Blockchain advocates are hitting back at accusations that the technology is too costly, slow and unwieldy to be used in energy trading platforms.

Speaking at an industry event in June, Stephen Woodhouse, chief digital officer for Pöyry in the U.K., worried that blockchain could never handle the volume of trading in energy markets. "I'm not convinced," he said.

These concerns may hold true for the blockchain underpinning popular cryptocurrencies such as bitcoin, but they are increasing irrelevant as the technology develops, according to Jesse Morris, secretary at blockchain platform developer Energy Web Foundation (EWF). 

Blockchain shortcomings cited in a GTM article last month were “a bit dated,” said Morris. “Existing efforts and research have largely overcome some of those challenges. I wouldn’t bring up those as the problem points.”

Blockchain issues with transaction speed, cost and scalability have been solved already or soon will be, he said. Theoretically this includes the most damning challenge blockchain has faced so far — that its proof-of-work security protocol can require tremendous amounts of energy.

With bitcoin, this energy consumption is currently estimated to top 73 terawatt-hours a year, more than Austria uses in a year.

That’s a problem, Morris admits. Making it worse, the bitcoin network is unlikely to move to a different security protocol any time soon.

But the public Ethereum network, which is now the largest and most-used blockchain in terms of transactions and computations, is readying for a shift away from proof-of-work to an alternative low-energy consensus mechanism called proof-of-stake. 

There is no set date for the switch, although Morris said it could happen within the next two to five years as part of ongoing improvement proposals. 

He said the Ethereum community is already mulling a plan to approve one out of every 20 blockchain blocks using proof-of-stake, as a way of checking on the stability of the process. 

Ethereum miners, the people who validate transactions, have to accept the proposal before it will go forward. But in the meantime, EWF is developing a platform that validates transactions with proof-of-authority, another low-energy consensus mechanism.

“We’ve got 15 computers maintaining our network right now, and they are each drawing something like 100 watts of power,” said Morris.

Once blockchain gets past the energy consumption conundrum, it still has to overcome perceived problems with cost and scalability.

Bitcoin and Ethereum network transactions today are “quite expensive,” Morris conceded, which would be a problem for low-margin energy trading applications. Morris cited a transaction cost of $5 for EV charging, on top of the cost of electricity. 

However, he said: “There are many, many technologies that can solve this transaction-cost problem.”

The cost, he said, relates to a further blockchain issue: scalability. The public Ethereum network can handle around 30 transactions per second at present. That’s not good enough to cater for energy transactions on an individual kilowatt-hour basis, said Morris.

But there is no reason why a day’s worth of energy transactions could not be registered at one time, on a single blockchain block. And alternative blockchains could offer much better performance.

EWF, for example, is designing its platform to handle 30 times as much throughput as public Ethereum. Another technology, Iota, is supposed to be infinitely scalable, so transaction costs disappear.

Colleen Metelitsa, a grid edge analyst at GTM Research, said: “There are a lot of workarounds that people are doing now and there are a lot of other people doing a lot to scale and resolve those problems.”

Proof-of-work, she said, was picked for bitcoin transactions because it represents the gold standard in blockchain security. But its energy intensity means it could never be suited to trading kilowatt-hours.  

For this reason, when energy-related blockchains reach commercial maturity, it is fairly safe to say they will be energy-efficient and scalable, and boast lower transaction costs.

Many companies already using Ethereum may have private versions that have been adapted to run using proof-of-authority, Metelitsa said. For EWF's Morris, the blockchain’s real challenges are no longer around energy, cost and scalability. Instead, the technology faces new problems.

One is about getting companies to see beyond hype and start looking at ways blockchain could add value, Morris said. This is complicated because there is no easy way to identify that value.

Finally, there are basic problems in helping corporate IT departments become more comfortable with blockchain. “This isn’t where they are coming from,” Morris said, “and talent in the blockchain development space now is thin. So it’s really hard to implement this stuff right now.”


Join us along with innovators from utilities, startups, investors and policymakers for Blockchain in Energy Forum on September 11 in San Francisco. Come learn more about what the future may hold for this technology.