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Blockchain technology for the renewable energy sector: A comprehensive study

Paradigm
Paradigm
Published in
44 min readJun 8, 2022

In this report, the blockchain technology applications in the renewable energy sector are explored in several aspects, starting with an overview of the current state and trends of the renewable energy sector, providing the advantages of integrating blockchain into the renewables distribution network, then exploring blockchain use cases in the energy industry, and ecosystem landscape. Afterward, the benefits and challenges of blockchain technology in the renewable energy sector are discussed.

  • Part I: Renewable energy industry overview
  • Part II: Blockchain technology in the renewable energy sector
  • Part III: Blockchain use cases in the energy industry
  • Part IV: Main blockchain players in the energy sector
  • Part V: Challenges and prospects

Overview

In an effort to achieve zero emissions by 2050, there is an ongoing transition towards energy decarbonization, decentralization and digitalization. The physical and information flows in energy systems are becoming increasingly complex and distributed, making centralized structures inefficient.

The renewable energy sources (RES) (biomass energy, hydropower, geothermal power, wind energy, and solar energy) provide opportunities in energy security, social and economic development, energy access, climate change mitigation and reduction of environmental and health impacts. Adding RES to existing distributed power supply systems requires new tools to maintain operational stability and security due to the complexity of decentralized platforms. Blockchain integration in RE is the key to realising energy sustainability.

A decentralized energy system is a new approach aimed at bringing energy sources closer to the user. Blockchain technology can give decentralized RE systems a novel approach to dominating the electricity markets. Blockchain can facilitate distributed peer-to-peer trading with reduced transaction costs, increased security through cryptography, and prosumer choice.

Part I: Renewable energy industry overview

Renewable energy (RE) is an alternative to traditional energy based on fossil fuels and is much less harmful to the environment. RE is determined by two criteria: it must come from natural sources that are replenishing but flow-limited, and it must emit little or no greenhouse gases (GHGs). RE even referred as clean energy.

RE technology has become a large and important part of the energy sector. RE is used in the heating, electricity, cooling and transport sectors. The global RE market is projected to reach $1,977.6 billion by 2030, growing at a CAGR of 8.4% from 2021 to 2030.

RES together provide about 7% of global energy demand. They are relatively more expensive than fossil fuels. The use of RES is driven by several factors, the most important of which is the attribution of global warming to carbon dioxide (CO2) emissions from the burning of fossil fuels. Rising demand for energy security, along with aversion to traditional nuclear power and the lack of progress in the nuclear power application, is expected to drive demand in the geothermal power market. The governments of various developing and developed countries have focused on the promotion of RE due to increased production efficiency, less pollution and low maintenance costs. All these factors together increase the demand for RES, thereby increasing the growth of the global RE market.

In 2020, the annual increase in renewable capacity increased by 45% to nearly 280 GW, the highest annual increase since 1999. Exceptionally high capacity additions will become the “new normal” in 2021 and 2022, with renewables accounting for 90% of new power capacity expansion on a global scale.

Average annual net renewable capacity additions, 2011–2022/ IEA

In 2020, the hydropower segment was the largest revenue generator and is expected to grow at a CAGR of 6.5% by 2030. Significant development of hydropower has occurred in Brazil.

Renewable energy market by type. Increase in renewable energy segments by 2030.

In 2021, the RE industry remained remarkably resilient. The rapid improvement in technology and the reduction in the cost of RES, as well as the increasing competitiveness of battery storage, have made RE one of the most competitive sources of energy in many areas. Despite supply chain constraints, rising shipping costs and rising prices for key commodities, installed capacity remained at an all-time high. Wind and solar capacity additions of 13.8 GW in the first eight months of 2021 are up 28% over the same period in 2020.

Renewables growth is expected to accelerate in 2022 as climate change concerns rise and environmental, social and governance (ESG) support increases, and demand for cleaner energy sources accelerates in most market segments.

Timeline of Renewable Energy Growth. Key milestones in the exponential growth for solar and wind energy.

Experts say that an additional policy support is needed to ensure that RE deployment grows fast enough to meet the goals of the Paris Agreement. All countries, including those that are not yet leaders in the sector, will need to be encouraged to roll out quickly and continue to drive down costs.

Possible pathways for solar and wind growth to align with 1.5 C goal. The graphic illustrates one potential pathway for how solar and wind could reach the climate targets needed to limit global warming to 1.5 degrees C. This is not the only shape an S-curve could take to meet the targets, nor necessarily the most likely, but it gives a general sense of what’s needed.

RES are increasingly being integrated into the energy system, and measures to increase efficiency and reduce consumption are recognized and seen as the key to success in transforming the energy system. Digital opportunities such blockchain are acting as enablers for the creation of a decentralized and democratized energy system.

Part II: Blockchain technology in the renewable energy sector

Characteristics of blockchain

The emergence of blockchain and the subsequent inception of Bitcoin in 2008 allowed researchers to explore the benefits of blockchain in various sectors such as finance, healthcare, agriculture, energy, etc. Blockchain as a technology for distributed and digital transactions allows to store data securely, as well as perform smart contracts in P2P systems.

Blockchain has the following characteristics: decentralization, permanence and anonymity. Trust in digital systems is not built by centralized institutions, but by protocols, cryptography, and computer code. Blockchain greatly improves the possibility of collaboration and interaction within these networks between organizations and individuals. The blockchain ledger contains a time-stamped chain of blocks containing a series of transactions, and each block is linked to the previous block in the chain.

How blockchains change the way we transact. Blockchain — an opportunity for energy producers and consumers? PwC Global FinTech Report.

Transactions for the negotiated contract are added to the blockchain containing the public key address of the participant, what is to be transmitted, etc., this transaction is then broadcast to the network and added to the queue for verification. When consensus is reached and the network verifies the transaction using cryptographic algorithms, the verified transaction is securely added to the existing blockchain in a timestamped block.

In terms of its potential to revolutionize the energy sector, blockchain can play an important role due to its unique features. The application of blockchain in the energy sector is vast and can have a huge impact both in terms of processes and platforms. It has many applications in the electricity supply chain process; networks and trading and marketing platforms; wholesale and P2P trade.

Blockchain in energy industry: advantages & limitations

Blockchain technology provides opportunities and can bring far-reaching changes in the energy sector, as well as risks for current models in the energy industry.

The most important arguments in favor of the use of blockchain technology in the energy market include the simplification and automation of processes, greater transparency, and lower transaction costs by eliminating intermediaries. However, there are also some arguments against the use of blockchain technology in the energy market, which include, in particular, low transaction speed, illegal activities, as well as consumption of energy and resources. In addition, there are fundamental legal issues such as data protection. By many estimates, blockchain technology can have a significant impact on the energy industry in the coming years and thus create a new energy transition dynamic.

