Energy Applications and Use Cases with Blockchain Technology
The application use cases for blockchain technology in energy specific industries is very diverse. You may already be familiar with some of the standard blockchain use cases that increase efficiencies from drilling to distribution of oil and gas, peer-to-peer solar panel energy distribution, and sustainability or environmental impact goals including compliance with the latest regulations. The World Economic Forum has been educating the world on blockchain for the energy transition as early as 2017.
What are some of the blockchain use cases in energy?
- Compliance traceability
- Workflow process traceability and automation
- Increased efficiency and productivity, partially through smart contract automation
- Supply chain and resource management tracking
- IoT systems and sensor integration
- Energy and Commodity trading (See PWC report
- Energy distribution
- Electricity trading
- Sustainable energy financing
Our resources are scarce, and we only have one Earth for the time being. The way we generate, process, distribute, resell, and consume energy has always changed as knowledge progressed. Some countries are ahead of the curve when it comes to the energy transition and tackling carbon, nitrogen, or greenhouse gas emissions. Yet, traditional oil and gas will remain a crucial resource for years to come. Even in a world where we all drive electric vehicles and warm our homes with solar, wind or nuclear energy.
When we look at some of the use cases in the energy industry for blockchain technology, the same use cases are repeated year after year on various websites. Many of which never really come to fruition yet, despite plenty of investments being made. An estimated €231 billion is spent annually on energy efficiency (EE) investments - ‘but tapping the full potential of EE will require at least four times as much investment’, according to a world energy analysis done by the International Energy Agency. We know what is possible with blockchain, and many startups and enterprises have experimented with, or created working blockchain applications.
We will go through some of those use cases for the oil and gas industry, for cleaner energy such as solar and wind energy, or perhaps nuclear energy. Even water management is something that we as humanity should really start to prioritize more on a global scale, not just locally or per individual country. Oceans, rivers, lakes, and rain all don’t recognize border signs.
Almost always, use cases for blockchain focus on value in terms of cost saving or extra income. For example, the fair reselling of solar energy produced by solar panels by households. It’s unfair to just give back this energy for free to the net of your electricity provider, when you as the house owner invested in the solar panels. So you can not only save on your electricity bills, but also earn some extra money if you produce more electricity than your household is using. Transparency in your earnings would be most welcome, and this can be achieved with blockchain proof reports and micro-payments.
What are some of the pain points workers experience on the job?
We’re going to explore the benefits of blockchain technology for the people in the field, doing the hard work. Sure, the energy transition is booming, but let’s not forget about the problems workers still face every day. Often small issues that can be solved and make one’s day a little more easy and productive. What if we look at productivity numbers more closely in very specific areas? Pretend you're in a helicopter right now, heading towards one of many oil and gas drilling platforms in the North Sea. Whether you’re part of the maintenance team as an underwater welder, or part of the daily operations such as contracting and reselling, there is always some amount of friction to be found. Especially when it comes to paperwork.
This friction causes productivity numbers to stagnate, or not increase as fast as it used to do over the years. And lack of productivity growth, or delays because of time spent on figuring out details in extra clausules, is generally speaking also money down the drain. Often the employee is not to blame, but the hassle with large amounts of paperwork, contracts, regulatory compliance checks, and other details causing inefficiencies. Even though much of this is standardized, and contracts may already be digital to some extent, there is so much that can be further improved to make cumbersome tasks quicker and easier.
As Wikipedia states, ‘The UK Continental Shelf (UKCS) is the region of waters surrounding the United Kingdom, in which the country has mineral rights. The UK continental shelf includes parts of the North Sea, the North Atlantic, the Irish Sea and the English Channel; the area includes large resources of oil and gas’.
Many in the oil and gas industry, in the UKCS area and beyond, are using standardized contracts provided by LOGIC. LOGIC is a not-for-profit that operates as the custodian for cross-industry projects that aim to increase the efficiency of working practice in the UKCS. Even though they really do a great job, there is always room for improvement. We hear this a lot from the ones using these standardized contracts. So we’re going to dive deeper into this, and see how blockchain technology can provide more efficiency, transparency, and better compliance.
LOGIC has 11 standardized contracts available, but every contract may have unique conditions, requirements, or clausules the parties agree on. Late 2019 these contracts were made available in Word format rather than PDF, providing users with the flexibility to digitalise the documents as required.
As a not-for-profit organisation operating as a custodian for UKCS cross-industry tools and services, LOGIC has spearheaded the standardisation of legal contracts in partnership with industry, to improve the efficiency of drafting, executing and negotiating commercial agreements. Even though LOGIC is a popular form of contract used in the oil and gas industry that is supposed to be standard, it often has agreed changes from the standard form for each company. Blockchain alone is not the holy grail solution for this, but rather a crucial addition in a completely efficient digital solution.
