RESEARCH REPORT Executive Summary: Energy Blockchain … · 2019. 8. 21. · Executive Summary: Energy Blockchain Applications Overview. Global Forecasts for Supply Chain, Generation,

Executive Summary: Energy Blockchain Applications Overview Global Forecasts for Supply Chain, Generation, Wholesale, Distribution, Retail, and Behind-the-Meter Market Segments for World Markets

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Published 3Q 2019 Johnathon de Villier Research Analyst Stuart Ravens Principal Research Analyst

RESEARCH REPORT

https://navigantresearch.com/reports/energy-blockchain-applications-overview

Energy Blockchain Applications Overview

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EXECUTIVE SUMMARY

Introduction

Driven by ongoing trends toward decentralization, democratization, and digitization, blockchain and distributed ledger technologies are an increasingly common feature of new solutions and service offerings in the energy and power industries. Use cases have been proposed across the physical commodities supply chain, in wholesale and retail markets, and in emerging distribution markets. These use cases seek to activate individual households or behind-the-meter (BTM) devices as market participants.

More than 215 energy blockchain vendors have entered the market, and at least 228 pilots, proofs of concept, and demonstration projects are underway to test the benefits and limitations of blockchain technology. These projects are funded by $700 million from initial coin offerings and traditional investments. The wave of financial speculation that fueled an initial surge in blockchain-related innovation in 2016 and 2017 has largely passed; the subsequent shakedown has seen more than 30 companies fail. The remaining companies are the vendors focused on applications that can deliver real value to the energy industry.

Incumbents and stakeholders in the energy and power industries are faced with the challenge of understanding how blockchain technology will or will not influence their businesses and whether or not they should get involved. Strategic planning around blockchain—and future innovations that build on blockchain’s successes—starts with a clear understanding of the problem that blockchain architectures are designed to solve, the features and limitations of blockchain, and the drivers and barriers affecting blockchain development.

This Navigant Research report examines the key characteristics of blockchain architectures, from the underlying hardware, protocols, and consensus algorithms to the applications that deliver services to the end user. This report also discusses the limitations of blockchain technology for energy industry applications.

Outlook

Despite strong momentum and investor interest, blockchain remains an emerging technology that is largely (but not completely) unproven in commercial deployments. Commercialization of blockchain-based solutions are expected to be limited to existing processes and services in the energy industry, from retail electricity supply to supporting the issuance, trading, and retirement of certificates of origin. These use cases emphasize the fact that blockchain’s effect on energy is anticipated to be a transformative process rather than a disruptive event.



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The majority of energy blockchain projects are pilots or demonstrations. Commercialization is hampered by uncertainty surrounding the technical capabilities of blockchain solutions and especially by the technology’s lack of compatibility with many regulatory environments around the world. Europe and North America are the current gravitational centers of blockchain technology development, but the fastest pathways to commercialization for most applications lie elsewhere.

Many countries in Asia Pacific and Latin America lack the high barriers of entry caused by aging legacy infrastructure and regulatory systems for grid management that evolved over a century of centralized, one-way electricity delivery. Other countries have high electricity prices and widespread availability of distributed energy resources, which create ripe conditions for an alternative solution like blockchain-based transactive energy (TE). The penetration of smart meters and infrastructure necessary for these models, however, is currently lacking.

Blockchain has been promoted as a mechanism in broadening the potential investor pool for distributed energy resources and for renewable electricity generation at the utility-scale. Several companies are exploring the potential of blockchain applications to stimulate energy access and electrification efforts that are difficult to finance through existing channels. However, the legal implications of blockchain-based financing mechanisms are far from clear.

Energy Blockchain Applications Market Forecast

This report forecasts revenue from blockchain applications across six market segments in the energy and power industries: supply chain, generation applications, wholesale markets, retail markets, distribution markets, and BTM applications. The report provides examples of leading use cases in each market segment, along with key barriers and drivers for each. It also provides an overview of the developing energy blockchain market across five world regions: North America, Europe, Asia Pacific, Latin America, and Middle East & Africa.



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Navigant Research expects energy blockchain applications to generate $19 billion in cumulative revenue over the next decade, reaching an annual market size of $7.7 billion in 2028, at a compound annual growth rate (CAGR) of 66.9%. Europe and North America are projected to be the leading markets for most of the forecast, but a rapid growth rate of 83.3% in Asia Pacific propels the region to the front in 2027. Among market segments, retail and distribution applications for blockchain technology are anticipated to each generate more than $1.4 billion in annual revenue by 2028, with CAGRs of 61.3% and 67.8%, respectively.

