Electricity digitalisation and blockchains

Digital transformation is a key enabler of societal transformation. Among the various digital technologies, blockchain recently attracted much interest due its potential to support climate-neutrality and green recovery policies, in the EU and beyond.

This review work - which focuses on the blockchain applications in the electricity sector - is based upon PhD/Master lectures given by the JRC (G. Fulli) at Politecnico di Torino (full slide deck here) and on projects run by the JRC with selected EU research and policy partners.

KEY MESSAGES

Blockchain (*) is a sort of database, duplicated across a network of distributed computers, recording information which can be hardly changed. Blockchain enables parties with no trust in each other to exchange data without intermediaries. Those features promise to render blockchain solutions as a key enabler for transaction-based climate neutral and sustainable initiatives (as an example, allowing distributed users to actively participate in financing and managing renewable energy projects).

Blockchain displays key advantages (relative to traditional centrally supervised systems): decentralisation (of actors and decision making), immutability (of stored information), transparency and verifiability (thanks to the full visibility of and accessibility to transactions), security (thanks to cryptographic and time stamping techniques and the absence of a central point of failure).

At the same time blockchain faces several challenges, including: security (human errors/actions or technological advances may challenge its security features), scalability (owing to the limited capability of handling numerous and frequent transactions), interoperability (how well can a blockchain interact with the real world or other digital solutions), sustainability (energy/environmental footprint).

 

 

 

 

 

 

 

 

 

 

 

Blockchain applications, initially developed in the digital finance sector, are now under test all across the energy value chain, from generation to transmission down to distribution and end-use. Most of the blockchain energy solutions - currently tested at low technological readiness levels - are based on Ethereum and a few other distributed ledger technologies (including: Hyperledger, Bitcoin, IOTA and others).

The policy and legislative initiatives on blockchains are moving their first steps, starting from the financial sector and gradually covering other sectors including the energy one. Numerous regulatory, legal and socio-economic hurdles still hamper the large-scale deployment of blockchain applications. Besides addressing the overarching issues associated with blockchain technologies - security, scalability, interoperability - policy decision making will need to tackle more energy-related specific problems in the privacy and identity, liability and markets, data access, fairness and acceptance spheres.

The extent to which blockchain innovation can pervade the power sector and support - or subvert - electricity business models remains to be seen. The JRC keeps monitoring such developments through observatories, desktop analyses and experiments.

(*) the terms Blockchain and Distributed Ledger Technologies tend to be used interchangeably, although Blockchain is just one - currently the most deployed/tested - among the Distributed Ledger Technologies.

From the following table of contents you can access the full sections/transcripts of this review work, whereas further below you can read an extended, annotated summary:

TABLE OF CONTENTS

1. ELECTRICITY DIGITALISATION TRENDS AND POLICIES 

2. DISTRIBUTED LEDGER TECHNOLOGIES

3. BLOCKCHAIN USE CASES AND APPLICATIONS

4. BLOCKCHAIN ENABLERS AND ROADBLOCKS ◂

EXTENDED SUMMARY

1. ELECTRICITY DIGITALISATION TRENDS AND POLICIES

(see video from 05'25") We explore the meaning and some implications of the electricity digital transformation. Electricity digitalisation is about deploying more ICT (information and communication technologies), sensors, electronics & data analytics. What for? For better running the system and better integrating different actors and technologies.

(see video from 24'10") We illustrate some of the main EU policy and legislative initiatives in the energy and digitalisation fields. Digital transformation is a key enabler to attain the Green Deal/Recovery objectives. A consistent approach in the regulation of several cross-cutting sectors (Energy, ICT, Transport, etc.) is needed to reach those objectives.

2. DISTRIBUTED LEDGER TECHNOLOGIES

(see video from 40'04") We introduce some basic features of the Distributed Ledger Technologies: what a lottery and an attack to a fortress have to do with a blockchain? We explain why the primary purpose of blockchain technologies is to remove the need for intermediaries and replace them with a distributed network of digital users.

(see video from 01h11'01") We explan how blockchain is steadily improving its performances while impacting more sectors (beyond finance). We compare crypto-currencies and crypto-assets such as bitcoin, ether and others. We elaborate on the two sides of the same...cryptocoin, addressing security, scalability, interoperability issues.

3. BLOCKCHAIN USE CASES AND APPLICATIONS

(see video from 01h38'26") We introduce the main use case classes of blockchain applications, concentrating on the power system, the wider energy system and other coupled/interfacing sectors. 

(see video from 01h47'54") We illustrate the main use case classes - as well as selected projects/initiatives - in the metering and billing, electricity market and trading, system operation and flexibility and electric mobility fields. 

METERING AND BILLING. Blockchains, when integrated with metering infrastructure, can automatise billing and enable other energy services for consumers and distributed generators. 

ELECTRICITY MARKET AND TRADING. Blockchains can facilitate new market structures among producers, consumers and prosumers, thanks to the trusted and decentralised direct exchange between parties. 

SYSTEM OPERATION AND FLEXIBILITY. Blockchain solutions - based on automation and decentralised grid management and control - can improve supply-demand balancing mechanisms, transmission-distribution systems coordination, and distributed energy resources integration. 

ELECTRIC MOBILITY. Transport looks the perfect application for blockchains thanks to its decentralised nature. Advantages of decentralisation include: elimination of a centrally managed EV charging infrastructure, fault tolerance, elimination of price-setting and collusion behaviours. 

(see video from 02h24'24") We illustrate the main use case classes - as well as selected projects/initiatives - in the green certificates & carbon credits and the energy crypto-assets & investments fields. 

GREEN CERTIFICATES AND CARBON CREDITS. Blockchain promises to streamline fragmented and compelx market structures for renewable certificates, cabron credits or general environmental attributes.

ENERGY CRYPTO-ASSETS AND INVESTMENT. Cryptocurrencies are being used as a method to 'tokenise' energy assets, thus creating new markets or business models based on co-ownerhsip and sharing.

(see video from 02h41'14") We illustrate the main use case classes - as well as selected projects/initiatives - relating to multi-purpose & integrated platforms and the Internet of Energy Things (IoT, smart devices, automation & assets management).

MULTI-PURPOSE AND INTEGRATED PLATFORMS. Several collaborative platforms - launched/supported by several governments, businesses and other organisations - explore the blockchain potential in a variety of use cases.

INTERNET OF (ENERGY) THINGS. Blockchains can enable IoT (Internet of Things) platforms, smart devices communication and automation, facilitating machine-to-machine interactions and asset management.

4. BLOCKCHAIN ENABLERS AND ROADBLOCKS

(see video from 03h04'21") We recap the key advantages and disadvantages of blockchain tehcnologies. We then discuss to what extent blockchain can support or subvert business models in the transitioning electricity systems and markets. We reflect on regulatory, legal and socio-economic actions fostering the blockchain deployment. We describe the EU's blockchain strategy with its main legislative proposals and actions.

 

TO LEARN MORE

JRC REFERENCES

 

Last update: 28 April 2023
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