How Blockchains are Changing the Global Energy Grid

How Blockchains are Changing the Global Energy Grid

Politicians and environmentalists have been targeting the crypto mining sector for a long time. Governments are not far behind in criticizing the amount of electricity Bitcoin mining uses, but investors’ growing interest in crypto is leading to positive steps in the energy sector.

The blockchain industry’s impact on the energy sector has been a major source of controversy over the past five years. Governments and environmental protection activists have expressed concerns about the amount of energy required to keep the Bitcoin network secure. Data shows the network’s energy consumption now rivals the yearly energy consumed by some small countries across the globe.

Much of the debate has been on the negative environmental impacts of Bitcoin (BTC) mining. The drive to maximize earnings from mining and integrate blockchain technology with the energy grid has also introduced new developments that have the potential to be beneficial in the long run.

Let us look at the several developments that have arisen out of the demand for energy to operate blockchain networks and the positive effects of crypto mining on the energy industry.

Recapturing Wasted Energy

One of the fastest-growing sectors of the crypto mining industry is the monetization of historically wasted sources of energy, such as natural gas that is flared at oil drilling facilities.

Discovering natural gas pockets is a common part of the oil drilling industry, but up until recently, this gas was typically burned in a process called "flaring" because the infrastructure needed for its collection did not exist and there was hardly any demand for LNG.

As the value of Bitcoin spiked over time, the search for inexpensive energy sources led to the installation of shipping containers filled with mining equipment at drilling sites to harness the energy from flaring to mine the BTC.

While the process still results in carbon dioxide emissions, income is generated during the process, and these funds could be used to mitigate environmental concerns.

Several companies have been exploring the integration of mining using flared gas in the Middle East, which accounted for over 38% of the global flaring in 2020 and presents one of the biggest opportunities to turn wasted energy into value.

Blockchain Technology for Efficient Energy Generation

The second significant advantage of the push to maximize crypto mining profits is improvements to the energy infrastructure and an increased focus on developing sustainable forms of energy generation.

Studies by the Bitcoin Mining Council have shown that there has been a noticeable increase in the amount of energy derived from sustainable sources, as opposed to sources like oil and coal.

Less developed countries like Kenya and El Salvador have also been able to benefit from improvements in energy generation from sustainable sources like geothermal power plants, which have given their economies an additional source of income.

With the utilization of excess power generated by hydroelectric power plants or an increase in the use of wind and solar power, crypto mining is providing a financial incentive to help further optimization of energy efficiency and generation.

Smart Grid Technology

Another energy-related blockchain development is the formation of blockchain-based smart grids that aim to improve energy distribution on a large scale.

Inefficiencies in electricity distribution have largely been traced to the distribution level. Small power distribution companies are mainly entrusted with billing and metering services, but they do not own the electrical grid infrastructure.

These types of services can easily be handled by blockchain technology and Internet-of-Things (IoT) devices that help consumers bypass distribution companies and connect directly with power generation corporations, potentially reducing electricity bills by up to 40%.

Connecting consumers with a smart grid also allows them to shop around with different providers to obtain the best tariffs possible. This could help to level the playing field in an industry that has been historically dominated by one local energy company.

Projects like Grid+ and Energy Web Token are helping to lead the way in this field as the old grid design of physical substations and monitoring equipment is replaced with a network of distributed energy resources (DERs) that includes battery energy storage systems, solar arrays, and natural gas generators.

While the sector is still in a nascent phase, in the coming years, blockchain technology is bound to be further integrated into the energy sector.