Chart 1-1. Revenue from Energy Blockchain Applications by Region, World Markets: 2019-2028

(Source: Navigant Research)

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$1,000

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2019 2020 2021 2022 2023 2024 2025 2026 2027 2028

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TABLE OF CONTENTS

...................................................................................................................................................... 1

Executive Summary .................................................................................................................................... 1

Introduction .................................................................................................................................... 1

Outlook .......................................................................................................................................... 1

Energy Blockchain Applications Market Forecast ......................................................................... 2

...................................................................................................................................................... 4

Features and Limitations of Blockchain Technology ............................................................................. 4

Blockchain Automates the Role of Third Parties ........................................................................... 4

2.1.1 Consensus Algorithms Are a Key Component of Blockchain Architectures ........................... 5

2.1.2 A Blockchain Data Structure Creates Cryptographic Links Between Data ............................. 7

Blockchain-Based Solutions Have Four Components .................................................................. 9

2.2.1 Hardware ............................................................................................................................... 10

2.2.2 Protocols ................................................................................................................................ 11

2.2.3 Platforms ............................................................................................................................... 12

2.2.4 Applications ........................................................................................................................... 13

.................................................................................................................................................... 14

The Role of Blockchain in the Energy Value Chain ............................................................................... 14

Blockchain Applications in the Energy Commodities Supply Chain ........................................... 15

Power Generation Applications for Blockchain Technology ....................................................... 17

3.2.1 Generation Asset Financing .................................................................................................. 18

3.2.2 Generation Asset Management ............................................................................................. 20

Wholesale Market Applications for Blockchain Technology ....................................................... 21



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3.3.1 Wholesale Power Trading and Settlement ............................................................................ 22

3.3.2 Certificates of Origin .............................................................................................................. 23

Retail Market Applications for Blockchain Technology ............................................................... 25

3.4.1 Blockchain-Based Solutions Drive Down the Cost of Supplying Power ............................... 25

Blockchain Applications in Emerging Distribution-Level Markets ............................................... 26

3.5.1 TE and Local Energy Markets ............................................................................................... 26

BTM Applications of Blockchain Technology .............................................................................. 28

3.6.1 EV Charging and Grid Integration ......................................................................................... 29

3.6.2 Energy Management Systems and Home Automation ......................................................... 31

.................................................................................................................................................... 33

Key Industry Players ................................................................................................................................. 33

EWF ............................................................................................................................................ 33

Hyperledger ................................................................................................................................. 33

Energy Blockchain Consortium ................................................................................................... 34

PONTON ..................................................................................................................................... 34

Guardtime .................................................................................................................................... 35

Xage Security .............................................................................................................................. 35

Siemens AG ................................................................................................................................ 36

sonnen ......................................................................................................................................... 36

TenneT ........................................................................................................................................ 37

Power Ledger .............................................................................................................................. 38

LO3 Energy ................................................................................................................................. 38

Verv ............................................................................................................................................. 38

Filament ....................................................................................................................................... 39

Electron ....................................................................................................................................... 39



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WePower ..................................................................................................................................... 40

Drift .............................................................................................................................................. 40

EtainPower .................................................................................................................................. 41

IBM .............................................................................................................................................. 42

GridPlus ....................................................................................................................................... 43

.................................................................................................................................................... 44

Global Market Forecasts .......................................................................................................................... 44

Global Markets for Energy Blockchain Applications by Region .................................................. 45

Global Markets for Energy Blockchain Applications by Segment ............................................... 46

North America ............................................................................................................................. 48

Europe ......................................................................................................................................... 49

Asia Pacific .................................................................................................................................. 51

Latin America .............................................................................................................................. 53

Middle East & Africa .................................................................................................................... 55

.................................................................................................................................................... 57

Conclusions and Recommendations ...................................................................................................... 57

Blockchain and Distributed Ledgers Have Real Limitations ....................................................... 57

6.1.1 Blockchain Cannot Verify Data Accuracy .............................................................................. 57

6.1.2 Not All Architectures Can Support All Applications ............................................................... 58

6.1.3 Blockchain Is Not a Replacement for Traditional Databases ................................................ 59

6.1.4 Blockchain Architectures Are Vulnerable to Cyber Attacks .................................................. 59

6.1.5 Energy Blockchain Standards Are Necessary, Expected to Take Time ............................... 60

Commit to Solutions, Not to Blockchain ...................................................................................... 61

Blockchain-Enabled Hardware Is a Massive Market Opportunity ............................................... 61

Regulations Are a Key Constraint on Growth ............................................................................. 62



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Efficiency Gains from Blockchain to Force Innovation from Incumbents .................................... 63

Customer Acquisition Is a Central Challenge for Blockchain Companies .................................. 64

.................................................................................................................................................... 65

Acronym and Abbreviation List ............................................................................................................... 65

.................................................................................................................................................... 66

Table of Contents ...................................................................................................................................... 66

.................................................................................................................................................... 70

Table of Charts and Figures..................................................................................................................... 70

.................................................................................................................................................. 71

