Electricity grids are becoming complex, with millions of devices that can buy, sell, exchange, and share electricity and information in different directions. This is in contrast to the past when electricity was delivered from a single utility company to many customers in one direction. The grid is evolving to incorporate more distributed energy resources (DERs) like wind, solar, and batteries. To ensure the smooth operation of a fast-changing grid, it will need a reliable and transparent ledger that multiple parties can trust. In this context, the relevance and impact of blockchain technology become evident as we transition to a bi-directional grid.

Blockchain technology is a versatile and adaptable distributed ledger technology (DLT) which has the ability to store and manage transactions among multiple participants. It is a linked list of records secured through cryptography. Its distinguishing features include immutability, security, and transparency which makes it suitable for a wide range of transaction-based applications that require security, traceability, and visibility. In a blockchain network, all participants have access to transaction records that are permanently stored in the ledger. By directly connecting buyers and sellers, blockchain eliminates the need for intermediaries, resulting in reduced transaction costs and fees. There are three types of blockchain platforms: public, private, and consortium, each defining who can add data to the chain and access the distributed ledger.

In the power system, blockchain can address various challenges at the generation, transmission, distribution, and consumption stages. It has the potential to integrate smaller decentralised energy units, reduce entry barriers, and enhance transparency and trust among participants. Smart contracts are also built on top of DLT. They automate actions based on predefined conditions and enable applications like automatic payments and operate on immutable data stored in the blockchain.

Uses of blockchain in electricity market

As per a report by Fortune Business Insights, the global blockchain in energy utilities is projected to reach USD1,564 million by 2026. Blockchain has numerous applications in the electricity market. Some of them include: peer-to-peer (P2P) energy trading; flexibility trade and grid management; renewable energy certificate (REC) trading; cyber security improvement; local energy market (LEM) and wholesale energy market (WEM); 24/7 carbon free energy (CFE); metering, billing, and security; and electric vehicles (EVs).

P2P energy trading: The traditional centralised grid model relies on stable fossil fuels, nuclear power, and hydroelectricity, providing consistent power with fixed pricing. However, renewable energy sources (RES) like solar and wind bring new challenges of variable nature and remote locations, making integration into the grid difficult. To solve this, the concept of P2P energy trading enables owners of small-scale power sources to directly trade energy. Participants agree on prices, conducting transactions at their chosen time and place. Blockchain technology plays a vital role in it by ensuring secure and transparent transactions. The ledger records all agreements, verified by multiple parties. In this decentralised system, individuals become ‘prosumers’ who both consume and produce energy. They can sell excess energy to others or back to the grid, incentivising active participation in decentralised energy systems.

With dynamic pricing, preferential trading, and even gifting options, P2P energy trading using blockchain allows consumers to manage their excess energy, reducing reliance on government subsidies. This paves the way for a greener future, where RES can seamlessly integrate into the grid. Blockchain technology has found significant application in P2P energy trading within local communities or microgrids. These P2P energy marketplaces enable more efficient use of DERs, reduce strain on traditional grids, lower costs for consumers, and provide additional revenue streams for small RES producers. A notable example of this application is the Brooklyn Microgrid (BMG) marketplace in the US, launched in 2016 by LO3, Consensys, and Siemens, which allows prosumers to sell their excess solar energy to New York City (NYC) residents who prefer using RES.

Flexibility trade and grid management: Transmission and distribution system operators (TSOs/DSOs) face challenges in balancing the energy system due to the fluctuating nature of RES production. Blockchain technology could potentially help address these challenges by providing flexibility services. It can record the availability of resources and automate demand response and DER activity in real time, therefore enabling more efficient resource management, reducing the need for costly interventions and improving the overall system stability.

Grid management involves setting rules and managing various services of the power grid, including capacity, flow direction, flexibility services, and security. This system consists of an advanced distribution management system (ADMS) and a distributed energy resource management system (DERMS). Blockchain technology can bring benefits to the grid management system. It operates on a distributed platform, eliminating single points of failure and providing trusted data for market value. It enables faster tracking of generation, consumption, and network data, improving coordination and stability in the power grid. This can reduce the need for flexibility services and lower associated charges as well as opens the possibilities for improving energy flows between generators and users. It provides resilience to information systems and helps prevent the compromising or hacking of public utility data, ensuring the availability of essential services to communities.

TenneT, the Dutch-German TSO, was one of the firsts to test blockchain technology for grid balancing at the transmission level. TenneT has conducted a platform pilot that demonstrated the successful application of blockchain technology in grid stabilisation through the use of storage systems, such as car batteries. By leveraging a network of residential solar batteries, the pilot showcased a strategy where EV charging is temporarily halted to accommodate a power increase on the grid. In return for the interruption, the car owner is appropriately compensated.

