The concepts of zero carbon energy or 24/7 renewable energy supply contracts have recently gained relevance. On the one hand, due to the pressure to decarbonize our economies and mitigate the effects of climate change. On the other, due to the demand that consumers have to verify the origin and delivery of products and services with a minimum impact on the environment through sustainable energy.
Unfortunately, the operation of the electrical system is quite complex and it is not always possible to know exactly if the electricity that we are consuming at any given time comes from renewable sources or not. All electrons are the same and you can’t tell if they were produced by a coal plant or a solar panel. For this reason, different accounting methods for “green energy” have been created.
The good news is that technologies have recently been developed that make it easier to account for renewable energy consumption. Blockchain technology (or blockchain, as it is called in English), which is the basis of the already well-known cryptocurrencies, has become a very popular topic. But its applications go far beyond economic transactions, since there really is great potential in the energy sector to take advantage of the benefits of this technology, especially transparency, security and decentralization capacity.
We also see how, especially among private sector companies, interest is growing in ensuring a certified supply of electricity with renewable energy, and there are already successful experiences in this regard in our region. Companies are not only doing it for environmental, social and governance (ESG) policies, but also for economic and energy security reasons, since solar and wind energy is generated in our region with the most competitive costs worldwide.
Some examples of DLT use cases in the energy sector include:
- The traceability of renewable electricity or energy inputs in the manufacture of products or provision of services and improve the current processes for their certification.
- With the advancement of smart grids, distributed generation systems and storage systems, new possibilities open up to offer this flexibility through better management of generation and consumption, establishing new markets in which the management of information and data requires transparency, security and autonomy, some characteristics that can be covered with DLT technologies.
- Finally, financial transactions in the electricity market are generally highly regulated, but can be inefficient in their processes. At this point, some characteristics of DLT technologies can be useful, such as transparency, handling high volumes of information, trust and security.
These experiences of private companies constitute a magnificent example for the public sector, which in many cases is a large consumer of electricity. Ensuring through these new technologies that the supply is truly renewable is a great opportunity to build trust, but it is only the beginning of how these technologies can contribute to the goals of clean energy and carbon emissions of a country.
How the IDB supports innovation in the energy sector
The fight against climate change is one of the priorities for the IDB Group under its Vision 2025, the roadmap to achieve sustainable and inclusive growth. For this reason, the Energy Division is focused on bringing to the region the most relevant issues related to the digitization of the sector. Within these activities, together with LACChain and the BIDLab, we have created the Energy Challenge 2022, which invites relevant actors in the energy sector and startups that have developments that use blockchain or distributed registries in their use projects to participate by the opportunity to win prizes to promote their solutions and impact the Latin American ecosystem.
To learn more about this opportunity, we invite you to visit challenge-energia.com.