Three Futures for Energy Blockchain

A Burst Blockchain Bubble, or the First Sign of Maturity?

The rise and fall of blockchain hype has more or less paralleled the rise and fall of major cryptocurrency valuations—virtually nonexistent in 2015, growth toward a meteoric peak in late 2017, and a crash back to reality in early 2018. 

Investors have (largely) curbed their drive to throw dollars at companies with nothing but a white paper to their name, but interest in the technology hasn't gone away. The flood may have subsided, but blockchain innovators in energy continue to produce a steady stream of thought leadership, and the occasional update on trials and pilot projects.

In this period of relative stability, questions about the future of blockchain in energy are increasingly common. Will it transform everything from wholesale power markets to the smart home, or will it fade into obscurity as a failed technology that never delivered on its promises? There are three broad scenarios for what blockchain could look like in 10 years' time.

Scenario 1: Burn Hot; Die Quickly

Despite an early infusion of capital, blockchain and its distributed ledger technology (DLT) cousins are unable to support the complexity of the energy sector. About half of the 200 energy blockchain companies active in 2018 fail to deliver a viable proof of concept. Some executives are jailed for fraud, stoking industrywide suspicion and pessimism that atrophies investment into the technologies.

Surviving companies’ proprietary development results in a profusion of platforms and services that cannot interact with one another. While some blockchain-based products find limited success in markets with light regulation, none gain elsewhere.

Scenario 2: Quietly Fold into Operations

A few pilot projects are successful and generate interest from established energy players. High cost, higher risk use cases like transactive energy and e-mobility receive relatively little attention, and the consensus is that blockchain-based platforms overcomplicate service delivery.

Blockchain settles into niche, back-office processes such as wholesale energy trading and supply chain management, where it improves traceability and auditability of energy products moving along the energy value chain. Platforms are almost exclusively built around private and permissioned blockchains with a minimal number of interacting stakeholders. Changes are invisible from a customer perspective, and conferences dedicated to blockchain are a thing of the past.

Scenario 3: Blockchain Supports the Energy Cloud Transformation

Energy blockchain innovators capitalize on the momentum and capital they gained in 2016 and 2017 and many companies deliver successful pilots. These projects prove blockchain can support sustainable business models while attracting customers with seamless automation and service delivery. Low transaction costs, together with device-to-device transactions and automation, convert many energy services to viable revenue streams.

After an initial period of uncertainty, the industry consolidates around a few open platforms suited for energy and enterprise use cases. Service providers develop proprietary applications (decentralized applications, or dApps) within the ecosystem for a consolidated customer base. The common framework supports the development of solutions that integrate transactive energy, EV charging, home security, and a growing number of energy-related services—the Energy Cloud.

All Three Scenarios Are Plausible

Any of these scenarios could happen, and there are other potential outcomes. The third scenario, while it holds the greatest promise for new services, business models, and revenue streams, also faces the greatest barriers. True transformation requires DLT technology to scale rapidly and cleanly, and requires companies to give up the idea of proprietary platforms in favor of proprietary applications and services. Though there are promising signs from the field of energy blockchain contenders, scenarios one and two remain real possibilities.