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Harnessing Blockchain Can Help Kuwait Build Robust Energy Infrastructure For The Future: Booz Allen Hamilton

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Blockchain has the potential to facilitate the development of new renewable energy markets and play a game-changing role in helping the GCC energy sector transition to a more secure, resilient, cost-effective, and low-carbon grid, according to Booz Allen Hamilton.

Since the development of Bitcoin in 2008, the interest in blockchain technology has exponentially expanded into many different industries, with its global market predicted to grow to USD 2.3 billion by 2021. However, despite the impact blockchain may have on different industries and its clear potential to disintermediate and shorten entire value chains, the technology is still young. Organizations are now starting to explore its application to traditional business models and processes, and players in the energy space, including start-ups and large-scale utilities, are starting to engage with this technology to explore its real potential.

Dr. Adham Sleiman, Vice President at Booz Allen Hamilton, MENA, said: “Many digital services are already possible today without blockchain, and energy players should avoid adopting this technology for the sake of it or for fear of missing out. Early adopters should conduct a holistic assessment to understand their own role in the energy value chain, identify the business need and define a clear direction of where and with what economic benefits blockchain-based applications could be used.”

Renewable energy is a good candidate for blockchain use since it operates in a system of economic and financial transactions (electricity and fares), currently operated by a central authority (utility). This is gradually becoming more decentralized thanks to the role that distributed energy resources are playing.

In this context, energy players are increasing their efforts to develop blockchain-based applications and processes in order to solve some of today’s challenges, while also integrating renewable energy in traditional grids.

With electricity demand in the GCC expected to continue growing rapidly, renewable energy has become a key asset in government strategies to diversify the domestic energy mix. By 2030, the GCC aims to install 80 gigawatt (GW) of renewable energy capacity across the six member states, constituting more than fifty percent of the region’s existing conventional capacity.

Booz Allen Hamilton has outlined three specific use cases in which blockchain can facilitate the integration of renewable energy in electricity grids across the GCC. These include: Enabling peer-to-peer (P2P) Energy Trading; Tracking Renewable Energy Certificates; and Articulating Smart Contracts.

Enabling P2P Energy Trading

According to the International Energy Agency, by 2040, one billion households and 11 billion smart appliances could actively participate in interconnected electricity systems. Transactive energy, enabled by distributed energy resources is the major disruptive change that the electricity industry may face in the coming 10 years. Several pilots have already illustrated the ability of a blockchain ecosystem to monitor flows of both value and energy as multiple parties transact.

Tracking Renewable Energy Certificates

It is impossible to distinguish electricity generated from renewable energy from electricity produced by other means. Therefore, it is important for utilities to make use of tracking tools such as renewable energy certificates (REC) that track renewables as they flow into the grid. Just as blockchain technology enables users to transact money or data, blockchain tokens can be submitted to the market as units of energy in the same way as RECs, becoming a tool to validate the authenticity of genuine green energy.

Articulating Smart Contracts

Smart contracts are self-executing programs that respond to a pre-defined trigger event. Once the action is done, it is added to the blockchain as a permanent record. Successful pilots based on blockchain have been tested in the operation of electric vehicles charging stations, enabling a fully automated, worldwide authenticated, charging and billing solution with no middleman involved.

Dr. Adham Sleiman, Vice President at Booz Allen Hamilton, MENA, added: “Looking ahead, scalability is the biggest challenge for industry-wide applications based on blockchain. Therefore, planning and investing in blockchain proof of concept is the only reliable way to understand the effectiveness of the technology in a real business scenario. Additionally, the blockchain ecosystem is especially active within the small and medium enterprise (SME) sphere, with successful use cases emerging from a number of SMEs set up less than two years ago. In such a young industry, finding the right partner to develop and implement blockchain-based applications is both risky and challenging. Therefore, utilities should be willing to explore different procurement strategies and approaches and should be open to external expert advice should they wish to embark on this mission.”

Utilities should expect and plan for technical challenges and should be willing to invest in risk mitigation before reaching the production stage. They must gain a better understanding of the customer experience, risk mitigation options, unexpected technical challenges, and different delivery models, including the blockchain-as-a-service model. Leveraging the lessons learned from these experiences will be key in enabling the success of future full-scale deployments.

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