Blockchain & Energy

Blockchain technology can increase overall efficiency of energy markets and thereby help to reduce waste and pollution. The main potential lies in decentralizing the markets and in incentivizing market participants to flatten peaks of energy demand and supply. A blockchain-based smart grid in combination with real-time auctions and smart meters is key to this ambitious endeavor.

In an interference-free energy network, providers must flexibly react to the temporal fluctuations of demand and be able to compensate differences in demand. The required balancing power is being traded at very high prices, especially for short-term fluctuations. Inefficiencies that result from this process can drastically be reduced by involving all consumers in the short-term balancing of energy load and supply. By combining three new technologies – smart meters, blockchain and real-time auctions – an integrated and standardized energy market can be created. Its underlying price mechanism offers all consumers the incentive to participate in the process of market compensation. Therefore, the peaks of energy load can be reduced and gaps in the allocation of energy can be avoided. As a result, the balancing power can be reduces without interfering the security of supply. Ultimately this leads to cost savings and an improvement of the environmental balance.

An integrated and standardized energy market offers enormous efficiency potential compared to the current status. With help of a variable price that depends on the current demand and supply of energy, incentives can be effectively shifted – for example, into the night, when energy is most cost-effective. Additionally, variable prices offer incentives for the establishment of intelligent energy storage systems. In such systems, energy is asked for in the most favorable moment, stored and led back into the system when the energy demand and thus the prices is at a high level. Through the connection to the blockchain, potentials for load displacement and energy storage can be depicted in a decentralized way. This enables owners of the corresponding facilities to make these externally accessible and manageable. In addition to the traditional electricity purchase agreement, a current supplier could offer his customers the possibility to connect private energy storage to the blockchain.

By using blockchain technology and smart meters, an owner of an electric car can connect the battery of their car to the blockchain, whereupon the car automatically buys and sells (or stores and delivers) energy when not in use. How much battery capacity is used for this purpose is easily determined by a blockchain-based smart contract. Users can make full use of the battery if they do not need the car or use it in a limited way, to make sure the car battery is always charged at least 50 percent. This concept can theoretically be applied to any electrical storage device and to any device whose use is variable in time. In addition to the offer for private customers, such a concept also represents a business model for business customers – possibly this use case is currently most feasibly for (large) business/corporate customers.

An energy market linked via a blockchain and smart meters allows for shifting of the energy load and efficient energy storage, thus enabling a reduction in energy consumption costs, an increase in supplier profits and an improvement in the environmental balance. At the same time, there are different hurdles along the way. The following are examples:

  • Existing business models could be superseded and thus a counter-defense could be formed

  • Existing equipment, especially in households, is not designed to react to time-dependent electricity costs; an exchange of intact devices is usually not worthwhile

  • Consumers are skeptical about publishing their consumption data

  • The clocking of the control power is still too inflexible in time to exploit the full potential

In the short term, therefore, it is unrealistic to integrate the entire energy market. However, we are working on approaches to the gradual introduction of an integrated energy market, which will put some of the hurdles into perspective.

In the long term an integrated energy market is the future of power generation.

Read our award winning paper

In 2016 our research paper „Die Vision eines integrierten Energiemarktes“ (A Vision of an Integrated Energy Market) won the Enversum Future Award. Feel free to read more of our ideas in the paper:

Die Vision eines integrierten Energiemarktes

Read more about the potential use of blockchain in the energy sector in an interview Dr. Fiedler held with Zeitung für kommunale Wirtschaft.

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For more information on the use of blockchain in energy markets, do not hesitate to contact us.