Blockchain a necessity for the distributed grid finds Global Smart Energy Federation

Blockchain is not only a nice to have but the sensible solution for an agile, renewables-based market, says the white paper from the Global Smart Energy Federation.

The white paper points to the issues such as intermittency, inertia deficits and grid congestion that have arisen with the introduction of renewables to the grid and the classical response being to build bigger and more infrastructure.

But with their costs and scalability issues, blockchain as a distributed architecture is seen by many as the sensible alternative – and according to the white paper, is the only option that will prove to be better and more efficient.

“The rapidly emerging and more complex energy landscape demands a shift from traditional centralised databases to blockchain and the new and decentralised markets they unlock. Realising this is fundamental to saving lots on battery capacity by using the existing resources better.”

Have you read?
The metaverse – delivering beyond expectations and here to stay
Blockchain in Europe’s energy sector – policy and regulation

The white paper continues that there is also a stronger claim to be made about the appropriateness of next-generation blockchain to mitigate the problems of the grid with new functionalities anticipated such as peer exchanges in real time and forward booking of electricity slots with time ahead cost dependencies.

With forward booking, auctioning and re-booking slots with penalty clauses and bonus offers, a real-time high-volume Gen 3 blockchain will be needed to manage this market.

Gen 3 blockchains

Gen 3 blockchains are the latest evolution providing significant advances in terms of scalability, interoperability and transaction throughput and cost.

Whereas Gen 1 blockchain, or Bitcoin, with its proof-of-work consensus, is energy intensive and Gen 2 blockchains introduced smart contracting, Gen 3 blockchains use the more energy efficient proof-of-stake or proof-of-history consensus mechanisms.

Examples are Polkadot, on to which Energy Web is moving for its next-gen Energy Web X, and Solana, which Powerledger – one of the white paper’s contributors – has adapted for its blockchain, while others include Cardano, Avalanche and Algorand.

The white paper points out that the high throughput and low latency of Gen 3 blockchains capable of processing thousands of transactions per second make them suitable for handling the high volume of data generated in energy systems in applications requiring near real-time settlement, such as energy trading and grid management.

Other features detailed of Gen 3 blockchains include transparency and security and trustless and decentralised operation.

Gen 3 blockchain use cases

Blockchain technology is best suited for environments where trust is especially important, where there is a need for a secure and transparent record-keeping system, supported by the automation of complex transactions through smart contracts, the white paper states.

Some examples cited among those that have been introduced include renewable energy tracking and energy attribute certificates and transactive approaches including peer-to-peer trading and demand response, while emerging examples are real-time electricity billing with smart metering and electric vehicle-to-grid transactions.

In conclusion, the white paper says that while centralised database systems are working well right now by and large, as countries reach their renewables goals or net zero goals, the grid will need to engage traditional consumers to help balance supply and demand. And in order for it to work well a very agile energy market is needed.

“While sceptics argue that existing technologies can fulfil the same functions, blockchain represents the culmination of advancements in mathematics that have revolutionised everyday activities like communication and online shopping.”