Blockchain Technology's Impact on Transaction Costs Transparency and Asymmetric Information in the Energy Industry: The case of the Swedish Guarantees of Origin market

Ida Rannestig & James Sjöstrand

Student thesis: Master thesis

Abstract

Blockchain technology is experiencing increased attention due to its possibility to transform how markets operate and reducing the need for intermediaries. Important aspects of markets are transaction costs, transparency and asymmetric information and by study them, deeper knowledge of the markets can be obtained. One area where blockchain technology is being explored is within the energy industry where it has enabled peer-to-peer trading of electricity. This enables consumers to track the origin of their consumed electricity. However, when electricity trading is not conducted bilaterally, Guarantees of Origin is used as a tool for tracking electricity. Guarantees of Origins are traded on an open market but there are no publicly available prices and no common trading platform, hence most trading occurs bilaterally or by using an intermediary. In addition, there is limited amount of information regarding the costs associated with its market and trading process. This study therefore explores the characteristics of the Guarantees of Origin market and trading process in terms of amount of transaction cost, transparency and asymmetric information. Along with how blockchain technology could impact it. This was done by using a qualitative approach with a single-case research method, the chosen case being the Swedish GoO market and trading process. Data was derived from secondary sources as well as from interviewing different stakeholders in the market. The conclusions from the study show that the Guarantees of Origin market and trading process is characterised by low transparency, low amount of symmetric information as well as inducing transaction costs. This gives a skewness to only large volumes being traded. The study shows that blockchain technology could add value to the market for Guarantees of Origin, by improving informational flow resulting in enhanced transparency, whilst reducing transaction costs. However, it is questionable whether there are sufficient incentives from stakeholders in the market to advocate adoption of the technology

EducationsMSc in Finance and Strategic Management, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2018
Number of pages117
SupervisorsMichel Avital