Blockchain and the dawn of web3

In the last couple of years, the conceptualization of web3 has almost become a defining inspiration for the energy transition, but we are still unaware and have limited understanding to how this blockchain-based iteration can impact the energy sector. As social interaction and multi-directional communication have become the pinnacle of the dawn of a new generation of internet, blockchain is increasingly mentioned as providing the decentralized mechanism enabling this evolution. In terms of the energy industry, increasing volume of clean energy entering the grid alongside the mass deployment of smart meters, as well as the mainstream of DERs is a parallel phenomenon to the imminent web3 area.

Embracing the idea of web3 for energy, we can expect big shifts in areas of energy generation, distribution and usage, and its implications for carbon emissions. At the device level, machine-to-machine communication all create new forms of activity, and web3 will allow these devices to connect and exchange information using decentralized identifiers (DIDs). As communication gives rise to actionable insights, users and devices will be able to get an alert whenever the power grid faces a critical need for energy conservation so the system can rebalance. Thus, web3 could give grid operators a powerful tool to help them interact and manage distributed assets across the grid automatically.

Another source for web3 enhancement is in the trading of carbon credits, where it often suffers from transparency issues. Voluntary carbon markets are a $50 billion value as more energy companies strive to reach net zero emissions. However, the voluntary offsetting market operates under different standards and procedures, as it works with little consensus or agreement on assurance and integrity, and when it does, it is often on a project-by-project basis. Web3 technologies like DLTs and the IoT could accelerate standardization and accountability by measuring and managing environmental data in real time.

Web3, as it is currently conceived, will have no central authority. What this can translate to the energy market and specifically to financing and asset management is the minimizing the dominance of big-data banks and companies. Through blockchain, no intermediary would be required to verify or broker transactions, resulting in lower transaction costs and lower entry barrier to small energy-market players, As the market expands through distributed renewables and energy trading markets become more public, small entrants will be able to sell and buy energy directly in the market, and will have the opportunity to monetize from their energy assets.

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