How can blockchain save energy? Here are three possible ways

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Blockchain is generating a lot of buzz as a promising system to verify and track peer-to-peer transactions in the energy sector. It could have multiple applications although there is still debate about which, if any, will work well. What’s clear, however, is that companies are already exploring uses of blockchain to save energy. Let me tell you about three applications that show promise.

Companies including Walmart and Maersk already use blockchain to track products along a supply chain. The technology records every transfer and financial exchange. This reduces processing and administrative costs (which can add up to 20 percent of overall shipping costs) as well as product spoilage.

By matching shippers with carriers, it may also increase equipment use and decrease fuel consumption. According to the American Trucking Association, truckers in the United States drive more than 29 billion miles a year with partial or empty truckloads.

A second blockchain application could spur the adoption of electric vehicles, which use considerably less energy than most gas-fueled vehicles. EVs need recharging to go long distances, and new software apps enable individuals to rent out their private charging stations. These apps use blockchain technology to record such peer-to-peer transactions. EV owners can use the rent revenue to cover the cost of their charging stations and cars, thus enabling more people to buy EVs and use less energy.

In a third application, energy service companies (ESCOs) are exploring ways to use blockchain to simplify the bookkeeping associated with energy performance contracts (EPCs). These companies help organizations such as schools, hospitals and office buildings save energy by taking over many energy management responsibilities. They make investments and implement energy measures and, in exchange, get a share of the energy cost savings. EPCs are a cost-effective way for organizations that don’t have the necessary capital or technical expertise to implement their own energy savings measures to reduce their energy costs.

One challenge with EPCs is that they involve multiple parties — customers, ESCOs, utilities and financial institutions — each of which keeps its own records of energy costs, savings and expenses. As you can imagine, with so many sets of books, there is the potential for errors and disagreements. The contracts also can be administratively expensive. Blockchain brings transparency, agreement and trust through the shared ledger. ESCOs are exploring blockchains with smart contract features that integrate the rules for determining energy savings and the conditions for authorizing payments and penalties. These contracts automatically will release payments after the contract’s conditions are met.

Such automation can reduce transaction costs, enabling it to serve smaller organizations — those not previously targeted because the savings were insufficient to cover the costs. The more facilities ESCOs engage, the more projects they will implement and the more energy savings they will achieve.

These three blockchain applications all address challenges in existing markets and have the potential to accelerate market growth. They may not be the most significant energy-saving applications, but because they’re already being piloted, we’ll soon see results. We’ll find out whether the buzz about blockchain is just hype, or if this technology can really deliver new levels of efficiency.

Andrew Whitlock and Kelly Rohrer contributed to this post.

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