Exploring blockchain for the energy transition: Opportunities and challenges based on a case study in Japan

Abstract

Under pressures to reach net zero emissions by 2050, there is an ongoing transition of energy decarbonization, decentralization and digitalization. Physical and information flows in energy systems are increasingly complex and distributed, leaving centralized structures inefficient. Blockchain technology is suggested as part of the next step in this transition. Blockchain has potential to facilitate distributed, peer-to-peer trading with reduced transaction costs, increased security via cryptography, and prosumer choice. However, there are as of yet multiple challenges to the expansion of blockchain in the energy sector. This paper argues that analysis of these challenges requires a multi-angled approach incorporating technological, economic, social, environmental, and institutional dimensions. First, each dimension is explored, substantiated based on a blockchain-based energy system case in Japan. Concrete challenges of scaling this case toward 2050 and potential opportunities in overcoming these challenges are discussed, leveraging extensive literature review. Finally, an overview of strategic indications is suggested. The findings of this paper present initial indications on challenges and opportunities to overcome them based on a multi-dimensional overview. It is suggested that the factors identified across the dimensions are interrelated. This would in turn call for coherent innovation management and multi-stakeholder innovation ecosystems. Living Labs and regulatory sandboxes are prospective foundations to support such ecosystems, and enable informed decision-making among both private and public sector actors. At large, it is suggested that a holistic and pragmatic approach can benefit the application and scalability of blockchain in the energy transition.