Liechtenstein could one day become the first nation to conduct its entire energy trading via a blockchain-based platform. The advantages could be enormous, but developing the infrastructure will take time.

LKW stands for Liechtensteinische Kraftwerke and is the energy company that makes sure it won’t get too cold in the small alpine nation. It is 100% state-owned and supervised by the Liechtenstein government.

Philipp Elkuch, the president of the company, wants to bring Liechtenstein’s energy grid into the 21st century. Apart from divesting from nuclear energy and developing the renewable energy infrastructure, digital technologies are high up on his agenda.

In an interview with the national newspaper Liechtensteiner Vaterland, he said digitalization is a key part of LKW’s strategy. “One question is, for example, how our clients can offer and trade the electricity which they produce via solar cells directly on energy trading platforms,” said Elkuch.

Blockchain-based energy trading

Blockchain-based energy trading could be a solution. The idea behind it is rather simple: Those who produce energy, for example, through rooftop solar panels or wind turbines, can sell it directly to consumers via a peer-to-peer trading platform.

Such energy trading would require the exchange of a massive amount of data, which blockchain-based smart contracts could facilitate. The use of blockchain would also eliminate the need for third-party brokers and thus lower the costs of trading renewable energy. Besides, increased transparency will reduce the risk of fraud and misconduct, motivating more sellers and buyers to join the grid.

First pilots have already launched, for example in the Swiss city of Walenstadt. The project is called “Quartierstrom” and allows 37 households to buy and sell locally produced solar electricity in their neighborhood.

LWK is working on a similar project in Liechtenstein, but Elkuch wants to go beyond the work of Quartierstrom. “We are thinking about going one step further than Walenstadt,” says Elkuch. “We do not only think about one neighborhood but the whole of Liechtenstein using such a platform to conduct all of their energy transactions. We would be the first country on earth that would handle it this way.” 

Are blockchain platforms ready yet for energy trading?

P2P energy trading is not without its challenges. A blockchain would have to process only a few kilowatts, and the transaction would only be worth a few cents. Today, blockchain trading is still expensive, which means it may not be economically feasible to conduct small transactions.

On top of that come scalability issues, which make it harder to launch a large scale energy grid. Liechtenstein, however, is not a huge country and has a population of only 38,000.

When asked if blockchain-based energy trading is a threat to centralized energy providers, Elkuch disagrees. “I would not call it a threat,” he says. “There is no disruptive process like, for example, in the music industry. Energy providers can use this opportunity to participate in these transactions. For instance, we can offer platforms for the local electricity market and P2P-transactions. Moreover, we see massive potential for energy providers to support customers to optimize their own ‘energy household,’ for example, when integrating solar panels, heat, or electromobility.”

It will probably take some time until blockchain-platforms will be able to facilitate large scale energy trading, even in Liechtenstein. Ellkuch adds, “We are currently investigating, and we will need more time until we can launch such a project on a large scale.”

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