Blockchain is a technology that supports distributed trading—such as the cryptocurrency Bitcoin—which is threatening to disrupt a number of industries. Its name describes what blockchain software does: transactions are stored in virtual blocks, which are connected together in a chain, creating a complete history of all transactions that have ever occurred within a particular network. Potential use cases for blockchain are being developed in many different industries, particularly where it is desirable to accelerate transaction times, remove centralized market control, reduce the cost of performing transactions, and ensure trust between different market participants.
While many use cases have been proposed for the energy industry, the one gaining the most traction at present is peer-to-peer (P2P) power trading, where owners of small-scale generation can sell excess generation direct to other consumers. Today, centralized control of distributed energy resources (DER) restricts to whom and when DER owners can sell their energy back to the grid. A blockchain-enabled P2P model allows much greater flexibility and could be a powerful enabler for truly customer-centric transactive energy. The earliest adopters of blockchain will likely not be utilities, but other stakeholders. Currently, those leading the research into blockchain are the owners of DER and startups seeking to sell directly to them.
This Navigant Research report discusses the many specific requirements of an energy blockchain and provides several practical recommendations to the industry. The study offers an analysis of the drivers for P2P trading and discusses why blockchain is an attractive option to support transactive energy. It also includes discussion of case studies, opportunities, and implementation challenges associated with blockchain technology.
Key Questions Addressed:
- What are the market drivers for peer-to-peer (P2P) energy trading?
- Why is blockchain an attractive option to support P2P trading?
- What are the specific requirements of an energy blockchain?
- What are the barriers to the adoption of blockchain?
- Where are current blockchain proofs of concept occurring?
- When should the industry start planning for blockchain?
Who needs this report?
- Distributed energy resources (DER) owners and manufacturers
- Blockchain developers
- Smart grid hardware and software providers
- Energy consultants
- Renewable energy advocates
- Investor community
Table of Contents
1. Executive Summary
2. Transactive Energy Needs a Customer-Centric Approach
3. Blockchain: A Granular Trading Infrastructure
3.1 Essential Elements of the Blockchain
3.1.5 Smart Contracts
3.2 Bitcoin Frailties Have Implications for an Energy Blockchain
3.2.1 Exchange- and Wallet-Hacking
3.2.2 Reputational Risk
4. Transactive Energy and Blockchain
4.1 Centrally Managed Transactive Energy Restricts Flexibility
4.1.1 Existing Infrastructure Does Not Support Customer-Centric P2P Trading
5. Blockchain Does Not Fully Support P2P Power Trading
5.1 The Energy Blockchain Process
5.1.1 Account for Multiple Stakeholders
5.1.2 Time Complicates Power Transactions
5.1.3 Power Tokens
5.1.4 Smart Contracts, Lawyers, and Regulators
5.1.5 Oracles Replace Central Market Function
5.1.6 Energy Blockchain Nodes
5.1.7 VPPs and the Energy Blockchain
5.2 There Are Few Energy Blockchain Trials
5.2.2 RWE EV Recharging
5.2.3 Brooklyn Microgrid
5.3 Strong Opportunities Lie in Developing Markets
6. Conclusions and Recommendations
6.1 Start Planning for the Blockchain Now
6.2 Security Is Paramount
6.3 Do Not Underestimate the Legal Implications
6.4 This Is a Leap of Faith: Do Not Do It Alone
6.5 Vendors Could Look beyond Their Traditional Markets
List of Charts and Figures
- The Energy Cloud
- The Blockchain
- Energy Blockchain Oracle
- P2P Power Trading with the Energy Blockchain