Scope of Study .......................................................................................................................................... 71

Sources and Methodology ....................................................................................................................... 71

Notes .......................................................................................................................................................... 72



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TABLE OF CHARTS AND FIGURES

Chart 1-1. Revenue from Energy Blockchain Applications by Region, World Markets: 2019-2028 ....... 3

Chart 5-1. Revenue from Blockchain Applications by Region, World Markets: 2019-2028 ................... 45

Chart 5-2. Revenue from Blockchain Applications by Segment, World Markets: 2019-2028 ................ 47

Chart 5-3. Revenue from Blockchain Applications by Segment, North America: 2019-2028 ................ 48

Chart 5-4. Revenue from Blockchain Applications by Segment, Europe: 2019-2028 ............................ 49

Chart 5-5. Revenue from Blockchain Applications by Segment, Asia Pacific: 2019-2028 ..................... 51

Chart 5-6. Revenue from Blockchain Applications by Segment, Latin America: 2019-2028 ................. 53

Chart 5-7. Revenue from Blockchain Applications by Segment, Middle East & Africa: 2019-2028 ...... 55

Figure 2-1. Simplified Models for Centralized vs. Decentralized Information Management ...................... 5

Figure 2-2. A Blockchain Data Structure ................................................................................................... 7

Figure 2-3. The Blockchain Architecture Pyramid ..................................................................................... 9

Figure 2-4. Key Revenue Streams and Components of Blockchain-Based Solutions ............................ 12

Figure 2-5. Blockchain’s Role in a Decentralized Electricity System ....................................................... 13

Figure 3-1. Energy Blockchain Use Cases Across the Energy and Power Industries ............................ 15

Table 2-1. Sample Inputs to a Common Hashing Function and Their Outputs ........................................ 8



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SCOPE OF STUDY

This report forecasts revenue from blockchain applications across six market segments in the energy and power industries: supply chain, generation applications, wholesale markets, retail markets, distribution markets, and BTM applications. It provides examples of leading use cases in each market segment along with key barriers and drivers for each. It also provides an overview of the developing energy blockchain market across five world regions: North America, Europe, Asia Pacific, Latin America, and the Middle East & Africa.

The forecasts included in this report focus on the revenue generated by energy blockchain applications, primarily through licensing fees (hardware and software) and through transaction fees or commissions exacted by the service provider. These values are distinct from the total value of commodities traded on a hypothetical blockchain-based platform, though the latter is anticipated to influence the value of associated fees.

This report does not explicitly model different scenarios for regulatory evolution around the world, as the permutations of possible development pathways and outcomes are innumerable. However, the influence of regulatory environments on the development of energy blockchain applications is reflected in the 5 to 7 years of primary historical data that underpin forecasts for each segment and region.

SOURCES AND METHODOLOGY

Navigant Research’s industry analysts use a variety of research sources in preparing Research Reports. The key component of Navigant Research’s analysis is primary research gained from phone and in-person interviews with industry leaders including executives, engineers, and marketing professionals. Analysts are diligent in ensuring that they speak with representatives from every part of the value chain, including but not limited to technology companies, utilities and other service providers, industry associations, government agencies, and the investment community. Additional analysis includes secondary research conducted by Navigant Research’s analysts and its staff of research assistants. Where applicable, all secondary research sources are appropriately cited within this report.

These primary and secondary research sources, combined with the analyst’s industry expertise, are synthesized into the qualitative and quantitative analysis presented in Navigant Research’s reports. Great care is taken in making sure that all analysis is well-supported by facts, but where the facts are unknown and assumptions must be made, analysts document their assumptions and are prepared to explain their methodology, both within the body of a report and in direct conversations with clients.

Navigant Research is a market research group whose goal is to present an objective, unbiased view of market opportunities within its coverage areas. Navigant Research is not beholden to any special interests and is thus able to offer clear, actionable advice to help clients succeed in the industry, unfettered by technology hype, political agendas, or emotional factors that are inherent in cleantech markets.



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NOTES

CAGR refers to compound average annual growth rate, using the formula:

CAGR = (End Year Value ÷ Start Year Value)(1/steps) – 1.

CAGRs presented in the tables are for the entire timeframe in the title. Where data for fewer years are given, the CAGR is for the range presented. Where relevant, CAGRs for shorter timeframes may be given as well.

Figures are based on the best estimates available at the time of calculation. Annual revenues, shipments, and sales are based on end-of-year figures unless otherwise noted. All values are expressed in year 2019 US dollars unless otherwise noted. Percentages may not add up to 100 due to rounding.



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Published 3Q 2019

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RESEARCH REPORT Executive Summary: Energy Blockchain … · 2019. 8. 21. · Executive Summary: Energy Blockchain Applications Overview. Global Forecasts for Supply Chain, Generation,