Advantages/strengths of blockchain technology in energy: Disintermediation and decentralization; Data integrity; Transparency; Trust; Automation; Security; Cost reduction; Immutability.

Key Benefits of Blockchain in Energy.

Potential benefits of a blockchain integrated energy efficiency market: Since the RE market is expected to grow over time, blockchain technology can greatly improve overall administrative processes, transparency, cost, and trust between various stakeholders. Some of the key benefits:

  • Lower utility bills and/or lower transaction costs in the gas or electricity market, which reduces the need for working capital. Cost reduction is also associated with more information for utilities and grid operators for the integration of RES capacity into the grid. Blockchain does not require intermediaries and the transaction can take place directly, which reduces the complexity of the process and the costs associated with it. Thus, it can significantly reduce the transaction costs of administering energy-related contracts.
  • New opportunities for communication between energy devices such as water heaters, electric vehicles, batteries, solar photovoltaic installations, etc. with a grid operator (smart grids).
  • Access to affordable energy for underserved communities through local and decentralized renewables grids.
  • Encryption of energy savings: Encryption is the process of converting data or any information into a code to prevent unauthorized access. Encrypting the energy savings and sharing it via the blockchain can make the market secure. Baseline energy consumption and savings data is one of the most important assets for the energy efficiency market, and several transactions are based on it, from bank charges to fees paid to energy service companies and technology providers.
  • Exchange of energy savings: Blockchain technology seems to have some potential (in cases where energy savings are exchanged for a new energy efficient product that can be purchased), as energy savings data can be encrypted and stored on a blockchain platform to offset the electricity bill or purchasing additional energy services.
  • Proper assessment of energy savings: The assessment of energy efficiency has been very difficult, since in many cases the benefits of energy efficiency cannot be technically measured or evaluated. Blockchain, along with information and communication technologies and process automation, can help to some extent in valuing the energy savings and associated benefits.
  • Increased transparency: As blockchain is a distributed ledger technology, data can be transferred transparently on a secure and tamper-proof platform.Tampering with the data shared on a blockchain platform is a very expensive and technically infeasible process. Blockchain is a trustless system and all data passed to other blocks is verified by all blocks in the chain, which means that all blocks will have information regarding the energy savings data.
  • Increased reliability: Trust is important especially in relation to data management, where data can be stored either in one location or in multiple ledgers owned by different stakeholders without any process automation. If the data is stored at a single point, it will be very difficult to track and verify it due to the time it takes to collect the necessary information. Since blockchain is a trustless distributed ledger technology in which data is stored in different blocks, this can greatly increase the reliability of the entire system.
  • Increased security and customer trust. Blockchain is secured through its cryptographic processes, which means that customers’ energy saving data, information from financial institutions, or data relating to any stakeholders in the energy market will be encrypted. With smart contract features, blockchain can also make the process automated rather than manual, which can help increase customer trust in the system.

Blockchain potential positive impact on energy company operations: Blockchain technologies could also be applied to a variety of use cases related to the operations and business processes of energy companies. Potential applications and aspects of business models that might be affected:

  • Billing: Blockchain, smart contracts and smart meters can implement automated billing for consumers and distributed generators. Utilities can benefit from the potential of energy micropayments, payment platforms for prepaid meters.
  • Sales and marketing. Sales practices may change according to consumers’ energy profile, individual preferences and environmental concerns. Blockchain, combined with AI such as machine learning, can determine energy consumption patterns and therefore enable the provision of value-added energy products.
  • Trading and markets: Blockchain-enabled distributed trading platforms can might disrupt market operations such as wholesale market management, commodity trading, and risk management. Blockchain systems are currently being developed for green certificates trading as well.
  • Automation: Blockchain can improve the management of decentralized energy systems and microgrids. The introduction of local energy marketplaces based on localized P2P energy trading or distributed platforms can significantly increase in-house energy production and consumption, also known as off-meter activity, potentially impacting revenues and tariffs.
  • Smart grid applications and data communication: Blockchain can potentially be used to link smart devices, transfer or store data. Smart devices on the smart grid include smart meters, advanced sensors, network monitoring equipment, energy monitoring and management systems, and smart home energy controllers and building monitoring systems. In addition to ensuring secure data transmission, smart grid applications can further benefit from the data standardization enabled by blockchain technology.
  • Grid governance: Blockchain can help manage decentralized networks, flexible services, or asset management. Blockchain can provide integrated flexible trading platforms and optimize flexible resources that could otherwise lead to costly network upgrades. As a result, the blockchain can also affect the revenues and tariffs for using the network.
  • Security and identity management. Transaction protection and security can benefit from cryptographic methods. Blockchain can protect privacy, data confidentiality and identity management.
  • Resource sharing: Blockchain can offer charging solutions for sharing resources between multiple users, such as sharing electric vehicle (EV) charging infrastructure, data, or a shared centralized community storage.
  • Competition: Smart contracts have the potential to make it easier and faster to switch energy suppliers. Increasing market mobility could increase competition and potentially lower energy tariffs.
  • Transparency. Immutable records and transparent processes can greatly improve auditing and compliance.

Limitations/challenges for large scale adoption in energy:

  • Scalability and power consumption: Due to its design, public blockchain typically requires high power consumption per transaction, and there can be long delays before a transaction is confirmed.
  • Lack of clear and consistent regulation: While work on regulations has already begun in different regions, such as Japan and Europe, the lack of blockchain procedures or global regulations is a key barrier to blockchain adoption in the energy sector. Regulations are needed to manage the future decentralized energy system, regulate electricity tariffs and resolve possible disputes.
  • Limited grid infrastructure: Optimizing the use of blockchain in the energy sector requires a more interconnected smart grid where new players can participate in existing smart meters.
  • Data protection: Attackers who control most of the network can interrupt the recording of new blocks and prevent transactions from completing. This type of attack poses a higher risk for smaller networks, as the processing power required to take over 51% of large blockchain would be enormous.

Therefore, blockchain has the potential to transform the energy efficiency market, as well as potentially disrupt established business models and traditional roles for energy companies. However, there are still some issues that need to be solved.

Blockchain integration into the renewables distribution network

The energy sector is in transition from traditional to smart systems and faces a number of challenges associated with integrating distributed RES in the existing centralized energy system.

Decentralization of RES has become a means of ensuring energy sustainability due to the revolution in blockchain technology. RES have undergone remarkable growth. Although RES are better for the environment than fossil fuels, their production is unpredictable, which poses a major challenge for grid operators. The current power management strategy includes centralized power generation, which can be located in areas where resources are most available. To transport electricity from a station to load centers, large stations require significant capital costs and may require additional transmission lines.

