Page 34 - Energize January 2021

CURRENT MARKET SHORTCOMING POSSIBLE ROLE FOR BLOCKCHAIN
Electricity market prices are lower Combined with IoT, securely records, stores and shares information about the time of generation/demand, location,
than the actual total cost of production type of generation/demand and other aspects to carefully craft price signals to market participants
Effects of large scale RES integration Can be used for efficient, automated and decentralized grid management and control. Due to the presence of a
into the electricity grid large number of producing and/or consuming entities present in the distribution grid, blockchains can be used to
improve balancing of supply and demand, automated verification of grid assets, improving the visibility of
distributed resources and assets and better coordination between TSO & DSO
Power resource adequacy Cryptocurrencies can be used to ‘tokenize’ assets to create innovative and new markets or business models based
on co-ownership and sharing of assets.
Increased coordination between Blockchain can achieve efficient, automated and decentralized grid asset management and control, incl. improved
System Operators (SOs) balancing of supply and demand between different network levels and network areas

Integrating Demand Response for Design smart contracts to engage and reward willing customers to help in DR activity to maintain the grid more
Ancillary Services economically.
Blockchains can help discard an incumbent intermediary and unlock a variety of markets for its participants.

Lack of residential Demand Response Due to the data integrity and traceability provided by the blockchain technology, the costs, origin and the charges
incurred are made more transparent. This leads to a better-informed consumer and opens up the potential for
incentivizing behavioral change and DR.

Adequate cross-border power system Cross border data exchange incurs costs as data flows through multiple intermediaries, adding time delays in
data exchange decision making and potential loss of data. Blockchains can streamline the process by removing intermediaries,
removing delays and maintaining data integrity as data is not transferred but immutably shared.

Consensus sector, dozens of companies are attempting to use blockchain for asset registry, peer-to-
The blockchain ledger is maintained by peer trading, grid-level transactions, energy financing, electric vehicle charging and
the connected parties agreeing to all renewables tracking.
changes, that is forming a consensus A more open and decentralised system is urgently needed, where the grid itself
regarding changes. This consensus is becomes the “internet of energy”. A platform based on decentralised control and
reached when all or most of the peers “permissionless” innovation, while maintaining the strict reliability and security
agree on the same state (version) of the requirements, is essential to such critical infrastructure; a system that adapts to and
ledger. There is a need for a enables new technologies and patterns of use, not the other way around. The table below
predetermined protocol for a distributed lists some of the potential ways in which blockchain technology can mitigate the current
network to reach consensus on, including market shortcomings.
a transaction, handling some pieces of There is merit for blockchain in specific marginal use cases where it can optimise
data, and transferring the ownership. existing processes. However, blockchain can be integral to a systemic energy solution in
There are several attempts to use one way — using the technology to better manage the connection between the physics (the
different algorithms, such as Proof of Work electrons) and economics of energy, taking into consideration both the time and location of
(PoW), Proof of Stake (PoS), Practical energy within the system. This requires sufficient visibility within the system itself, which can
Byzantine Fault Tolerance (PBFT), Proof of only be achieved by embedding the technology into the grid.
Authority (PFA) and many more, to solve No current blockchain for energy applications yet take this approach, let alone have the
the consensus problem. However, capability to deliver upon it, according to the World Energy Council’s recent blockchain
difficulty, cost, and validation time are report. What is needed is a fit-for-purpose solution that is specifically designed to optimise
their major issues, which all depend on the energy trilemma and deliver a sustainable energy system for all. This may be an
the blockchain design. architecture that inherently balances itself, using decentralised control of energy exchange
enabled by blockchain, or something similar, but the solution must be determined by the
Potential application of blockchain to system characteristics, not the other way around.
energy markets
Blockchain technology is an elegant Current blockchain implementations
protocol enabling people to verify The CIGRE C5.30 Working Group is just completing its study into operational projects which
information and transact directly with one use blockchain in energy power systems. The graph below shows the functional areas
another in a trust-less environment. where these projects have used blockchain technology.
Three important and fundamental
characteristics of blockchain are security, Summary
transparency, and immutability. These Blockchain technology has the potential to enhance energy markets significantly. However,
aspects are what make blockchain current implementations are quite small-scale so there is significant development needed
technology unique and a potential solution before any widespread implementation can be a significant disruptive force in this area. n
for energy and power applications.
The absence of a third-party can Acknowledgment
result in cost, operational and market This article was first published in the December 2020 edition of Electra.
efficiencies. It could be applied to almost
any market, in theory. In the energy Send your comments to rogerl@nowmedia.co.za

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