Blockchain Technologies for Energy Markets
The energy grid is moving to a new era, shifting from centralized broadcast-like energy systems to decentralized smart energy systems by incorporating a large number of small-scale Distributed Energy Prosumers (DEP). The advent of intermittent decentralized renewable energy sources is completely changing the way in which electricity grids are managed, supporting the shift to more decentralized smart energy systems. Variations in energy production, either surplus or deficit, may threaten the security of supply, leading to energy distribution systems’ overload, and culminating in power outages or service disruptions, forcing the DEPs to shed or shift their energy demand to deal with peak load periods.
The centralized energy systems take limited account of local conditions and are difficult to be optimized, and offer no incentives for consumers to manage and adjust their consumption according to the generation profiles.
In this context, the H2020 eDREAM project contributes to the transformation of the traditional energy systems into novel decentralized and community-driven ones, by leveraging on blockchain technology to exploit local capacities and constraints fully at the micro-grid level to preserve the continuity and security of supply at affordable costs at the smart grid level. The grid is modeled as a collection of DEPs’ resources able to coordinate through a blockchain based infrastructure to support fully decentralized management, control, and stable grid operation.
The eDREAM project presents a blockchain decentralized management relying on the implementation of:
- A distributed ledger for storing DEPs’ energy data at the micro-grid level. All monitored energy data recorded at the level of a DEP are registered and stored as immutable transactions. Therefore, the individual energy production or 330 A. Zamuda et al. energy consumption values are aggregated in blocks which are then replicated in the ledger
- A set of self-enforcing smart contracts for decentralized energy management and control. Through specific mechanisms, these contracts enable the peer-to-peer trading of energy among DEPs and offer-demand matching and decentralized coordinated control for energy stakeholders, such as the DSO (Distribution System Operator). The contracts are able to assess and trace the share of contracted flexibility services actually activated in real-time by the aggregators (from their enrolled prosumers).
- Consensus-based validation for transactions’ validation and financial settlement. The project offers the solution of a novel blockchain-based validation that goes in the direction of increased reliability of the smart grid system operation, better energy incentives for DEPs, and increased usage of renewable energy.
Three types of smart management scenarios are supported by self-enforcing smart contracts: (i) The provisioning of energy flexibility services by the DSO leveraging on aggregators, (ii) The implementation of a decentralized green energy market at the micro-grid level promoting the consumption of renewable energy where it is produced, and (iii) The creation of a community based coalition of prosumers, allowing them to participate in the national energy or capacity market.
The Provisioning of Flexibility Services supposes that prosumers are able to offer and trade their flexibility in terms of loads’ modulation. They are involved via enabling aggregators, or directly with the DSO via direct Demand Response and control of DEP’s energy assets. Using smart contracts, the DSO is able to assess and trace the share of contracted flexibility services, actually activated in real-time by the aggregators (from their enrolled prosumers) at the grid level. At the same time, the self-enforcing smart contracts act as a decentralized control mechanism used to manage the levels of energy flexibility from aggregators and enrolled prosumers on one side, and from aggregators to the DSO on the other side, associating incentive and penalties’ rates. If relevant deviations between the expected energy flexibility request and the actually delivered flexibility are detected by smart contracts, specific actions are taken to rebalance the energy
demand with energy production.
The Decentralized Green Energy Market designed at the micro-grid level enacts any small-scale prosumer to participate and trade energy directly. The market acts as a management mechanism by rewarding the consumption of renewable energy when it is available, leveraging on green energy tokens, making sure that the potential energy imbalances at the micro-grid level are addressed locally and not exported to higher smart grid management levels. The nonfungible tokens are generated at a rate proportional with the forecast renewable energy production, transforming the energy in a transactable digital asset.
The producers and consumers use the generated tokens to participate in the electricity market sessions and leverage on self-enforcing smart contracts to submit energy bids/offers and transact energy in a peer-to-peer fashion.
The Creation of Virtual Power Plants (VPP) addresses the increasing need to optimize the output from multiple local generation assets (i.e. wind-turbines, small hydro, photovoltaic, back-up generators, etc.) that serve primarily local communities and have export connections at the power distribution network.
The benefits behind creating such coalitions are that a mix of different energy generation resources, which have different energy generation models and scale, may be interested to cooperate in a convenient way, with a view to achieving pre-defined smart grid sustainability objectives. The VPP aims at maximizing the utilization and revenues from RES and classic generation sources through accessing different markets as an aggregated portfolio, bringing its capacity to the optimum paying service at any time. The DEPs can ultimately participate in other higher-level energy markets, such as a flexibility service provider to a TSO (Transmission System Operator) or a wholesale capacity provider on the wholesale or capacity market.
The adoption of the above-presented blockchain based management approaches will transform the smart grid into a democratic community that no longer relies on a central authority but can take any decision through smart contracts rules, enforced and verified by each DEP of the grid. At the same time, it is in line with the European strategic vision of creating a secure and sustainable energy system by 2050 and reducing the greenhouse gas emissions by at least 80%.