The block chain is used for exchanging electricity

Over the past year, microgrids have been appearing in the Brooklyn area of New York. By connecting residents, these local smart grids seek to facilitate the exchange of energy between consumers.

Developed by TransActive Grid, this microgrid combines renewable energy and the sharing economy. Two companies are behind this project: Lo3 Energy for the installation of solar energy networks and ConsenSys, which specializes in blockchaining.

The blockchain (well known to users of the BitCoin virtual currency) is a technology for storing and transmitting information without centralized control. It consists of a database built block by block, hence its name, containing the history of all “transactions” made between its users since its creation. This database is shared by its various users, without any intermediary. A transaction can be a barter, a sale/purchase, via a contract or others, between two or more parties.

Users of the Brooklyn microgrid can therefore exchange energy in real time without having to go through an aggregator or the local distributor. Their transaction is legal, secure and monetized via the blockchain.

Paying for a package, voting, obtaining energy

Any public blockchain works with a programmable coin or token. Transactions between network users are grouped in blocks. Each block is validated by the network nodes using techniques that depend on the type of blockchain.

In the Bitcoin blockchain, this technique is for example called “proof-of-work” and consists of solving algorithmic problems.

Once the block is validated, it is time-stamped and added to the blockchain. The transaction is then visible to the entire network. This process takes from a few seconds to several minutes depending on the parameters of the blockchain.

Transactions in the blockchain can also be carried out via smart contracts (e.g. Codius or Ethereum blockchain). These are programs that can be accessed and viewed by all authorized parties and whose execution is controlled and verifiable. They automatically execute the conditions of a contract when certain elements are met.

In this context, the blockchain allows, for example, the automatic payment of a parcel at the time of delivery or electronic voting.

The blockchain thus offers a technology that makes reliable commercial transactions without face-to-face or negotiated commercial agreements between the parties; it is the participation in the blockchain that certifies the transaction.

The decentralized nature of the blockchain, coupled with its security and transparency, promises applications far beyond the monetary field. And large companies such as Microsoft are taking the lead to offer many uses of the blockchain in the world of luxury goods, electronic voting and peer-to-peer energy exchanges.

The smart grid backbone

The energy transition will turn the consumer into a consumer’s actor, and the multiplication of self-producers and islands of consumers already favours energy exchanges at the local level.

However, today, energy produced by the consum’actors and not used locally is injected into the network, which poses major problems at the level of the distribution network.

The most popular solution today is, as in Brooklyn, to create local smart grids and develop smart contracts to link microgrid users together. Energy can then be sold or bought according to local rules.

This type of blockchain is not limited to microgrids; it can involve any type of peer-to-peer exchange that can be monetized and controlled by computer tools. Slock.it, for example, is working in partnership with the German conglomerate RWE on the use of the blockchain for electric recharging terminals.

In France, Bouygues Immobilier and Microsoft (via the SME Stratumn) are currently developing smart contracts for energy exchange on a neighbourhood scale in accordance with French law. For its part, Engie has launched a project aimed at improving the traceability of flows (water, gas, electricity) for automated trading software management and maintenance, by combining sensors to the block chain.

A question of scale

In order not to disrupt the distribution network, it is important that the monetisation of energy transactions via the blockchain takes into account user comfort, network flexibility and the price of energy.

The blockchain must also guarantee the integrity and confidentiality of the transactions; issues such as leaving the chain, joining another chain, and getting tokens refunded remain controversial.

A number of initiatives are currently being developed, including the creation of a solar energy currency, SolarCoin, which is recognised by the International Renewable Energy Agency (IRENA). For every MWh of solar energy, SolarCoin grants 1 SolarCoin to the producer. These tokens will then be traded on a marketplace without an intermediary. Only supply and demand will determine the price of energy. The start-up Grid Singularity, in partnership with IBM and LO3 Energy, is implementing this technology for developing countries in areas with little or no connection to the distribution network.

While the blockchain offers a viable option that is easy to implement in all types of grids, it raises many questions related to regulation and the market economy. And for the incumbents, who are indirectly impacted by this local peer-to-peer management, they will have to deal with the multiplication of local energy markets in competition with the energy market. These interactions can disrupt the market, as the energy produced is no longer directly linked to its price, thus rendering price-based demand-response projects obsolete.

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