The main drivers that prompted distributed generation to become the major or backup source of power for many companies and organizations are:

  • Transmission and distribution costs: The average cost of electricity provided includes up to 30% of the total cost, including both transmission and distribution. Low voltage distribution is most affordable for industrial customers, while high voltage distribution is most expensive for small and medium businesses.
  • Environmental impact: Due to the heavy reliance on coal and, to a lesser extent, natural gas, the centralized energy system has a significant negative impact on the environment.
  • Rural electrification. Rural electrification is challenging in an integrated power system due to two factors. If you have a small consumption, connecting remote locations with overhead lines may not be cost-effective due to long distances. As distance traveled increases, transmission and distribution losses increase, exacerbating this effect. Therefore, the cost of bringing electricity to rural areas is prohibitive.
  • Energy efficiency: The efficiency of generated power from the long distances decreases drastically.
  • Security and reliability: Since monitoring power lines is nearly impossible, security is compromised, making centralized power systems less reliable.

A recent study proposed a new framework for integrating blockchain into a RE distribution network. The participant responsible for the operation of the network should have complete control and plan the structure of the blockchain, while transactions between prosumers and consumers are organized through smart contracts.

A structure for using blockchain technology in the distribution network in the presence of RE systems.

The transition goes beyond the simple production of energy from RES, it embodies the transition to decentralized generation, when users become prosumers and generate their electricity from RES. Renewable intermittent generation is testing the existing power supply system in unimaginable ways. These fluctuations can lead to instability in the power supply. The growing demand for electricity can only lead to an increase in the current crop of challenges. Therefore, there is a strong need for innovative grid management architectures that can support energy production and consumption.

Smart grid decentralization

A smart grid is an electric network that enables a two-way communication transaction between the grid and its customers. It uses information, bi-directional, cyber-secure communication technologies and intelligent software applications across the spectrum of the energy system in an integrated manner, from generation and storage to the endpoints of electricity consumption.

A smart grid implies decentralization, as well as the consistent use of sensors and information and communications technology. A smart grid is more capable of meeting the current and future needs of energy consumers for electricity through the use of technologies like smart contracts and smart meters.

The benefits of a smart grid compared to a traditional energy grid:

  1. Reliability: Power outages occur less frequently due to the decentralized nature of smart grids — there is no single point of failure and power is restored more quickly in the event of a power outage.
  2. Accessibility: Small-scale, highly localized energy generation and transmission makes the energy market more accessible even to remote consumers.
  3. Efficiency: Smart grids employ smart meters and use RES and energy efficient sources.
  4. Lower cost: Lower management costs and smaller operations result in a more efficient supply chain and therefore lower prices for energy consumers.

Digitalization is transforming the electricity market and brings many new transactions between participants and subsystems. Blockchain technology could be used to empower distributed and decentralized electricity markets, can make a significant contribution to the safe, efficient and transparent execution of these transactions.

Application scenarios include:

  • Provision of energy control and grid-stabilising measures;
  • Electricity trading at macro and meso levels, as well as models of electricity supply to neighbors and tenants;
  • Certification and proof of origin of RES (type, place and time of energy generation);
  • Monitoring the energy consumption behavior of networked smart devices in real time;
  • Automation of the billing process, including the payment of fees, charges, etc., including cross-sectoral;
  • Transparent provision of reliable data from the energy sector, such as consumption statistics or statistics on energy production from RES;
  • Asset management of distribution network operators and utilities.

Enabling virtual currencies for payments is one of the most important applications of blockchain in the smart grid. This has inspired companies to develop cryptocurrency-based billing and metering systems, with some offering incentives for consumers who pay with bitcoin rather than cash. These blockchain-based energy exchange tokens enable P2P electricity transactions, allowing users to spend energy tokens from their e-wallets. This allows home prosumers and consumers to exchange RE.

The first real application of blockchain in RE began in April 2016 with the Brooklyn MicroGrid project, which demonstrated the technological feasibility of blockchain in microgrids. The initial pilot project, which involved prosumers and customers, represented the first ever use of a blockchain to record energy transactions. The platform was built using Ethereum-based smart contracts, allowing consumers to buy surplus RE from prosumers through a token-based transaction mechanism. Excess energy absorbed by prosumers through rooftop photovoltaic (PV) panels is converted into tokens via smart meters installed in their homes, which can be used directly for energy market trading.

BrooklynGrid project.

The platform keeps track of the transaction mode in energy units or tokens, depending on the user’s preferences. Detailed information about each transaction, such as the persons involved, the amount of energy consumed/sold, and the relevant contract terms, are stored in the ledger in chronological order. In competitive bidding, RE is sold to the highest bidder. Such efforts could change the way people buy and sell energy.

Part III: Blockchain use cases in the energy sector

When it comes to energy industry, blockchain technology has proven to be one of the significant technological breakthroughs of recent times. Blockchain use cases could be classified into eight groups according to their purpose and field of activity:

  • metering/billing and security;
  • cryptocurrencies, tokens and investment;
  • decentralised energy trading;
  • green certificates and carbon trading;
  • grid management;
  • IoT, smart devices, automation and asset management;
  • electric e-mobility;
  • general purpose initiatives.

Recent studies have shown that approximately one in three use cases is associated with decentralized energy trading, which includes wholesale, retail, and P2P energy trading initiatives. The second most popular category is cryptocurrencies, tokens, and investments, which account for one in five use cases. This is followed by IoT, smart devices, automation and asset management, and accounting, billing and security, accounting for 11% and 9% of total use cases, respectively. Other projects account for 6–7% of the total:

Blockchain use case classification according to their activity field.

Blockchain activities can also be classified according to the platform used and consensus algorithms if the information has become public. 60% are developing Ethereum-based solutions as a starting point, and 55% have used PoW algorithms.

Blockchain activities could also be classified according to the platform and consensus algorithms used. 60% are as a starting point developing solutions based on Ethereum, while 55% have used PoW algorithms.

Blockchain use cases in the energy sector according to consensus algorithm used.

In addition, most developers are oriented towards private permissioned platforms that are most attractive to enterprises. Energy Web (also an Ethereum-based blockchain specifically designed for the energy sector) explores the 10% of projects that have publicly disclosed the platform they prefer. Energy Web uses PoAu consensus, a preferred solution for energy utility companiesa preferred solution for energy utility companies. Other popular platforms include Hyperledger and Tendermint. Future development projects may see a shift towards more scalable, faster, and energy efficient blockchain that will explore solutions like PoS or BFT.

Blockchain use cases in the energy sector according to blockchain platform useds.

1. Metering, billing and security

Several research initiatives are exploring the use of blockchain technology in metering and billing processes. When integrated with metering infrastructure, blockchain enables automated billing of energy services for consumers and distributed producers, with the potential to reduce administrative costs. Blockchain provides tracking of energy production and consumption at each endpoint, informing consumers about the origin and cost of their energy supply, making energy payments more transparent. This opens up opportunities to stimulate behavior change. In addition, blockchain security features can potentially be used to protect data privacy, identity management.