REC trading: RECs are instruments that certify ownership of one MWh of electricity generated from RES plants. They can be sold as commodities in the energy market, allowing entities to offset their emissions or participate in secondary markets. Traditionally, accounting for RECs has been challenging, with potential issues such as double counting, manual errors, inefficiencies, and lack of transparency. Blockchain technology offers a promising solution by providing instantaneous ownership transfer, settlement, and an immutable audit trail.

In a blockchain-based REC marketplace, smart meters post generation data to a smart contract, which mints a REC and assigns it to the asset owner’s wallet. All trading activities are recorded on the blockchain, ensuring a robust audit trail. Settlement can occur instantly using crypto-currencies or traditional means, which are then recorded on the blockchain. When a REC is retired, it is permanently destroyed, and any new REC with the same generation data triggers an investigation to prevent double issuance.

Cybersecurity improvement: The electricity system is going through significant changes due to electrification, decentralisation, and digitalisation. System operators face challenges in terms of network fitness, stability, managing large amounts of data, and the risk of cyber-attacks. Blockchain technology, with its decentralised and encrypted data storage, has the potential to improve network management by providing automatically verifiable network data. It can also reduce the risk of cyber-attacks on the grid by leveraging its inherent redundancy. However, there are currently limited blockchain-based projects in network management and security due to the difficulty of the task. One notable project in this area is by UK-based Guardtime, a cybersecurity services company. They have developed a permissioned blockchain system called Keyless Signature Infrastructure (KSI) to protect critical infrastructure such as nuclear power stations and the electricity grid in the UK.

LEMs and WEMs: WEM is a large-scale electricity market that facilitates electricity trading between retailers and generators. Blockchain technology can be applied in WEM to store rules and regulations using smart contracts. It can also facilitate financial trading, record transactions, and enable permanent and transparent billing settlements on a blockchain ledger.

A LEM is like a small community where people can trade electricity with each other. If there is surplus energy, it can be sold back to the main power grid and vice-versa. Distributed energy models, supported by blockchain technology for recording data, are well-suited for managing energy distribution and transactions in LEMs.

24/7 CFE: The concept of 24/7 CFE involves closely aligning the use and generation of electricity, ensuring that they are matched in intervals as short as 15 minutes. This approach allows the premium paid for RES to be directed towards sources that meet the energy demand effectively, thereby reducing the consumption of fossil fuels. By leveraging blockchain technology and smart contracts, decentralisation of  computer power, which ensures that the decision-making and control do not rest in the control of an individual or group, can handle the extensive computations required, while ensuring the accuracy of back-office processes. This not only streamlines operations but also minimises the risk of fraud.

Metering, billing, and security: In recent times, smart energy meters which track real-time energy consumption have become prevalent. When combined with blockchain technology, smart energy meter readings can enhance confidence in real-time electricity billing and enable users to adjust their usage based on current energy prices. This interaction with LEMs occurs in a transparent and secure manner. The use of blockchain technology also simplifies electronic billing systems by facilitating seamless payment processing and maintaining trusted data records. Transactions can be automated without the need for a centralised authority. With blockchain, meter data producers can have ownership over their data and share it with the appropriate parties for settlement. The transparency of blockchain allows for easy tracking and monitoring of these transactions, and the entire transaction history can be downloaded from the blockchain platform for periodic bill settlements.

EVs: With a move towards clean energy, more charging stations are being built as EVs are becoming more affordable leading to their rapid adoption. Blockchain technology can be used to organise the charging transactions handled by energy retailers. It has the potential to identify EV users and simplify the exchange of charge records between charging networks. It could also handle payments and settlements, reducing operating costs for charging stations. Additionally, blockchain has the possibility to eliminate the requirement for a centrally managed EV charging infrastructure.

Recent developments

In a recent development, a team of researchers at the Oak Ridge National Laboratory under the US Department of Energy (DOE) has demonstrated how blockchain technology can enhance grid security by unveiling a communications framework powered by blockchain. This framework offers a solution to quickly detect and identify unauthorised changes within the power system, helping to mitigate the impact of cyber-attacks and equipment failures. The power of this framework lies in its ability to verify the configuration data of grid devices by comparing it with the last known correct settings to identify any unauthorised modifications. Moreover, the system can differentiate between faults caused by cyber-attacks and those resulting from natural events, providing real-time analysis and bolstering trust between substations, control centres, and metering infrastructure. The achievement marks a significant step toward a more secure power grid, where blockchain’s reliability and transparency converge with the need for resilience. This sets the stage for a future where the power grid can better withstand threats and ensure a more secure energy infrastructure.

