Blockchain Redefines Energy & Digital Trust
The emergence of blockchain technology in 2008 significantly revolutionised the payment system in the financial sector. And as time went by, more and more industries began to realise that they too could reap the benefits of this technology. One of these industries, was energy.
For the longest time, in the energy sector, electricity could only be used at the point of generation, or sold back to the grid at a bare minimum price. Moreover, the increasing electricity retail prices and decreasing feed-in tariff rates had been posing a big threat to the interests of all the energy customers: prosumers, consumers; as well as the development of the micro-generation market.
There was less incentive for people to become prosumers thanks to the decreasing feed-in tariff rates, and the energy consumer was subjected to continuously paying more and more for their energy needs thanks to increasing retail energy prices.
A solution for all energy market participants
At SunContract, we believed that in order to fully benefit from micro-generation of distributed energy resources, P2P energy trading would be the ideal solution for all energy market participants.
We developed our P2P energy trading marketplace, such that energy prosumers are able to set a producer order for their excess generation, and in this way they can earn extra income by selling energy to consumers at a better rate which they themselves get to define.
On the other hand, consumers too have alternatives in selecting their source of energy from the same marketplace, and they too can select the price at which they are willing to buy their energy at.
Typically what happens on the SunContract marketplace is that producers are able to sell their surplus generation at a higher price than the regular (and ever decreasing) feed-in tariffs, while consumers lower their energy costs, buying energy at a lower rate than if they sourced it from retail energy suppliers.
But how can we establish trust without utilities?
A traditional solution in energy has been to use a central point of authority, also known as the energy utility, who acts as the trusted intermediary between energy consumers, electricity generating entities and other agencies involved in the process of power distribution.
At SunContract, we felt that this central management of utilities may not be the most efficient nor desirable way to go about energy management, as it introduces unnecessary intermediary costs to both consumers and prosumers, and requires energy customers to trust a third party to operate the system. We also felt that this centralised system has significant disadvantages due to a single point of failure, which can renders it more vulnerable to technical failures.
The primary purpose of blockchain technology is therefore to remove the need for such intermediaries and replace them with a distributed network of digital users who work in partnership to verify transactions and safeguard the integrity of the ledger. Contrary to centralised systems, every member of the blockchain network holds his own copy of the ledger or can access it in the open cloud. As a result, anyone in the network can have access to the historic log of the system transactions and verify their validity, enabling a high level of transparency. On the SunContract platform for example, users have access to their hourly transactional data, and they can verify the data provided on the platform using the blockchain explorer that is integrated into the platform.
Blockchain or distributed ledger technologies are enabling innovative energy companies like SunContract to digitise the energy sector, while also allowing them to redefine digital trust and make it possible for energy ecosystems to operate independently of intermediaries — forming a new, efficient paradigm of management that can significantly disrupt traditional forms of energy governance.
The disruptive nature lies on the potential of replacing top-down control with consensus and also in the underlying philosophy of distributed consensus and transparency – all to the benefit of all energy market participants, rather than monopolies.
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