One of the first blockchain applications in the energy sector was the acceptance of cryptocurrencies to pay for energy and electricity. In fact, more and more companies are accepting payments with crypto, including several companies in the energy industry. For example, BAS Nederland became the first energy company to accept bitcoin as a new form of payment for electricity bills. This was quickly followed by other utility companies such as Enercity and Elegant. With Enercity, residential customers can make payments over the Internet and use the automatic exchange of bitcoins for euros. Elegant introduced payments in crypto for the provision of energy services, including for gas and electricity.

In terms of emerging challenges, a key prerequisite for applying blockchain technologies for smart meters is having a working smart meter infrastructure. For example, in the UK, concerns about the creation of a National Data Communication Company (DCC) that would provide a single point for collecting and distributing smart meter data to authorised users have significantly delayed the deployment of the SMETS2 smart metering standard.

Blockchain technology promises a more decentralized way of managing smart meter data that avoids the need for a single data authority and therefore avoids a single point of failure. In addition, the integration of smart meters and distributed ledgers will incur significant development costs, especially since smart meter infrastructure is already being deployed in several countries without blockchain features. In addition, it will require the development of new standards to ensure interoperability.

2. Cryptocurrencies, tokens and investment

Cryptocurrencies are by far one of the most popular and understood blockchain applications, with more and more new cryptocurrencies and energy tokens appearing on the market. Issuing a cryptocurrency specifically for an energy application may have some advantages, since the allocation and use of this cryptocurrency can be left to those who have the largest stake in the system or provide the most public benefit service (for example, in a RE application, generators can be rewarded with more crypto units if they generate the least carbon-intensive energy). Cryptocurrencies are used as a method of “tokenizing” assets in order to create new markets or new business models based on joint ownership and sharing of assets. An increasing number of enterprises are using cryptocurrencies as a tool to attract investment and funding (also known as Initial Coin Offering or ICO). New cryptocurrencies can also be used to reward desired behavior and facilitate investment in RE.

RE cryptocurrencies aim to motivate solar prosumers by rewarding them. This is similar to how bitcoin encourages miners to allocate computing power to the network by incentivizing them with bitcoin for each mined block of transactions.

Cryptocurrencies developed to encourage the use of RES:

  • SolarCoins: SolarCoin pays people with an alternative digital currency for generating solar energy. It pays one coin for one megawatt-hour of solar electricity.
  • M-PAYG: M-PAYG aims to significantly improve access to RE for the poor in developing countries by digitizing access to energy. The M-PAYG infrastructure includes a prepaid solar power solution that provides individuals and households with access to solar power through small mobile payments.
  • Coinfy: Coinfy provides a blockchain-based payment processing and trading platform, which facilitates transactions across national and geographic borders. Because blockchain payments entail minimal transaction fees, energy trading between off-grid solar companies and people without access to energy sources has become possible in developing countries.
  • KWHCoin: KWHCoin is a blockchain based community, ecosystem and cryptocurrency based on units of RE. In this trading system, physical units of kWh of energy are aggregated from multiple sources of origin, including smart meters, sensor readings, and green button data. This measurable output is tokenized on the blockchain to create KWH tokens.

Specific examples include 4NEW, a UK startup offering a new energy token called KWATT. A 1 KWATT coin represents 1kWh of electricity per year in a waste to power energy plant co-located with a cryptocurrency mining farm. Coin holders can either decide to sell the energy of the UK National Grid or use it to mine other cryptocurrencies such as Bitcoin and Ethereum. Similarly to 4New, a US-based startup PRTI intends to build a waste-to-energy plant that will mine cryptocurrencies.

In general, when launching a new cryptocurrency, a number of key issues need to be addressed. One of the main concerns is the overhead of implementing a cryptocurrency system, as well as the issue of user trust in the long-term value of the new currency. For example, RE producers may prefer fiat currency if they believe that the value of the cryptocurrency will not be enough to pay off their investment in practice.

3. Decentralised energy trading

To date, decentralized energy trading has attracted the largest number of blockchain transactions. Several applications are being developed, such as 1) wholesale energy trading, 2) platforms that provide end-consumers with access to wholesale energy markets, and 3) P2P energy trading platforms between prosumers/consumers.

In wholesale energy trading, blockchain can reduce transaction costs while providing transparent data for access by multiple parties, including authorities that can certify compliance. Blockchain can eliminate intermediaries, reduce transaction costs and possibly trade volumes, and thus allow small consumers to participate in energy markets. Limitations in this area are related to the scalability and transaction speed that the blockchain system can support. In addition, a critical issue is that commercially sensitive data is open-access to all partners.

Platforms providing end-consumers with access to energy markets can unlock new flexibility services for the grid. In addition, such initiatives can increase consumer awareness and choices regarding energy supply and can lead to faster switching and increased competition.

Local P2P energy markets can provide a solution for local energy system optimization that can reduce the load on electrical networks or delay costly reinforcements. In addition, local markets can provide RE producers with additional revenue streams and can potentially reduce energy costs for end consumers. Local marketplaces may seriously disrupt the structure of energy markets and might even increase grid defection. The balance between supply and demand is a critical issue that blockchain systems cannot solve alone. Solving such problems will require a combination of AI, machine learning and predictive analytics.

1. Wholesale energy trading and supply

A potential blockchain application is the use in wholesale autonomous trading procedures. The term wholesale energy refers to energy, such as electricity that is traded by numerous participants. Wholesale energy markets consist of complex procedures that require third-party intermediaries such as brokers, trading agents, exchanges, pricing agents, logistics service providers, banks, and regulators.Trading platforms and financial institutions such as banks use the wholesale markets to provide the needed liquidity, manage risk, optimize assets, and speculate on the price movements of wholesale energy. It allows producers and retailers of energy to buy and sell energy products. It allows retailers to avail themselves of to bid for output from competing generators. This approach drives innovation and gives consumers a buying choice. Wholesale markets provide a platform for a balance between energy supply and demand in real-time, with the intent of stabilizing prices as well as keeping prices low.

Energy and commodity transition life cycle. Ernst & Young. Overview of blockchain for energy and commodity trading.

Distributed ledger technologies and smart contracts can allow a generating unit to directly trade with a consumer or an energy retail supplier via autonomous trading agents eliminating intermediaries. The agent would search for the best deal in the marketplace that satisfies a consumer’s demand for a given time period. The agreement will be securely recorded on the blockchain and automatically executed at the specified delivery time. Payments will occur automatically at the time of delivery, as specified in the agreed contract. Transaction data would be available to all parties and the system operator through a single point of access. Such use cases will require fundamental changes in the regulatory framework, which could seriously affect the role of intermediaries such as brokers, exchanges and trading agencies.

