WÜRSELEN, GERMANY / ACCESSWIRE / February 22, 2020 / The energy market is dominated by big energy companies that pretty much dictate the prices and the conditions for the end consumer. Because of the importance of fuels and most importantly oil to the whole industrial sector, some companies possess immense power and even influence the political decisions that directly affect them by lobbying politicians.
Although not as powerful as oil companies, big providers of electricity can also have a high degree of economic power, resulting in local and sometimes national monopolies. The fact is that due to the substantial market barriers of the energy sector in the form of strict legal requirements, huge initial capital investments and high expertise, new players find it immensely difficult to enter the market, let alone compete with the leaders.
From an economic standpoint, a monopolistic market is not driven by the invisible hand, the un-observable market force that helps the demand and supply of goods in a free market to reach equilibrium automatically. The monopolistic structure prevents the element of the “free market” by eliminating competition and the invisible hand no longer controls the market as it should. Oil companies, for example, control the supply and dictate the prices of oil, which allows them to acquire a significant profit from changes in the oil prices. Industries that are prone to such monopolies (like the energy sector) are regulated by federal and local governments in order to protect the consumer. However, sometimes the regulation is not enough and the end consumer is forced to pay higher than normal prices for the value they acquire. Overall monopolies are perceived to be bad because not only a one-sided power exists (most often on the expense of the consumer), but it allows the supply side to become “lazy” because of the lack of competition. Competition is known to drive progress the most and in a monopolistic market situation, there are fewer incentives for the supply side to invest in innovation.
With environmental issues taking their toll, the energy industry and the whole industrial sector are facing tremendous pressure to cut down the negative impact they are inflicting on nature. Governments and environmental organisations are stressing on the importance of adopting efficient and eco friendly ways of energy production and the optimization of current energy processes. As a result, the sector is forced to invest in innovation, research and development, however, the issue with the monopolistic market persists and the increased cost is carried over to the end consumer. This is evident in the electricity prices that have surged over the course of the past 10 years – in Germany, the cost surpassed 33 cents / kWh last year, positioning the country as the leader for the most expensive electricity in the world.
So, considering that federal and local governments are not always efficient at designing market conditions that are fair for both the demand and the supply side, what is the right way to achieve fair market conditions in a market that is prone to monopolistic structures? The answer is digitalization and above all – blockchain technology.
Digitalization and blockchain
The first step towards a sustainable and efficient future for the energy industry is digitalization. In fact, energy companies are among the pioneers of the digitalization era – they first started to research and adopt it in 1970, almost 50 years ago. It was evident how much value digitalization can offer to the sector – more efficient ways of data transfer, storage and analysis were explored, leading to improvements all across the supply chain.
With the recent advent of blockchain technology, new doors were opened for the energy sector. The current monopolistic situation on the market can now potentially be resolved thanks to the power of blockchain to disrupt centralized structures. Furthermore, due to the immutability and transparency of distributed ledgers, blockchain-based transactions cannot be manipulated and are disclosed only to the parties that are engaging in them. This is a crucial condition for the prevention of the issue with the one-sided power of big energy companies we discussed above – not only are the consumers protected against overpricing by the supplier, but with the implementation of the right regulations, energy companies will no longer be able to manipulate the prices and distribute the higher portion of their cost to the customer.
The question is, are energy supply companies keen on adopting blockchain for their operations and do they believe they can also benefit from the fair market conditions the technology can establish? The answer is yes – one licensed electricity provider and energy contractor on the German market with over 10 years of market experience and an existing customer base of over 50.000 people is about to become a pioneer in the sector.
The LCG Energy ICO
LCG Energy was founded in 2008 and quickly established itself as one of the few independent electricity providers on the German and Austrian markets after acquiring licensing by the Federal Network Agency for Electricity, Gas, Telecommunications, Post and Railway.
LCG Energy is planning to create a full-fledged energy ecosystem that offers its users a wide array of energy-related services through a blockchain-based platform known as the LCG platform. Initially, the platform will give the existing customers of LCG Energy the option to pay for their electricity bills using the LCG token.
Users who do not have direct access to the services of company will have various options made available to them, such as investments with LCG tokens in renewable energy projects that are carefully evaluated by the company and enlisted in land registers and other services through the wide partner network of more than 1000 providers and suppliers of LCG Energy.
LCG plans to go a step further and integrate the Smart Meters the company has been installing for the past years with blockchain technology. Smart Meters are innovative electricity meters that transmit data digitally. With their help, LCG Energy managed to reach an average energy optimization of 20% per customer and lower cost due to manual readings on site being a thing of the past. The integration of blockchain technology to the innovative electricity meters will enhance their functionality and become a potential breakthrough in the energy sector. With the integration of the Smart Meters to the LCG platform, users will have full information about the consumption and the cost of energy consumed. What is more, the aggregated data about the consumption by the Smart Meters will allow for a deep analysis and optimization suggestions with the synergy effects of blockchain, automated machine learning and artificial intelligence.
The revolution is at our doorstep
LCG Energy plans to become the first electricity provider to adopt blockchain, an inevitable change for the whole sector that can bring only benefits to both the supply and the demand side. People will no longer have to simply trust their electricity providers – they will have a solid, immutable proof of the energy they have consumed and the cost they have to carry.
Learn more about the upcoming blockchain initiative of LCG Energy on https://lcg-group.de/.
SOURCE: LCG Energy
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