The potential of blockchain technology has been recognised globally, with a number of international organisations and technology companies highlighting the benefits of its application in reducing costs of operation and compliance, as well as in improving efficiencies. While the technical underpinni ngs of the technology can be intimidating to a large section of policy-and-decision makers, blockchain can enable ease of collaboration for enterprises and ease of living for citizens by bringing in transparency across government and private sector interfaces. Although very often grouped with technologies such as artificial intelligence (AI) or internet of things, which have the potential to deliver completely new services to citizens and other stakeholders alike, blockchain is unique in the sense that it has the potential to revamp the existing processes to unlock new sources of efficiency and value. It offers unique possibilities of addressing issues relating to improving governance.
In this regard, NITI Aayog recently came up with a discussion paper titled “Blockchain: The India Strategy – Towards Enabling Ease of Business, Ease of Living and Ease of Governance”. The discussion paper analyses the value of blockchain in facilitating/instilling trust in government and private sector interactions, followed by considerations when evaluating a blockchain use case for implementation, possible challenges, and lessons from experiences in blockchain implementation.
Blockchain basics
Blockchain is a database, a list of records/transactions, that keeps growing as more entries are added. It is distributed in the sense that copies of the entire database are stored on multiple computers on a network, syncing within minutes/seconds. These records are adjustably transparent as records stored in the database may be made visible to relevant stakeholders without the risk of alteration; and highly secure as malicious actors (hackers) can no longer just attack one computer and change any records. Data is immutable as the mathematical algorithms make it impossible to change/delete any information once recorded and accepted. Hence, unlike present-day networks that depend on trusted intermediaries for security and trust, blockchain creates trust in networks by introducing distributed verifiability, auditability and consensus.
Use cases of blockchain in the power sector
Energy trading
According to NITI Aayog, India currently faces a dual problem of poor access to energy, and a high proportion of fossil fuel. Moreover, the central grid, which powers most Indian households, is driven largely by fossil fuels; with this the percentage is predicted to remain above 50 per cent even in 2040. Renewable energy-driven microgrids have been suggested as a possible means of solving the dual issues of poor access and energy mix. These would be particularly useful in areas with no grid connectivity. As the central grid expands, these microgrids would benefit from the capability to interface with the central grid through mechanisms such as power purchase agreements (PPAs). This would help in increasing the share of renewables in the energy mix, and allow conscious consumers to choose the energy of their preference.
In today’s market, there are different authorities and intermediaries where there is an entity responsible for registering assets, verifying whether they are renewable, measuring their production, and finally creating renewable energy certificates (RECs). A lot of buyers are not dealing directly with specific generation assets, instead they are going through brokers or intermediaries. There are different authorities that are responsible for reporting and verification, and preventing issues such as double counting, and making sure that once you claim a credit it is retired and no longer available to be traded or sold or claimed against.
Blockchain may serve as a valuable platform to achieve the proposed targets due to the inherent features it would help deploy. Blockchain may enable a sustainable energy trading system by implementing smart PPAs, smart microgrids, and REC issuance. Turning energy resources into digital assets that can be traded on a blockchain could open up new investing and trading opportunities, allowing ease of entry to new players and fostering innovations. It can also lead to a community-driven change that would solve the problem of last-mile access.
EV battery swapping
The government is targeting 30 per cent electric mobility by 2030. In order to realise this, incentives are needed in the areas of manufacturing, sale, and the usage of electric vehicles (EVs). It is expected that the increased usage of EVs will substantially increase the usage of batteries to power them. However, there are a number of challenges in increasing the adoption of EVs in the country, the main being the high cost of usage and low range of vehicles. Although EV technology is improving, issues with battery charging are particularly troubling. Charging station infrastructure required to allow large-scale proliferation of EVs is still limited, and affects the choice in buying vehicles. A proposed method to deal with this challenge is to bypass cumbersome charging stations and create battery sharing ecosystems. These ecosystems would allow users to swap used batteries with fully charged ones, thus doing away with the need to charge their own batteries.
While battery swapping stations may be easier to install than a network of charging stations, this solution poses challenges of its own, such as the cost of battery itself. Some features in batteries may directly affect their worth, such as the age of the battery and its historical treatment. The tracking of energy consumption is also cumbersome. There is difficulty in energy source attribution – an aspect of EVs sometimes overlooked is that they are largely environmentally viable only if the source of electricity is also based on renewable energy. The storage of parameters describing each battery on blockchain, used together with IoT, emerges as a possible solution to the problems highlighted above. Blockchain may store information such as the age of battery and its previous treatment in an immutable fashion, thus removing the possibility of misrepresentation to increase price or lower cost of usage. The use of blockchain for storing information about the sources of energy for charging the battery may incentivise the usage of energy sources. Exploiting the smart contract feature of blockchain applications would allow for more efficient swapping of batteries at charging stations, since simple rules on costing can be applied on the basis of battery attributes and executed on exchange.
Challenges and the way forward
The immutable nature of blockchain necessitates the need to feed authentic data in order to prevent retrospective changes. Further, blockchain requires that the asset being tracked be represented digitally; this would require changes in the traditional process and may even cause reluctance amongst the stakeholders involved.
The blockchain solutions are more amenable to atomic transactions, that is, transactions that have a finite life, as compared to non-atomic transactions which may have a large/infinite life. The initial infrastructure cost of such a system is high. In addition, technical expertise is needed to ensure implementation. The requisite numbers for both are in short supply at present in India. Lack of regulatory uncertainties is further discouraging people from venturing into this sector. The limited number of qualified blockchain developers globally also poses a serious challenge to the development of this technology.
The current paper focuses on the application of blockchain to resolve business and governance process inefficiencies. Going forward, NITI Aayog will scale up some of its current pilots, in addition to pursuing new pilots, results of which will decide the further fate of the technology in the country.
Nikita Gupta