PwC global power & utilities, Blockchain — an opportunity for energy producers and consumers?

Blockchain for wholesale energy trading has the potential to transform the current energy market structure. However, realising this vision in practice will need to overcome a number of significant roadblock and technical challenges:

  • The number of transactions that can be done on a blockchain is often an order of magnitude smaller than what is possible with conventional electronic payments, especially those that use PoW algorithms to reach consensus. For example, the Bitcoin network can process up to tens of transactions per second, rather than the thousands or more transactions per second that electronic payment systems used in banking process every day. PoS and Byzantine fault-tolerance systems (such as Ethereum or Tendermint) can be a potential solution to this problem, however, the implementation of such solutions can lead to significant overhead and requires careful design and implementation.
  • A radical transformation of existing energy market structures in a short period of time can be a difficult task. For this reason, many existing blockchain projects tend to focus on only one part of the whole energy market, which is identified as the most easily amenable to blockchain implementation, such as imbalance settlement.

Blockchain initiatives in the wholesale energy market:

2. Energy trading support for small generators and end-consumers

Blockchain projects aimed at providing direct access of small and medium consumers to central energy markets:

  • Grid+ aims to develop a blockchain platform that will give direct access of consumers to wholesale electricity markets. Grid+ acts like an energy retail supplier that can provide consumers with savings in energy bills with the help of the Grid+Agent, an agent that makes automated smart decisions on energy trading on behalf of consumers.
  • Drift is an energy supply company that aims to provide customers with cheaper electricity prices and more transparent energy bills. Drift uses a combination of smart algorithms, based on AI and machine learning, high-frequency trading, and blockchains with application in retail electricity markets. Consumers can purchase electricity in a P2P marketplace from local renewable or conventional sources. P2P transactions are recorded and processed by blockchain.
  • Restart Energy, a Romanian energy supplier company, has developed a blockchain platform that enables bilateral transactions between consumers and RE producers.
  • SunContract has launched a decentralized platform for energy trading between generating units and consumers in Slovenia. Consumers can choose their energy supplier.

3. Blockchain trading for utilities and energy system stakeholders

Projects aimed to provide platforms open to all energy system stakeholders:

  • Bittwatt aims to develop a digital platform based on Ethereum, open to distribution and transmission system operators, regulators, energy suppliers, producers and consumers. Blockchain protocols are used to share and synchronise near real-time operational information between stakeholders enabling a decentralised service for energy delivery, balancing, metering and billing. The platform uses AI to achieve demand response services and market forecasts. In the case of P2P settlements Bittwatt proposes the use of a new cryptocurrency BWT.
  • Clearwatts is developing a distributed platform where different stakeholders (RE generators, utilities, grid operators, regulators) can share reliable information on a real-time basis for energy trading and settlement of power purchase agreements, such as price information. They collaborate with blockchain developers BigchainDB and Spherity, and developed a blockchain database solution that achieves simultaneously desired blockchain features (decentralisation, immutability etc.) with low latency and high transaction rates.

4. P2P trading in community projects and microgrids

P2P trading involves more than one participant in the buying and selling of energy on an agreed contract. Potential use cases in this category are decentralised trading in microgrids, bilateral transactions between prosumers and consumers and business-to-business (B2B) energy trading. This often involves solar energy as it is the most commonly produced source of RE. Blockchain could also provide solutions in demand response services, coordination of VPPs, grid and network management and control, management of energy storage systems, control of decentralised energy systems, community energy projects and coordination of RES power plant portfolio.

Blockchain P2P network.

The first recorded P2P energy trading took place in 2016 through the Ethereum blockchain. Since then, this idea has spread around the world. Energy trading platforms are mainly focused on business models and energy markets that play the role of suppliers in the RE industry. The targets of these platforms are local government systems and ICTs for microgrids.

Innovative P2P solutions in RES:

  • Vandebron is an Amsterdam, Netherlands-based green energy provider that provides green power and regular gas to residential and commercial users. No energy is produced by the company; instead, it sells the energy produced by other companies. Vandebron allows participants to trade directly from independent energy producers.
  • Suncontract is a blockchain-based P2P energy trading platform that offers numerous features to buy and sell RE. Within the EU — Slovenia, the SunContract platform now has over 5000 registered customers. The company’s mission is to create Global Energy sharing and trading Marketplace (GEM) that facilitate very customer to interact directly with one another in absence of intermediaries and allowing them to become more energy self-sufficient.
  • Bankymoon is a provider of prepaid meters that are blockchain-aware. The goal is to make funding for energy, water, and gas available to everyone in the world. By transferring money to the meter in several cryptocurrencies, “loading” the meters is possible.
  • The TransActive Grid platform was created by LO3 Energy and is built on Ethereum and smart contracts. In a distributed grid and transactive energy space, the platform is geared toward multiple business models. P2P energy transactions, demand response, emergency management, and other purposes are all possible because of this technology. A computer and an electric meter are used to create TransActive Grid elements (TAG-e). The TAG-e are responsible for monitoring energy production and consumption, distributing this data to other TAG-e in the network, and taking action based on this data. The goal is to build a smart microgrid based on blockchain. LO3 Energy and Centrica are developing a local energy market in the network constrained area of Cornwall, UK, that aims to reduce high renewable curtailment.
  • Brooklyn Microgrid, a peer-to-peer energy market for locally produced RE. This concept revolutionises the way energy is shared and distributed.
Brooklyn Microgrid peer-to-peer retail platform
  • PowerLedger creates a market trading and clearing mechanism using blockchain technology. In microgrids and the distribution network, RE producers can sell their excess energy at a predetermined price. A portion of the energy traded across the distribution network is paid to the DSOs that manage the system.
Power Ledger peer-to-peer exchange platform
  • Electron, a startup established in the UK, creates Ethereum-based energy solutions that integrate with existing systems. The Meter Registration Platform (MRP) is a shared registration platform for many types of assets, such as gas and electricity supply points, that allows for near-real-time switching of energy suppliers. The Flexibility Trading Platform (FTP) is a demand-side response exchange platform that allows collaborative trading similar to P2P trading. Another area of focus is Smart Meter Data Privacy (SMDP), which uses encryption techniques to enable value extraction from smart meter data while also protecting the privacy of users’ data.
  • EnergieSudwest and Karlsruhe Institute of Technology (KIT) are developing a local energy market in the Lazarettgarten microgrid in Landau, Germany. Solar panels and energy storage devices are part of the microgrid. The project focuses on market mechanism design and regulatory changes required for further roll-out of similar local marketplaces. With Allgauer Uberlandwerk they will test blockchain technologies in the Allgau microgrid. They aim to investigate the interest of consumers in such markets and how local microgrids and marketplaces can be integrated into existing energy systems.

