Various kinds of technology have emerged in recent times seeking to transform operations in the energy sector.
Some of these include smart metering and rooftop solar installation. The most recent form of emerging technology is the blockchain, which presents itself as the next big thing to revolutionize operations of the energy sector through system interoperability and smart contracts.
With the complexities surrounding operations within the energy sector, and the fast-paced growth of commercialization, transportation, and industrialization, the sector needs structural and operational amends via technology.
In 2019, Deloitte made a forecast blockchain will serve as the central processing unit of the energy sector in the coming years. Blockchain will also serve as a network that would guarantee the independence of operations and the transfer of data from one end to the other without any interferences from third parties. The system by default will eliminate the concept of third-party operations.
What is blockchain technology?
In simple terms, it is an autonomous network designed for disseminating and storing information in a more secure way. Blockchain technology eliminates third-party engagements during operations.
Benefits of adopting blockchain technology
Transparency: Every set of data that is entered into the blockchain network is recorded sequentially, thus, making it easily accessible to users.
Decentralization: With blockchain technology, the ability to control the system is not held by a central body, rather, it is distributed across the various nodes on the network. This democratizes accessibility and automatically eliminates third-party influence. Every node on the network has the liberty to operate freely without interference.
Data security: Blockchain technology provides cybersecurity frameworks, assurance services, and best practices against fraud. Before a transaction takes place, parties to the transaction are allowed to verify it, following which it is processed to the next stage. Additionally, data is cryptographically secured in blockchain technology.
Immutability of Information: Once data is entered into the system, it does not give room for further manipulation, modification, or deletion. It secures the data in its original form.
How blockchain seeks to revolutionize the energy sector operations.
Blockchain powered-smart contracts: The basis for any kind of commercial relationship is a contract. A contract exists when two or more parties come together to make an agreement by word of mouth or in a written form, which is enforceable by law.
Invalid commercial contracts, one party called the offeror offers to render a service to another party called the offeree, which is accepted with a reasonable amount of consideration.
The inherent lack of trust between the offeror and offeree introduces a significant complexity in commercial contracts, which blockchain technology seeks to address through the introduction of Blockchain-powered smart contracts. Blockchain-powered smart contracts arrange existing contract terms between the parties in a more secure way by capturing the terms of the contract in real-time.
This is mutually agreed upon to avoid circumstances of delayed payments, disputes, and complicated reconciliations, thereby significantly reducing transaction costs.
This is the transactional aspect of the E&R chain, which requires digital ledger technology to amplify its operations. Digital ledger technology provides an independent, reliable, and secured space for recording transactions without the influence of third parties as all interested parties to the transaction using the same platform.
The interesting part of this technology is that the terms of the contract can be represented with executable computer codes that validate the contracts without human interventions.
Global energy supply
Before gasoline and gasoil are refined into usable states, the various processes involved from extraction to conversion and transportation to the end-user are disjointed, due to a deficit in technological advancement within the information support system.
This makes it difficult for business owners and stakeholders to clearly understand what happens and further worsens the intricacy of their activities.
With these existing lacunas, Deloitte has seized the opportunity to develop a platform (which is at its developing stages) to help bridge these systematic gaps. The feasibility of this platform requires a digital ledger technology to complement it, which will help with issues of transparency, real-time information, and tampered proof reliability to work.
Regulatory reporting and compliance
Regulatory bodies within the energy sector are making demands from industry players to provide them with data and information for inspection to enable them to conduct their due diligence and check for compliance with their regulations.
After the collection of these data for inspection, the cleanup process of the data becomes difficult and hectic. Even worse, sensitive information could be exposed to the wrong persons, putting the operations of the company at risk.
Blockchain technology is well-positioned to counter these challenges by allowing sector regulators to access information at the source point. This technology also grants companies the exclusive right to have control of what information is put out and who should have access to it.
Blockchain-powered smart contracts
A contract exists when two or more parties come into an agreement either by word of mouth or in a written form that is enforceable by law. Invalidcommercial contracts, one party called the offeror offers to render a service to another party called the offeree, which is accepted with a reasonable amount of consideration.
The inherent lack of trust between the offeror and offeree introduces a significant complexity in commercial contracts, which blockchain technology seeks to address through the introduction of Blockchain-powered smart contracts.
Blockchain-powered smart contracts arrange existing contract terms between the parties in a more secure way by capturing the terms of the contract in real-time. This is mutually agreed upon to avoid circumstances of delayed payments, disputes, and complicated reconciliations, thereby significantly reducing transaction costs.
Blockchain technology is a breakthrough mechanism that can assist in eliminating costly intermediaries, whiles facilitating unprecedented levels of transparency, coordination, and data sharing across the industry – at the same time, granting companies the exclusive right to ownership of information thereby giving them a competitive advantage in the market.
However, for the energy sector to fully capture the benefits of this emerging technology, concerted efforts from governments across the world, private investment companies, and other stakeholders are needed.
Ibrahim Adle Muhammad
Research Intern, Institute for Energy Security (IES)
Host, Market Place on Joy News
Linked In: https://www.linkedin.com/in/charles-ayitey-79984883/