TheConversation: When the blockchain is used to exchange electricity

Zeinab Nehai, a second-year engineering student at the ESILV, is co-author of this article: When the blockchain is used to exchange electricity in The Conversation

When the blockchain is used to exchange electricity

Since a year, microgrids appeared in the New York borough of Brooklyn. By connecting residents, these smart local networks seek to facilitate the exchange of energy between consumers.

Developped by TransActive Grid, this microgrid combines renewable energy and the sharing economy. At the origin of this project, there are two companies: Lo3 Energy for the installation of solar energy networks and ConsenSys, specializing in blockchain.

The blockchain (well known to virtual currency users BitCoin) 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 the "transactions" carried out between its users since its creation. This database is shared by its various users, without intermediaries. A transaction can be a barter, a sale/purchase, via contract or otherwise, 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.

Pay for a package, vote, get energy

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

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

Once the block is validated, it is timestamped 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 blockchain settings.

How blockchain works. French Blockchain

Transactions in the blockchain can also go through smart contracts (we are thinking here of the blockchain codius Where Ethereum). These are programs accessible and viewable by all authorized parties and whose execution is controlled and verifiable. They automatically execute the terms 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 the electronic voting.

The blockchain thus offers a technology that makes commercial transactions reliable without vis-à-vis or commercial agreement negotiated 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 much broader applications than the monetary field. And large companies such as Microsoft take the lead in proposing many uses of this blockchain in the world of luxury, electronic voting and peer-to-peer exchanges of energy.

Blockchain in smart grids

The energy transition will make the consumer a consummate actor and the proliferation of self-producers and consumer islands is already promoting energy exchanges at the local level.

But today, the energy produced by the consumer actors and not used locally is injected into the network, which posesmajor problems in the distribution network.

The most popular solution today is, as is the case in Brooklyn, to create intelligent local networks and to develop smart contracts to link the users of the microgrid to each other. Energy can thus be sold or purchased according to local rules.

This type of blockchain is not limited to microgrids; it can concern all types of peer-to-peer exchange that can be monetized and controlled by IT tools. Slock.it, works for example in partnership with the German conglomerate RWE on the use of blockchain for electric charging stations.

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

A matter of scale

It is important, in order not to disrupt the distribution network, that the monetization of energy transactions via the blockchain takes into account the comfort of users, the flexibility of the network and the price of energy.

The blockchain must also guarantee the integrity and confidentiality of transactions; of the problematic like leaving the channel, joining another, getting tokens refunded remain controversial topics.

Initiatives are currently multiplying; a currency was thus created in the field of solar energy: SolarCoin, recognized by the International Renewable Energy Agency (IRENA). SolarCoin grants for each MWh of solar energy 1 SolarCoin to the producer. These tokens will then be traded on a marketplace without an intermediary. Only supply and demand will set energy prices. The start-up Grid Singularity implements, in partnership with IBM and LO3 Energy, this technology for developing countries in areas with little or no connection to the distribution network.

ElectriCChain, based on the SolarCoin.

If the blockchain offers a viable and easy option to implement in all types of networks, it nevertheless raises many questions related to regulation and the market economy. And for the historical players, who find themselves indirectly impacted by this local peer-to-peer management, they will have to deal with the proliferation of local energy markets in competition with the energy market. These interactions can upset the market, the energy produced no longer being directly linked to its price, thus rendering obsolete the projects of request-response based on price.

Article published on The Conversation here.