How Can the Energy Industry Benefit from Blockchain?

Blockchain is usually perceived as only the building block of the much-hyped virtual currencies. As such, it wouldn’t seem like there is much technology can do for the energy industry. After all, what do cryptocurrencies have to do with the process of generating and distributing electrical power?

But from an insider’s look, blockchain has the potential to spur growth in the energy sector through its transformative benefits. More so, the energy industry is constantly changing – as seen from the entry of new innovations such as smart metering, electric vehicles, and renewable sources of energy. As such, blockchain technology is a viable solution to help improve efficiency in the industry. 

Ways Blockchain can be used in the Energy Industry.

Blockchain technology promotes transparency and immutability of stored data through its decentralized nature as a ledger system. These characteristics can be beneficial to the complex network of participants in the energy distribution chain, who often suffer from siloed infrastructures and unexpected inefficiencies. 

Here is a detailed look into six major benefits blockchain brings in to the energy industry; 

i) Improved Data Management 

Being a ledger system, blockchain can serve as a database providing users with secure and real-time energy usage data. Other important energy statistics, such as market prices, marginal costs, and fuel prices, can also be stored in the system to allow users to monitor how much they spend on energy. 

Additionally, the blockchain-based database system makes it impossible to corrupt the stored data, which helps enhance transparency. This saves energy providers as well as customers the financial costs associated with accidental clerical errors and intentional data manipulation.

ii) Peer-to-peer Energy Trading 

Over the last few years, energy production has shifted from large, centralized power plants to smaller power generation sources such as windmills and solar farms. This is especially true in “distributed energy grid” systems where electricity is generated and stored by small power plants that are connected to the larger electric grid. 

The integration of blockchain into the system allows the smaller farms to sell excess power to other consumers, decentralizing the energy distribution network. Essentially, the technology creates a peer-to-peer energy market, reducing the role of wholesale and central authorities entities. This helps promote competitive market prices.

iii)Enhance Commodity Trading 

Commodity trading in the energy sector involves massive ledger systems that keep account of the commodity prices at specific moments. Maintaining, securing, and updating these records requires significant resources in terms of money and time, which could otherwise be used to improve other core areas of the trading cycle. 

Applying blockchain technology to commodity trading makes it easier and more affordable to securely record trading data as compared to traditional ledger systems.

iv) Tokenizing Energy

Blockchain can be used to create tokens for use within the energy industry. One of the uses of these tokens is to facilitate a variety of energy market transactions, such as paying bills directly to the provider without involving an intermediary.

In addition to being a medium of payment, the tokens can also serve as an incentive. For instance, by tokenizing the energy grid, consumers can earn tokens for reducing energy wastage in their households. 

Similarly, a tokenized energy grid means that energy is expended depending on household needs. This not only helps with the reduction of energy wastage but also cuts down on utility bills since consumers pay for the exact amount of power they need.

v) Propel Clean Energy as a Mainstream Option 

As governments and environmental activists advocate for clean energy, blockchain can be used to promote the use of renewable energy. This can be achieved by creating a blockchain-based smart grid that allows consumers to compare and choose their energy providers. The transparency in energy choices facilitates the integration of clean energy in the market, where renewables could become consumers’ favorite choice due to their affordability. 

The State of Blockchain in the Energy Industry

Currently, blockchain hasn’t fully permeated the energy industry despite its promising benefits. This is not to say that there aren’t any blockchain-based projects carving a niche for themselves in the vast energy market. In fact, some of them have even partnered with their respective governments to improve service delivery.

However, a good number of blockchain projects are still under development and are yet to materialize their solutions. Their delayed success can be attributed to the following challenges:

  • Conservative Industry Players

Success in an older industry like energy demands solid working experience and knowledge, considering that it’s intertwined with other complex sectors such as law and finance. Therefore, blockchain entrepreneurs need an insider’s insight on how blockchain can be beneficial to the energy industry.

Unfortunately, those with vast working experience and market knowledge of the energy industry aren’t inclined to blockchain solutions. They prefer old hat solutions which have served them fairly well for long. Probably, as the crypto space matures, key industry players in the energy sector will warm up to blockchain solutions. In the meantime, educating the stakeholders on the benefits of blockchain might be helpful.

  • Legacy Gatekeepers 

The integration of blockchain into the energy industry will result in a decentralized market. While such a marketplace is beneficial to the consumers, it threatens the existence of major banks and businesses who, for years, have benefited as intermediaries. Even without taking out their role as the middleman, their control will be diluted once blockchain enters the industry. As such, the industry giants are committed to slowing down the integration of blockchain into the energy industry so as to retain their control over the market. 

  • Strict Government Regulations 

Blockchain has been met with the same type of austerity measures that are imposed on virtual currencies. Likewise, the global energy market, being one of the highly regulated industries in the world, hasn’t been easy on blockchain technology either. It gets even worse knowing that the industry is run by conservative stakeholders who are skeptical about blockchain technology. As such, designing a blockchain solution that can find favor among industry players and energy-sector regulators is quite difficult. 


Blockchain is a relatively new technology whose awareness is limited to the tech-savvy population. So, the idea of this technology finding use outside the cryptocurrency market is still catching on. In an older industry such as the energy sector, the technology will certainly take time before industry players see it as a solution to existing problems. Hopefully, as aggressive blockchain developers continue to design solutions for the industry, their solutions might serve as the entry point of blockchain into the energy industry.