Microgrids on Blockchain – Harnessing Energy

The global electricity market today has an estimated worth of almost 2 trillion USD while being monopolized. However, it is losing stronghold in recent times as more people continue to generate their own wind and solar energy. Currently, traders buy and sell energy on the exchanges with banks serving as intermediaries for transactions carried out by the involved parties. 

Blockchain in the energy sector is forecasted to reach above $5.8 billion by 2025 – likely to come from microgrids based on their consumption, demand, and management in the power sector. The fact that blockchain and its distributed ledger properties, play an exemplary role to support transactions without any third-party involvement makes them suitable as the underlying foundation of peer-to-peer applications in this sector. 

Microgrid framework    

A microgrid is a local power grid or station that could be connected to the main grid, as it can work independently or as an extension of the main power grid, to supply power as a safeguard against outages. Also, to mention electricity generated can be used to meet one's demand or sold to the Central Electricity Board to generate revenue. 

Microgrids typically include renewable energy sources such as wind generators, small hydropower generators and solar panels that are locally grouped together. By disconnecting from the main grid, the local area powered by the microgrid can operate for many days. A key benefit of the microgrid is the ability to be self-sufficient in case of emergencies, in case of disruptions or blackouts. 

Blockchain to enhance Microgrids

Blockchain has a significant role to play, as it makes certain that all the transactions are securely stored on the distributed ledger and are executed with smart contracts. This will make it possible for consumers to have an opportunity of scanning through the blockchain listings to find the best deals that are closest.

Blockchain has recently gained the attention of millions due to its applicability in different sectors like healthcare, education, finance, and energy. With regard to the energy sector, an innovative solution came up with “Blockchain-powered microgrids”. 

Optimization of energy resources

microgrid generates electricity through renewable energy resources like wind energy, solar power, hydropower, etc. By the use of blockchain technology, one can have a clear estimate of how much effort we have to put in order to meet the demand and can subsequently decarbonize the power consumption. 

Blockchain can showcase how much electricity one grid needs to produce as per demand while they pass on the surplus electricity. It can enable microgrid operators to have timely updates for overall operation status on a real-time perspective. 

The importance of microgrids cannot be overemphasized as they can be employed to serve as an alternate energy source, especially in cases of emergencies when there may be issues with the main grid. 

Fair energy trading

In the current system, if anyone has energy in excess, it can be sold back to the electric company; but then, a considerable amount of energy will be lost by the seller in the course of transporting it back to a central place until such a time that it can be sold to another person. With blockchain, customers will be empowered by the decentralized energy transaction and supply system to take care of their consumption data and electricity supply contracts. 

Besides fulfilling its own demand, surplus electricity generated from a microgrid can be sold to create a source of revenue. As such smart grids allow energy producers to sell their excess to their peers while they consume a portion as well. By the use of blockchain technology, that provides Peer-to-Peer applications, we will be able to reduce the time and effort required by removing the intermediaries from the market. Therefore, the buyer and the seller will be able to make deals instantly and independently.

1. -What challenges can be tackled considering the current scenario?

Currently, the electricity network is disorganized where electricity is produced at power stations, electricity board buys electricity from them and stores it. Then it distributes the electricity to all its consumers, thus forming many governmental electricity boards and private electricity producers, wherein independent consumption prices are not regulated. Here the consumer is part of anyone producer-only and the role of prosumer so they can’t buy/sell energy from/to others.

With migrating the entire system to the blockchain, we are allowing all small/large prosumers to buy/sell electricity from/to others. The prices of all the major producers will be in sync and consumers may decide from which producer to buy energy.

2. What alternatives does this proof-of-concept lead to?

As a centralized organization for electricity boards should be trusted to make the entire system work. Hence, in this concept, a consortium to add new members using accounts with a public-private key is created once their KYC is completed. Here all three actors namely producers, consumers and prosumers in the system indulge in forming a network to buy/sell electricity.

3. How does this give a competitive edge over the existing system?

Replacing middleman to buy/sell the electricity as cases where consumers have been asked to pay huge sums due to incorrect readings, etc. Such errors won’t occur in the blockchain-based network as nodes will validate the consumption which would improve efficiency to a great extent.

4. What is your approach for POC deployment?

The Quorum platform can be used to implement this consortium network, wherein private transactions with increased speed are carried out with additional security. Quorum does require a lot of computing power which could increase setup cost; however, we can use the Ethereum framework as a utility token for transactions as the RAFT consensus algorithm based on random leader election would suit this use case. Alternatively, the Corda platform can be used for DLT to allow private transactions without broadcasting them to the network.

As a matter of fact, blockchain reduces cost, increases transparency and immutability to the electricity sector’s stakeholders. With an appropriate blockchain architecture, final users, prosumers, regulators and distribution system operators can benefit on a long-term basis. The intersection of energy markets, digital technologies, and appropriate legal frameworks can accelerate the energy transition to be inclusive for bringing a change in the near future.