To begin with, the US Congressional Research Service released a report on August 9th, titled “Bitcoin, Blockchain, and the Energy Sector”, detail the potential advantages and disadvantages of deploying a blockchain-based ledger system to control the transactions and sales of energy. That report has stated that while there may be a lot of advantages to tracking an energy sector with a blockchain system, such a system could also impose legal and cybersecurity issues.
Advantages and disadvantages of blockchain
So, that report contains a survey conducted by Electric Power Research Institute which states that 77% of respondents stated that the energy sector lacks appropriate standards for implementing a solution like this. This is due to the complexity of energy regulation within the United States.
Traditionally the federal government, the Department of Energy, only regulates sales and transmission of energy between states. Energy sales conducted between states are classified as wholesale. It is up to individual states and local governments to regulate sales and transmission of power within the states themselves. Inner-state sales are typically classified as a retail sale and falls outside of federal regulation.
Difficult moments of blockchain in the energy sector
Next, there is currently a lack of clear legislation that could define and regulate these types of sales. Clear regulation would be needed before a blockchain-based system could be implemented within the United States.
Furthermore, state legislation could prove to be problematic. California, for instance, has much harsher regulations concerning the creation and distribution of energy compared to other states. A blockchain-based system could muddy those waters and make it more difficult for California to enforce these regulations. The DOE also has programs, like Energy Star ratings, that are currently voluntary. Such voluntary programs also make tracking such data in a universal ledger much more complicated.
Nonetheless, a blockchain technology that tracks and controls the sales of energy could make sales and transparency easier for consumers. In many states, consumers have the option of choosing their energy providers. Customers may choose energy providers based on price or ethics. For instance, an electricity customer may choose to use a provider that generates power through sustainable methods rather than a provider that uses gas or coal. By using a blockchain-based ledger, customers can guarantee their prices, costs as they relate to other providers, and energy generation methods.
So, understanding the complexities of such a system, the Department of Energy has recently awarded a grant to four different organizations for further research. That grant totaled more than $1.05 million. Those four organizations will be tasked with creating a commercial block-chain based system to track energy transmission and sales.