Monday, 13 July 2020

Put blockchain to work for Germany’s energy transition

Germany needs blockchain technology to put its energy transition back on track, writes energy management professor Jens Strüker.

Laws that allow Germany’s energy transition to benefit from the digital age have clearly missed the mark so far. There is no question about the state of the energy sector’s digital infrastructure in 2018, says a monitoring report commissioned by Germany’s economy ministry. It’s still running analog. What is surprising is that Germany has an excellent starting point when it comes to blockchain technology, potentially one of the most substantial digital innovations in recent years.

Blockchain promises to decisively move the Internet forward, letting users stay in control of shared data. It allows for payment and service exchanges to take place simultaneously without any intermediaries. With the financial participation of users on networks, a powerful antithesis to market-dominating internet platforms is arising.

For the energy system, blockchain provides decisive new degrees of freedom for the interplay of energy networks and markets. Fortunately in the energy sector, Germany has developed into a global blockchain hotspot. Positioning Blockchain technology as the spearhead of a digital energy transition is an overall positive for Germany. However, regulations and a manpower shortage are increasingly threatening to halt this drive, meaning the country’s competitive advantage could quickly evaporate into thin air.

Instead of waiting for comprehensive reforms in networks and the market, the regulatory framework must first be made non-bureaucratic, chronological and flexible within local constraints. Devices and tools, such as the living lab research concept mentioned in the coalition agreement, can deliver important insight into the development of digital energy market regulation.

A second hindrance to development is a lack of qualified employees. Small and large energy providers cannot wait for university graduates with blockchain know-how; rather they must start gradually educating their employees now.

Silicon Valley first recognized the potential of blockchain as a game-changer relatively late in the game. In the meantime, it’s catching up at a tearing pace, with large venture capital companies deliberately investing in startups which will attract further development. Germany is missing a comparable venture capital culture. Even China is developing targeted blockchain centers.

We now have one or two years, at the most, to set the right course. Policy needs to use well-focused, cost-effective measures, such as facilitating the living lab concept and a digital education offensive, so as not to gamble away this advantageous starting position with blockchain technology.

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