The P2P energy trading market allows participants to save the cost of energy, which results in a value paid by the participant to the distributor through an aggregator. The revolution towards the P2P power exchange system makes it possible to produce, consume and sell excess electricity capacity, as is done in the commodity market. In addition, it makes it easier to connect power loads from exhibitors to retailers as well as the wholesale market.

As a result of the rapid development of blockchain technology, P2P energy trading is now a widely accepted in the decentralised RE sector, providing benefits to previously underserved individuals and communities worldwide. Although P2P energy trading has not yet reached the stage of mass integration, this idea is seen as a fundamental component of the future of energy trading.

4. Green certificates and carbon trading

Blockchain technology can become a tool for managing certificates. It provides trust, a high level of security, speed and lower transaction costs, and simplicity compared to today’s complex and expensive outsourced management systems.

Several developers are working on the use of blockchain technologies for renewable or carbon certificates, their automatic issuance and trading. Current market structures for renewable certificates, carbon credits, or overall environmental performance are fragmented and complex. Small energy producers are in practice excluded from applying for carbon credits due to the high costs associated with this procedure. In addition, audit processes are often performed manually by a central authority and are prone to error and even fraud.

Blockchain can automate the issuance of green certificates, reduce transaction costs, create a global market for such assets, increase market transparency and prevent double spending. The limitation for the blockchain in this area is the certification and verification of the services provided. For example, smart meters integrated with blockchain solutions can automatically certify energy production, but the possibility of interfering with such systems has not yet been explored.

Initiatives in this sphere:

  • Nasdaq, the first global stock exchange to explore DLT, ran a successful green certificates trading pilot. Solar producers were granted certificates with technology developed by Filament, which were next traded online via Nasdaq’s Linq platform.
  • Veridium has launched an Ethereum-based platform for trading carbon credits and natural capital assets through their token TRG.
  • DAO IPCI is a Russian startup company that aims to provide integrated services for carbon and environmental assets based on blockchain and smart contracts. They aim to develop an open-source blockchain solution that will create an immutable, trusted and decentralised platform that will allow for more efficient coordination between stakeholders.
  • Evolution Energie is experimenting with blockchain to track and certify renewable energy.

Blockchain technology can be an enabler for new incentive certificates where no one wants to manage them, or where no authority at a more local level, such as a city, is considering launching and managing certificates, or when the complexity of implementing a certificate system is an obstacle to its launch.

5. Grid management

Several blockchain developers are working to find innovative solutions based on automation and decentralized grid management and control. Potential benefits in this area are the potential to improve the balance between supply and demand, better coordination between transmission and distribution system, automatic verification of grid assets, and improved visibility of distributed resources and assets.

Blockchain faces a number of challenges here. First, blockchain systems need to be significantly improved to provide higher throughput and transaction speed, which would allow real-time verification. Metering, grid infrastructure, control and communication systems already deployed in the power grids need to be connected to distributed ledgers. This will result in the creation of massive new datasets that need to be carefully managed and protected from potential cyberattacks.

Initiatives in this sphere:

  • Gridchain (developed by PONTON), an innovative pilot software based on blockchain technology that simulates future processes for real-time grid management. The tool aims to achieve greater coordination between TSOs, aggregators and DSOs and to provide solutions for grid congestion management. Moreover, Gridchain aims to contribute to the European standardisation of communication technologies for future smart grids.

For grid operators there is potential for blockchain technology as it enables to facilitate processes that are distributed across organisations like TSOs (transmission system operators), DSOs (distribution system operators), aggregators (pooling the generation capacity of a large number of small units), suppliers, balancing responsible parties, balancing group coordinators, etc.

A typical TSO-driven processes is to request balancing energy in order to keep grid load and frequency stable. This process has been practised for a long time now and it is deeply entrenched in all participants´ IT systems. On the other hand, DSOs continuously monitor load of the distribution grid and take measures to keep it stable at the local level. They need to coordinate planned and unplanned local outages and exceptional congestion situations within local grids due to an increased share of generation from renewables — which is expected to further increase in the future.

6. IoT, smart devices, automation and asset management

One of the most important applications of blockchain technology is associated with IoT technology, which is widely used in smart grids. Furthermore, IoT-based blockchain infrastructure requires a lot of devices, storage, servers, and local bridges to integrate all IoT components into smart grids. Meanwhile, a server is used to receive data from various sensors, manage the operation of IoT devices, and control different components in the blockchain. In addition, a large amount of data can be stored in the hardware or software storage. On the other hand, consumers can interact with the blockchain through their computers to be informed of any changes in the data transactions. Moreover, local bridges are used to facilitate the connection between IoT devices and servers using communication protocols.

Diagram of the infrastructure of using IoT devices according to the blockchain technology in smart grids.

Several research projects, startups and trials have already been deployed. Initiatives in this sphere:

General IoT Stack Layers.
  • Slock.it aims to develop IoT applications and a platform for sharing economy, named the Universal Sharing Network.
  • Dajie offers a software solution that is installed in IoT devices or own integrated hardware and software IoT devices. Energy generated by prosumers creates coins that are stored in a digital wallet. One coin corresponds to every kWh generated. Coins can afterwards be used to claim carbon credits, pay for energy services or used to facilitate P2P energy trading in local communities and microgrids.

7. Electric e-mobility

Electric vehicles and e-mobility are natural application for blockchain. The decentralized nature of transport, with many parties (vehicles, drivers, charging stations, passengers using on-demand mobility services such as Uber of Lyft) lends itself naturally to blockchain implementations.

The benefits of decentralization here include: removing the need for a centrally managed EV charging infrastructure, resiliency, and eliminating pricing and collusion between charging stations or transportation providers. However, even in this application, blockchain will have to overcome serious privacy and security issues. Blockchain solutions aim to create incentives for privately-developed EV charging infrastructure. With a blockchain-enabled solution, EV owners can achieve greater transparency regarding electricity fees and potentially have more choice when choosing an energy source. Moreover, blockchain offers a unique verification and communication platform that will work in different locations, including when traveling abroad, as an advantage over other solutions. For network operators, blockchain systems offer a market solution that can be used to optimize the management and coordination of EV charging.

Interactions between blockchain and EVs in the smart grid, including secure financial transactions and secure data transactions.

