Smart contracts that build on accessible data created by blockchains could be essential to developing clean energy platforms and enhancing renewable transitions, according to a new report.
The report, Managing Climate Change in the Energy Industry with Blockchains and Oracles, outlines eight hybrid smart contract use cases to support the transition to clean energy. They include issuing carbon credits, tokenizing energy commodities and using energy conversion contracts.
By building on secure external data through middleware called oracles, developers can then create advanced blockchain applications, according to the report. The report, which was completed by Chainlink Labs and Tecnalia, says the oracles can unlock a variety of blockchain-based use cases in clean energy.
The data can then help renewable energy developers keep the distributed grid maintained and increase the share of renewable energy generation while achieving investment returns on clean energy projects.
Other contract areas the report addresses include decentralized finance (DeFi) energy derivatives markets, on-chain climate and green bond ratings, parametric insurance for renewable energy infrastructure, grid management, and consumer rewards for sustainable consumption.
Blockchains are data sources that connect various types of information chronically over time. They can help companies accurately track and report their emissions to help them establish baselines for sustainability goals, according to the report.
The report says DeFi is the largest market for blockchain-based smart contracts and is worth more than $250 billion. It says DeFi can also help support green bonds and help reduce risk through a transparent valuation model.
Blockchains, according to the report, can improve grid management including tracking energy trading. They can also help with carbon credits by showing when energy objectives are met, and help with energy conversion contracts to make sure energy transitions are running properly and efficiently.
Several recent examples of blockchains helping to lower emissions or improve sustainability include digital trading company Mattereum’s platform, which aims to help companies track their materials and the impacts of their manufacturing and shipping processes, as well as in the energy-intensive crypto mining industry.
“During this period of major infrastructure and market transformation, utilities, service providers, and governments can use blockchain technology to digitize and assign value to clean energy investments and design fully automated incentive systems for participating in sustainable practices,” says Jose Luis Elejalde, energy, climate and urban transition manager at Tecnalia.