In Europe, Equigy, which is a consortium of major European TSOs led by TenneT, has developed the Crowd Balancing Platform (CBP) which utilises blockchain technology to facilitate the integration of small, decentralised units by leveraging its platform and connecting to TenneT’s automatic Frequency Restoration Reserve (aFRR) process. Launched in 2020, CBP facilitates the standardised registration, bidding, and activation of flexibility transactions from aggregators of DERs. By enabling proof of delivery and operating within grid limits, CBP supports the market for flexibility transactions and empowers TSOs to receive, activate, and deactivate flexibility offers, handle measurement data, and validate delivery. It also facilitates settlements with balance service providers and balance responsible parties, ensuring financial agreements are met. Several TSOs across Europe have recognised the CBP for specific purposes.

  • TenneT recognises it as an official market channel for contracted and free bids of aFRR products. Through Equigy, TenneT is also conducting pilots with market parties for redispatch delivery in Germany.
  • In April 2023, TenneT enabled asset aggregation in the Netherlands to improve the efficiency of its secondary reserve and support the balance of the electricity system. Flexibility aggregator Flexcity, along with Equigy, has successfully qualified for TenneT’s aFRR services, allowing them to participate in network balancing. Participation by Flexcity which has been actively operating in the Netherlands, Belgium, France, and Italy, supports the stability of the Dutch electricity grid and enables RES integration.
  • In February 2023, Equigy partnered with Nord Pool, the Nordic power market, to establish an innovative approach for trading energy flexibility in the Dutch market. The joint initiative, known as FlexiSwitch, is set to launch its first phase in the first half of 2023. It will help eliminate entry barriers for small-scale flexibility service providers by simplifying and streamlining access to trading by offering a structure that connects flexibility producers to both TSO-managed ancillary services markets and the intraday market. Initially, the project will route flexibility to Nord Pool’s successful European intraday market and the existing Dutch aFRR market, leveraging the current rules and technical interfaces. Designed as an open infrastructure, the project aims to facilitate the market in a neutral manner, without exclusivity, and has plans to expand to other countries, markets, and products in subsequent phases, ultimately aspiring to establish a European standard.
  • In December 2022, Switzerland’s TSO Swissgrid along with a major DSO and aggregator successfully completed a pilot for TSO-DSO collaboration to prepare for a fully operational frequency containment reserve (FCR) process. It developed a coordination approach that optimises DER utilisation for both transmission and distribution grid services, prioritising the overall security of the electricity system. Important features of the concept include considering distinct roles for aggregators and DSOs, allowing flexibility to be used for both types of services, and enabling DSOs to perform grid security analysis with their own tools.
  • Italian TSO Terna acknowledges the CBP as part of Italy’s Virtually Aggregated Mixed Units (UVAM) project for registering and pre-qualifying flexibility resources.
  • The Austrian Power Grid is implementing a pilot for aFRR in Austria as a preparation for further market scaling.

eFlex, a P2P trading platform developed by Belgian EMAX group, leverages blockchain technology to enable efficient management of smart energy grids. By recording and processing transactions in real-time, eFlex allows for immediate grid management and enhances security against cyberattacks. eFlex provides visualisations that allow operators to plan grid stability and procure flexibility services.

eFlex is gaining popularity as a solution for managing smart energy grids and facilitating digital micro-transactions. Flexibility service providers, such as RES generators and prosumers, can create profiles and submit bids to DSOs and TSOs through the platform to match the demand. While the EMAX platform is currently in the prototype stage, initial testing results indicate its effectiveness as a valuable tool for managing grid congestion and voltage constraints in a smart and efficient manner.

  • In Bulgaria, eFlex pilots are being conducted by DSO ENERGO-PRO and TSO Electricity System Operator (ESO). These entities utilise the eFlex platform to effectively manage grid congestion and synchronise communication. The trading feature of eFlex is accessible to local energy generators, enabling them to submit bids for their offers to the network operators.
  • Romania’s TSO and DSO – Transelectrica and Distributie Energie Oltenia utilise eFlex for communication and visualisation of grid congestion. They rely on the eFlex trading platform to purchase flexibility services from local providers, facilitating the efficient management of the energy grid.

The way forward

Blockchain has the potential to revolutionise electricity market by providing secure, transparent, and efficient systems for recording and verifying transactions. However, it is still in its nascent stage of research and development and faces challenges of scalability and standardisation. As the ongoing demonstration projects start recording positive results, it is expected to improve scalability, energy efficiency, security, confidentiality, and overall performance of the technology. In the next few years, technology advances will make blockchain faster, more compatible, and less energy-consuming, making it more competitive. This progress opens the door to new possibilities and uses for blockchain beyond what we have now.