Blockchain technologies have been explored by a large number of companies for their use in EV applications:

  • Share&Charge platform allows P2P transactions between EV drivers and private EV charging infrastructure owners. The EV charging stations network runs on public Ethereum and smart contracts. Users have an electronic wallet that gets access to real-time information on prices and transactions within the network. Any member of the network can monitor and track all transactions. The platform achieves automated billing and can incentivise building EV charging infrastructure, as privately owned charging stations can generate revenue streams by enabling other drivers to charge EVs at their points. Share& Charge joined the Energy Web Foundation initiative and aims to develop EV charging solutions. They have also partnered with Oxygen Initiative, a US-based company, to use their Share&Charge platform for real-time payment settlement in EV charging stations.
Share & Charge digital wallet for drivers of electric vehicles

The opportunities for blockchain innovation in e-mobility applications are significant, but some challenges need to be addressed. Blockchains are, by their nature, public ledgers, so the daily location and movement of EV users need to be anonymized to protect their privacy. Moreover, blockchains in e-mobility systems would have to be tamper-proof to prevent attackers from compromising the security of EV. Finally, given that EVs can interact with the grid and be charged at multiple locations, the development of interoperability standards is critical to achieving the benefits that blockchain can offer in this area.

8. General purpose initiatives developing underpinning technology

In addition to commercial activities focused on specific application areas, several organizations have established collaborative platforms that aim to explore the potential of blockchain in various use cases. Among them is an initiative by Eurelectric, the European Electricity Industry Association, which has launched an eexpert platform that aims to explore the potential of the blockchain technology in the electricity value chain, including generation, trade, supply and networks. [see Eurelectric’s Blockchain platform report]

Part IV: Main blockchain players in the energy sector

To make energy grids accessible, affordable, and sustainable, many startups around the world are already using blockchain to champion this course by way of enhancing and encouraging data sharing in real-time. The concept behind linking energy grids to the blockchain is quite simple; it works on the principle that, when you give consumers control over where they obtain their energy as well as the production data, it drives competition, thereby promoting sustainability, in contrast to centralized energy systems.

Various players in the energy field experiment with blockchain

Top companies operating in blockchain in energy market by revenue

  1. SAP (US$31.70 Billion): The “Green Energy Tracking and Distribution System” was developed as part of a WIPRO-SAP co-innovation programme that used SAP Cloud Platform Blockchain (GETDS). The solution meets the needs of the rapidly evolving green energy industry, which requires energy retailers and DSOs to develop new business models that encourage customers to become prosumers while also meeting regulatory requirements to consume energy from local green sources.
  2. Acciona (US$7481 Million): A Spanish multinational firm, created the energy blockchain platform (together with FlexiDAO) to ensure that green hydrogen comes from RES. Blockchain platform, GreenH2chain will allow users to verify and visualize the green hydrogen value chain from anywhere in the world in real time.
  3. WePower (US$23 Million): An Australian-based blockchain firm that connects energy buyers (investors and end users) directly with green energy providers, allowing them to purchase energy ahead of time at below-market pricing. The company has developed Ethereum Smart Energy contract tokens, which it sells to customers through an e-commerce platform.
  4. Powerledger (US$5 Million): Australian blockchain company, software and technology startup dedicated to making RE more accessible. In 2021, company introduced its next generation energy blockchain by migrating its platform to more energy efficient Solana from Ethereum. This offers higher transaction throughput and speed.
  5. Greeneum (US$5 Million): A blockchain company that uses advance technology to facilitate the production, and distribution of clean and sustainable energy. Green Certificates and Carbon Credits in the form of cryptocurrency are awarded by the Israeli firm for every watt-hour of RE generated, rewarding users to save energy and adopt eco-friendly lives. The Greeneum Network is dedicated to combining Blockchain and customised machine learning to accelerate the global transition to clean energy.

Distributed Autonomous Energy Organizations (DAEOs)

The ongoing trend towards more peer-peer and public energy systems, in which energy prosumers are increasingly empowered to control their own energy supply, could be a key driver for smart contract adoption. For instance, future community energy projects could be supported by blockchain-enabled decentralized autonomous organizations (DAOs), which use smart contracts to self-enforce mutual agreements between their members.

The combination of blockchain smart contracts with machine learning and AI algorithms opens up opportunities for distributed autonomous energy organizations (DAEOs). DAEO could provide a platform for a more distributed autonomous system that helps improve the speed, scale, security, and autonomy of complex distributed IoT environments. The need for third parties to perform complex energy transactions can be reduced when autonomous smart contract can execute and exchange value and services via an autonomous agent or even a DAEO platform. Smart contract design and DAEOs can also help build machine-learning algorithms. As with many PoW blockchain technologies, DAEO does not need to have a single user with control. Blockchain platforms and related smart contracts could help create control mechanisms to keep control of a DAEO behind the autonomous AI agent. Blockchain technology can help protect the sensitive data needed to inform the AI ​​in a DAEO, as the data would be cryptographically signed and stored securely in a distributed ledger, providing access, data provenance, and auditability while maintaining privacy. This is especially important if the AI ​​is to be informed of sensitive or personal information.

One of the current needs to realize the potential of DAEO is the development of a secure blockchain-based smart contract mechanism to facilitate more distributed and complex energy transactions. Part of the problem is that there is no agreed upon ttransactive energy methodology or best practice for connecting different endloads across multiple blockchains with hybrid blockchain design. If such a solution is implemented, it would help remove restrictions on the use of any particular blockchain by the country’s utility and energy companies.

Distributed autonomous energy organization (Mylrea & Gourisetti, 2017).

DAEO could help to achieve the following goals:

  • Fundamentally transform the architecture of the transactional energy system from today’s traditional process to future blockchain-based autonomous transactional systems.
  • Provide a more autonomous smart contract mechanism and design that meets electricity consumer needs without any costly changes in the existing electricity infrastructure
  • Accelerate integration and use of the renewable generation, prosumer base, distributed generation, and demand response
  • Provide a next-generation market design aimed at messaging and communication architecture to enable a blockchain smart contract to ensure privacy for market participants, develop market mechanisms that maximize transaction volumes.

Blockchain and AI-enabled DAEOs may help to improve energy efficiency, cybersecurity, and resilience of the electricity infrastructure.

Part V: Challenges & prospects

The blockchain projects show that blockchains are a promising technology for a wide area of services and use cases in the energy sector. The large number of established energy companies and utilities that are currently involved in this area, shows the potential of this emerging technology for the energy industry. However, several questions will need to be answered before mainstream adoption of the blockchain in the energy industry.

