talk at the moment about blockchain’s application in microgrid transactions – the ability for individuals with some solar PV on their roof, and other people on their street, to buy and sell the energy generated peer to peer. This is definitely a good idea, but we think there’s a much wider application of the software.
If it’s applied at an industry wide level, from the ground up, the energy blockchain could be the catalyst to a transformation of the last analogue industry. Any and all of the existing industry flows would become publicly visible, verifiable, and available, meaning suppliers could bill, and be billed, more accurately. Likewise, customers could have access to and visibility of their data and the transactions taking place on their account.
With China setting up the world’s first energy blockchain laboratory this week, and trials beginning in America, progress is already being made in this area, but it’s definitely early days and we anticipate it will be quite a few years yet before any real change starts to happen.
The energy blockchain is certainly an exciting prospect, but it’s still far out on the horizon, which means that suppliers are still facing, and will continue to face for some time, the same financial and operational problems that are borne of poor data quality.
At ENSEK, in the absence of blockchain, we’ve created an energy data reconciliation platform that’s able to fully piece back together the disparate pieces of information that suppliers work with, and to put that unified source to work in improving operational and financial performance.
Don’t wait for blockchain, get in touch and see how we can help you today.