Emerging technologies are driving digital transformation and causing industry disruption on a large scale, bringing major benefits to the energy sector. Boasting trustworthiness and transparency, blockchain is one such technology.
This potentially revolutionary innovation can help businesses to manage the growing complexities of the industry while also eliminating inefficiencies.
Blockchain, also known as a shared ledger, is a database that keeps a digital paper trail of all transactions. The ledger is not located in one place. Instead, it is stored on a chain of hundreds or even thousands of computers around the world. When a change is made to one record (block) in the ledger, this is reflected throughout the entire chain, along with a timestamp of the change.
This makes it impossible to alter one block retrospectively without altering all subsequent blocks – which would require consensus from the whole chain. This is why blockchain is attractive for any transactions which need to be completed in a secure way, and where transactions cannot be changed or re-allocated. Blockchain is best known as the backbone of cryptocurrency Bitcoin as payments between sender and receiver are secure. But its capabilities extend far beyond cryptocurrencies.
There are three key ways that digital technologies like blockchain can improve business. The first is the development of new business models, which is perhaps the strongest value-adding benefit. The second is disrupting existing processes. Outdated business practices can stunt growth, while reimagining and redefining them can have a transformative effect. The third major strength of blockchain is disintermediation. The technology can help to disintermediate existing value chains and offer ways of redefining them. This can give businesses direct access to information that otherwise would require a mediator.
In terms of new business models and innovative digital platforms enabled by blockchain, we have already witnessed the convergence of different industries within the marketplace. For example, oil companies have become actively interested in owning capacities for power generating and for the ‘last mile’ delivery of marketing services to both B2B and B2C channels. By doing so, they are attempting to play a role across the end-to-end hydrocarbon supply chain. It is beneficial for both them and their customers to provide services that improve business. Blockchain can become one of the key mechanisms for B2C channels to manage authentication, management, syndication and sharing of the datasets in a secure and trustworthy manner across various parties within the ecosystem.
Another example is the peer-to-peer trading of energies, where the consumer is someone who both consumes and produces. This means that they can be incentivized to generate renewable electricity and trade any surplus they might have as a result. If given the opportunity to create energy which offers individual value from which they themselves can benefit, today’s consumer will be willing to pay the premium price to join the service. However, they might not have the insight to do this efficiently. A scalable business model could develop around people who want to offer and transact within a marketplace.
Here, blockchain offers a trustworthy depository where consumers are able to place that marketplace dataset, including information on how much energy they produce, how much they are offering for sale, and to whom. All of that information remains unaltered in a blockchain-based depository which is secure to use for all parties within the network.
Another example of a new business model revolves around electric vehicles. There is a rapidly developing network of vehicle charging stations, with many large companies taking positions within this sphere. Blockchain could be central to such a service, enabling authorization, authentication and maintenance of that charging station dataset. Blockchain can become a foundational digital platform, capable of orchestrating the sharing of power across different channels, helping to create and scale new business models. In Europe, Wipro has worked with a client to create a marketplace for electric vehicle and hybrid charging points, developed on a blockchain-based solution.
The second key benefit of blockchain centres on reimagining, redefining and retooling existing business processes. There are numerous examples where blockchain can potentially disrupt the way that things are currently done, to make them more efficient and secure and less expensive to run and maintain.
This could benefit everything from procurement supply chain-related work processes to customer-facing or customer value-creating processes. Blockchain can give the data pipe the necessary level of security, resilience and performance so that it can be securely used by a hub of different participants within that process.
The third key advantage of blockchain within the energy market is disintermediation. In the energy industry – including power, oil, gas and renewables – each individual sector has a unique opportunity to take advantage of the technology. The electricity market has gone through a transition of regulation to deregulation.
This means that there has been a history of market participants who have a series of business interests where one feeds off the other. At every node of the ecosystem, there is always some value creation - but there are inefficiencies. The same applies to oil and gas, with movement and creation of hydrocarbon and molecules across the supply chain, involving parties in between.
Agents, brokers and providers support the existing supply chain, but they also accrue costs to the business over time. Blockchain has the potential of uniting all these roles and making everything much more efficient by cutting out the middle man - removing some of these intermediates from the process.
A classic example of this disintermediation is in trading cycles where there is a lot of manual handling between several parties. Blockchain can completely disrupt that whole process, creating a digital mechanism for businesses to carry out post-trade settlement, trade processing and even to manage trade finance.
There is currently a range of industry initiatives that are trying to achieve this. The same applies to small-scale energy businesses where the challenge is to create a digital marketplace, rather than a physical one where people are interacting using more traditional methods that involve a significant degree of inefficiency. Blockchain can have a huge positive impact on traditional supply chains that are currently reliant on ageing and inefficient processes.
Many businesses are experimenting with various new technologies, trying to determine which ones suit their businesses best, including blockchain. We can see various scalable production-grade deployments in the industry, most of which are in the more physical supply chain, mainly concentrating on container businesses and in some cases around remittances. These early use cases give an early indication of the vast potential of blockchain, which is now becoming a focus for more organisations looking at how they can strategically use new technologies to accelerate their businesses.
Therefore, interested parties are now coming together to create common definitions, data standards and solutions backed by blockchain, and participate in industry consortiums by putting in equity and investments.
Wipro recently became an affiliate of the Energy Web Foundation (EWF), a global nonprofit organisation focused on accelerating the adoption of blockchain technology in the energy sector. In collaboration with more than 50 affiliates from around the globe, EWF is building and scaling the Energy Web Chain, the first public, open-space blockchain platform tailor-made for the energy sector.
As we are still in the early stages of the blockchain revolution: the technology is at times misunderstood and viewed as an answer looking for a problem – similar to an aspirin looking for headaches.
This is why Wipro is investing in deployable business use cases for this promising technology, and in relevant solution accelerators. These are ready-to-use “software building blocks” for common business requirements which accelerate the development of customised software. This will drive adoption of blockchain, enabling organizations to focus on identifying the strategic value of blockchain to their business.
Wipro is an active contributor in various technology development and strategy forums. We have made selective investments in industry consortiums to promote standardization and development of secure and scalable platforms for digital market place, straight through processing, remittances etc. Our blockchain lab as a service is underpinned with industry solution frameworks and technology assets, so as to enable organizations to rapidly experiment and innovate on their digital transformation and acceleration efforts.
Blockchain offers huge possibilities for the energy industry and is set to play a key role in its digital transformation. We believe that 2018 will see the growth of blockchain as a viable platform, coupled with industry-wide efforts to create common standards that will enable more business to unlock the potential of the new technology.