Challenges

  • Scalability & speed. Research efforts on distributed consensus algorithms, which are crucial to achieving these objectives, are still ongoing. The prospects of blockchain are still not clear and often, these developers may face the critical challenge during the testing phase. Blockchain developers are increasingly moving towards PoS schemes that are energy efficient, faster and more scalable. Other promising solutions include techniques such as ‘sharding’ that enable parallel processing. Often these solutions may come, however, to the expense of security and decentralization. The energy trading platforms today are only capable of recording a series of energy transactions in conventional databases but are unable to provide a certain level of immutability. Hence, it is clear that blockchain technologies have already passed the proof of concept stage for several use cases but require further development to achieve desired operational and performance objectives.
  • Security risks. Blockchain faces additional risks such as possible malfunctions at early stages of development due to lack of experience with large-scale applications. Blockchain ecosystems rely heavily on coding new algorithms. Security breaches are still highly likely before the technology becomes mature, which could result in bad publicity and delays in acceptance from consumers. Resilience to attacks is of great importance, especially for applications in critical infrastructure, such as energy systems.
  • High development costs. Blockchain may realise significant cost savings by circumventing intermediaries, however for several use cases, it might not has the competitive advantage against already existing solutions in well-established markets. For example, energy transactions can be recorded in conventional databases, such as relational databases that are designed to recognise relations between stored items of information. Blockchain systems may require costly new infrastructure, such as custom ICT equipment and software, the costs of which need to be outweighed by benefits achieved by data integrity, enhanced security and elimination of the need for a trusted intermediary. In the energy sector, smart meters are currently being rolled out without significant computational capabilities, hence integrating the existing smart metering and grid infrastructure with distributed ledgers could come with significant costs.

At present, information in blockchain systems can be transferred for very low costs, but validation and verification of data comes with high hardware and energy costs. PoS or PoA algorithms may significantly improve this in the future. In the field of grid communications however, blockchain systems would need to compete with already established solutions such as telemetry, which is not only more mature, but also significantly cheaper technology solution. Adding to the cost of information verification, blockchain systems also face an additional cost of storing the data in continuously expanding ledgers. Promising solutions proposed to address this challenge is storing actual data in ‘sidechains’ and operating the blockchain as a control layer rather than as a storage layer.

  • Policy and regulatory barriers. Regulatory bodies endorse the active participation of consumers in electricity markets. In addition, several policy makers have established supportive measures for local or community energy systems that aim to reduce costs for consumers, promote low-carbon technologies and tackle fuel poverty. Blockchain technologies can support or accelerate such objectives, therefore coordinate well with current regulatory priorities, however regulatory frameworks would need to be amended to allow larger adoption of DLT. In general, local or microgrid energy markets would need to be integrated with current regulatory practice.

The P2P trading platforms face many challenges in trying to balance the coordination of central controls with the main grid. Besides, the complexities involved in decentralisation, as well as the general manager of energy systems accelerate existing issues on the grid. These issues require significant regulatory changes to address. In the case of P2P platforms granting access of consumers to wholesale energy markets, DSO coordination of marketplaces might deliver greater benefits for the consumer. The regulatory nature of current electricity tariffs needs a flexible tariff based on smart contracts. This can help in integrating the energy markets with the central grid system to be a part of the general regulated system.

In addition, regulatory authorities are responsible for setting the rules of consumer data protection. Blockchain system users should be identified to account for their liabilities but at the same time, consumer or commercial sensitive information need to remain confidential, such as the prices agreed between an energy supplier and consumer within a smart contract recorded in a ledger. When information from multiple participants are recorded in shared ledgers, solutions need to be found for data privacy, confidentiality and identity management. Moreover, smart contracts need to be integrated into legal code to ensure compliance with the law and protection of consumers. In a distributed system architecture, it is not always clear who has the legal and technical responsibility for the negative consequences of the actions of different parties. All these issues call for significant regulatory changes and might lead to delays or lack of blockchain adoption.

  • Public acceptance and adoption: Uncertainties in behavioural change are another challenge facing blockchain integration in RES, public adaptability, as well as skill development. Sensitisation of prosumers to increase confidence in RE is key to the overall adoption of P2P energy trading platforms. Also, assuring consumers of the origins of RE may motivate them to patronise it, according to green marketing theory. Therefore, transparency, certificates of origin, and immutability on blockchain platforms can go a long way to boost consumer confidence.
  • Integration of blockchain with existing technology. The migration of the existing systems to blockchain-integrated platforms may not be economically viable even if the platforms are compatible. Besides, these systems would take a significantly longer period to be replaced with blockchain-based platforms. Therefore, blockchain may supplement the present system, for now, to replace it in the longer term. Blockchain-based platforms may also need to evolve for easy integration with different technologies.
  • The lack of standardization and flexibility. Standards for blockchain architectures need to be developed to allow interoperability between technology solutions. An additional challenge is that once a blockchain system is deployed, any changes in the ruling protocols or code needs to be approved by the system nodes. In blockchain ecosystems, this has historically led to disagreements between developers and multiple system forks. If blockchains are largely adopted in energy systems, these issues may lead to mistrust and fragmentation.

Further prospects

Blockchain technology provides a possible solution to the challenges facing RE development. Increasing participation in energy trading can make a big difference by reducing costs and improving efficiency. The energy ecosystem has a positive impact on the optimization of generating capacities, as the role of prosumers is increasing and strengthening. Ultimately, this will lead to the development of the sharing economy. The blockchain-based solution for managing microgrids and distributed energy resources is huge, although it is still not mature enough for widespread deployment.

The decarbonization of energy platforms allows individuals to make informed decisions as information is democratized. With the help of blockchain, smart grids can reduce inequality as ordinary people have the ability to produce and sell energy.

Blockchain technology can accelerate the decentralization of the grid, and the digitization of the energy sector is the key to achieving ambitious decarbonization goals. Blockchain clearly has the potential to benefit energy system operations, markets, and consumers. Blockchain technology offers disintermediation, transparency, and transaction security, but most importantly, it offers new solutions to enable consumers and small renewable energy producers to play a more active role in the energy market and monetize their assets.

Thus, blockchain can optimize the RE market. This, combined with high-speed communications and smart meters, will help move us closer to the digital future of distributed RE generation. However, the application of the blockchain will require significant policy and behavioral changes.

Summary

The global renewable energy market is projected to reach $1,977.6 billion by 2030, growing at a CAGR of 8.4% from 2021 to 2030.

In terms of its potential to revolutionize the renewable energy sector, blockchain can play an important role due to its unique features. Blockchain could potentially provide solutions across the energy sector:

  • reduce costs by optimising energy processes,
  • increase transparency & improve energy security in terms of cybersecurity, but also act as a supporting technology that could improve security of supply
  • promote sustainability by facilitating renewable and low-carbon solutions.

At the same time, there is a need to overcome key challenges:

  • Scalability, speed & security risks
  • High development costs
  • Policy and regulatory barriers
  • Public acceptance and adoption
  • Integration with existing technology
  • The lack of standardization and flexibility.

Blockchain is being tested for various applications in the energy sector as a tool to improve the efficiency of processes by providing the concept of decentralized power. To make energy grids accessible, affordable and sustainable, many startups around the world are already using blockchain.

DAEOs may also help simplify and improve the efficiency of energy utilities by securely linking producers with consumers and creating prosumers with increased flexibility and control of how they generate, consume, and exchange energy.

References

Blockchain
Blockchain Technology
Renewable Energy
Sustainability
Green Energy

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Paradigm
Paradigm

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