Dragonchain could work with LOGIC and industry players to create a digital platform where their customers can:
- Choose any of the standardized contracts in an environment;
- Add and remove custom contract conditions or processes,
- Add custom rule sets,
- Add custom clauses,
- Provide a compliance dashboard and reporting system which would include
- Flagging or prioritization for attention
- Visualize areas of concern.
Other parties would be invited by LOGIC and participating industry players, and encouraged to provide feedback.
Dragonchain has an existing product that can be used as the basis of a standardized digital contract creation platform.
This platform may be used as the base of the new digital contracts platform, enabling access restrictions and contract management, blockchain proof of every change, saving costs on developing a new platform from the ground up, and saving time on repetitive tasks with autofill functionality. Old contracts can be reused by making a copy of them, again saving time.
Decentralized identity (Dragonchain’s Factor solutions) may be added to accounts, requiring proof of certification (completed training course on contracts) before a user is able to start, edit, or sign contracts with other parties inside the platform. This brings trust and can act as a first safe pass / competency / authorisation proof of existence. In case of existing certificates, these can be added to someone’s identity and verified on chain by the original issuer of the certificate.
In addition to the standardized contracts, a predetermined set of rules, conditions, or clausules can all be checkmarked inside the platform by the authorized party(ies), to finalize the transfer of ownership or payment for services. If agreed conditions and rules are not met, or certain conditions of breech are met the contract may be withdrawn by either side.
Historical data can travel along with each new transfer from producer to purchaser, and so on, providing insights to the full supply chain, if all parties in the supply chain participate. The historical data can be standardized in partnership with the industry, e.g. company details, contractor details, resource specifications, costs involved, carbon content traced through the supply chain, etc.
Dragonchain advises to bring the necessary parties (e.g. LOGIC, OGTC, Petrofac, and other parties such as operators, service contractors, vendors) together and build a POC for the digital platform where the standardized LOGIC contracts are available to both seller and buyer. From there on, continue to add new functionalities based on experiences, feedback, and urgency.
The workflow for a first POC stage may look like this:
- Open the digital platform ((web) app) with your authorized user account
- Select one of the standardized LOGIC contracts, or browse and reuse existing contracts in your library
- Select with which party (person and/or entity) you want to make the contract
- Auto populate as many fields as possible to decrease repetitive tasks
- Fill in, adjust and edit all other fields
- The software highlights fields that need extra attention, that are different from the standard, or edited in a reused contract
- Both parties review and sign, optionally other accounts can review e.g. legal access to both sides as configurable
- Every action is time stamped on the blockchain and can be watermarked
- Contract pricing may be determined per contract usage or contract template
Add additional functionalities after a first trial period and feedback session. If needed distribute tablets or smartphones with the (web) app on site to all parties and professionals in the trial.
In September 2020, The Nederlandse Aardolie Maatschappij (NAM) was fined a total of 125,000 euros by the public prosecution service. They believed that the company has not done enough to prevent two leakages of harmful substances. At the beginning of 2019, about one cubic meter of desulphurization liquid leaked into a ditch. A small amount ended up in an adjacent ditch. The other fine NAM received was for leaking thirty cubic meters of natural gas condensate into a canal. According to the prosecutor, the NAM failed at the time the spills occured. The oil and natural gas giant has also paid all damage and clean up costs, an amount of more than 1.3 million euros.
Blockchain based emergency management and proof systems are not only a cheaper alternative for any company dealing with these sorts of risks, but also better for the environment. Companies are able to get alerts more quickly through sensors and IoT devices, while at the same time having immutable proof reports on blockchain, showing precisely when the warnings or emergency alerts came in, and how quick the company responded to the incident. This may result in saving costs on fines, legal, clean up and damage repair costs, and environmental impact.
It would be worthwhile for any company in the energy, oil, gas industry to explore these solutions with Dragonchain in partnership with other companies (think of semiconductor companies such as NXP) to make an all-in-one solution. After data migration to the cloud, and more integrations with IoT enabled sensors and devices, the next step is adding indisputable proof of how data is handled, stored, deleted, and so on. With Dragonchain’s Interchain, this is a simple RESTful API integration with existing data management systems and software platforms already in use.
What Dragonchain has available right now:
- Blockchain-based compliance solutions
- Identity solutions for IoT devices
- Proof Systems for proof reports
Next steps for energy and blockchain solutions
More investments in research & development is needed to deploy a broader set of solutions in production. Due to misinformation and lack of understanding, too many new business models in the energy sector have not yet been established. Costs and scalability are some of the main concerns we come across, though Dragonchain has proven scalability issues are a thing of the past with independently scalable systems and drastically lower (and just as important, stable/fixed) fees compared to other more broadly known blockchain networks such as Bitcoin and Ethereum. Both of which are public blockchains too, whereas Dragonchain is a hybrid blockchain, reaping the benefits of both worlds. Unfortunately, information available online is often dating back to 2017 or even prior to that, only taking into consideration platforms such as Ethereum and Bitcoin. The good news is, any and all limitations of the past, trule are a thing of the past.
Get in touch with Dragonchain today, and innovate the energy sector together.