When you hear “blockchain,” do you still think about Bitcoin and other cryptocurrencies? The association is understandable, since blockchain technology provides a foundation for the decentralized transaction structure that makes cryptocurrencies unique, but blockchain is also compelling many industries to experiment with different ways an open, distributed ledger could make business better, for instance, by making it simpler, more secure, more transparent, or more efficient.

In the energy sector, blockchain technology could have a dramatic effect on the ways energy markets transact business. According to Wood Mackenzie, formerly GTM Research, 2017 was a turning point in global recognition for blockchain’s potential applications in energy. The first blockchain-in-energy transaction took place in April 2016 in New York, when an individual sold excess renewable energy from his solar rooftop to another individual using a peer-to-peer consumer energy exchange, and, fast forward to today, Wood Mackenzie says there are more than 120 organizations involved in blockchain technology and at least 40 deployed projects, and there was more than $300 million invested in the blockchain-in-energy industry between Q2 2017 and Q1 2018.

In the 2016 example, blockchain enabled a model for peer-to-peer energy trading, in which consumers could leverage a decentralized blockchain network to sell excess power to each other rather than back to a utility provider. But beyond facilitating energy transactions between individuals, blockchain is also creating a shift in how energy markets transact business at scale, which could prove to be disruptive to global energy markets and processes. For instance, the current system is generally considered to be inefficient, but blockchain technology, when used to keep track of transactions between energy providers and between utilities and their customers, could drastically improve processes by eliminating the need for third parties like banks, enabling faster, more transparent, and more secure transactions.

Several major players in the oil and gas space are already looking to incorporate blockchain technology in their business processes, including companies like BP (British Petroleum), Petroteq Energy, and Royal Dutch Shell, among others. Petroteq, for instance, through its wholly owned subsidiary PetroBLOQ, is working to develop a blockchain-based platform designed to meet the specific supply-chain management needs of the oil and gas sector. Since the energy sector is heavily regulated, using blockchain technology for records management could allow players to easily share data within blocks with regulators to provide visibility and transparency and ensure compliance.

The use of blockchain in energy is expected to grow in coming years, thanks to the promise of reducing operating costs, improving supply-chain management, and increasing cybersecurity in one of the most targeted global sectors. The question now is: Will blockchain live up to the hype as pilot programs play out and as adoption ramps up? As with other industries leveraging this relatively new technology, the advantages inherent to blockchain suggest it will indeed be a game changer in energy, both on the grand scale of global energy transactions and on the smaller scale of peer-to-peer energy transactions.

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