New Report Predicts Massive Growth for the Blockchain Market in the Energy Sector
A new report by Business Wire, a Berkshire Hathaway company, predicts that blockchain technology will significantly impact the energy sector in the next five years.
“The Blockchain Market in the Energy Sector market is expected to register a CAGR [compound annual growth rate] of over 67.23 % during the forecast period 2019 – 2024. The blockchain technology, which has greatly benefitted the financial sector, finds applications in the energy sector predominantly for wholesale energy trading. However, the increasing number of use cases and efforts from the regional blockchain associations are promoting the adoption of the technology for various other applications like smart contracts and digital identification.”
The report provides examples of where energy and blockchain are intersecting. Tokyo Electric Power Company, for example, is a Japanese utility company which has invested in the Energy Web Foundation to “accelerate the commercial deployment of blockchain technology in the energy industry.”
Distributed ledger technology, as it relates to the energy sector currently, is “under testing phase” where the “technical and costs constraints” are being challenged. As it currently stands, “The presence of very few use cases that can emphasize on the scalability of the technology and the cost associated is the reason for the blockchain technology not being viewed as a cost-effective solution in the long run.” Moreover, scalability for high volume entities such as an energy company is the greatest long term issue constraining adoption.
There is, however, a clear short term impact that will come immediately from blockchain technology:
“The energy sector has certain limitations, including high administration and transmission costs mainly, due to the centralized functioning of the sector. As blockchain addresses these issues and decreases the scope for single point failures and increases transparency across the supply chain, the technology is expected to be a noteworthy digital transformation for the sector.”
The report also predicts a significant growth in the use of smart contracts. “The smart contract enables consumers to execute and dispatch various commodities automatically, once the trade is booked. By reducing the involvement of multiple intermediaries, Blockchain will decrease the time and costs involved in executing these transactions.”
As such, smart contracts are “anticipated to reduce the number of different administrative processes, which involves the deal of execution.” The report provides the example of ING and Socit Gnrale S.A. executing the first oil trade using a “prototype of the Blockchain platform, (Easy Trading Connect).” ING expects the use of blockchain technology will reduce their transaction time from 3 hours down to 25 minutes, which would result in a 30% cost savings per transaction.
The field is highly competitive as “few of the major players currently dominate the market.” It will be interesting to see how the market ultimately plays out at the end of the five years; and especially how integrated blockchain technology is in the energy sector.