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Blockchain Technology Expected to Disrupt the Electrical Grid

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By: Kent Bernhard, Contributor

Austria and France, Britain and Brooklyn — utilities and startups on different continents are testing ways blockchain technology could usher in an altered future for electricity production and distribution.

“There are a number of utilities all over the world that are looking at blockchain,” said Dan Nossa, an attorney with Steptoe & Johnson’s Houston office who has been studying the technology that underpins the cryptocurrency bitcoin and its potential impacts on industries from finance, to real estate to energy.

Blockchain technology is a cryptographically secure, shared record of transactions, updated by a network of computers instead of a central authority. Every transaction within the system is secure, timestamped and linked with previous and subsequent transactions that can be seen by anyone with access to a given blockchain.

The technology has the potential to be ideal when it comes to simplifying complicated transactions and helping to digitally track physical assets, such as electricity, as they make their way from point A to point B. That potential makes the technology very attractive to large utilities and scrappy energy startups alike, because blockchain can be used to monitor energy consumption and trading alike.

In Brooklyn, startup LO3 Technology has been running a test using blockchain to track sales of solar energy by individuals to other individuals. Nasdaq is involved with Nevada startup Linq in using the blockchain to track sales of electricity back into the grid by individuals with solar panels. Meanwhile, Austria’s largest utility Wien Energie is testing blockchain technology for trading electricity between it and other utilities. Electron, a startup in Britain, is developing a blockchain platform to allow consumers to easily switch from one power provider to another.

There has been some speculation that blockchain technology could ultimately be used to help eliminate or curtail the role of utilities in the energy market. Nossa doesn’t see that as likely.

“I think they’ll probably maintain their roles,” he said. “I think blockchain can make the incumbents that much more efficient.”

The technology can be used in conjunction with Internet of Things technology to better measure electricity usage and collect payments. It could also help consumers see where electricity is coming from and whether, for instance, it is from a renewable source.

“It could be extremely beneficial to all types of energy management systems,” Nossa said.

Blockchain technology could be used by large electricity customers to help trade energy between them. A factory could sell or trade its unused power to another factory that needs it. That, according to a Harvard Business Review article, could yield big efficiency benefits to utilities.

In that article, James Basden and Michael Cottrell argue that, though blockchain technology could have a disruptive effect on utilities, it’s likely that the utilities themselves will be the ones doing the disrupting. They write:

“While there’s always room for startups to move in and disrupt this industry, established utilities are best placed to evaluate and make strategic bets on blockchain technology’s potential applications. If they can seize the moment, centralized incumbents may turn out to be the true disruptors, ushering in a new era of decentralized power.”

To learn how blockchain technology can affect your business, contact Daniel Nossa.

Steptoe & Johnson PLLC is a U.S. law firm with core strengths in energy, labor and employment, litigation and transactional law, serving clients from its 13 strategic locations across the nation. In 2013, Steptoe & Johnson celebrated 100 years of helping clients reach their goals.

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