Blockchain technology applied to energy: what opportunities and challenges to support the energy transition?

The blockchain is primarily known to the public thanks to the advent and popularization of Bitcoin. This digital currency launched in 2009, also known as cryptocurrency, relies on a register and transaction validation protocol shared by millions of participants on the internet. More specifically, it works thanks to a "distributed" and synchronized register by these participants, which contains all the history of Bitcoin exchanges. This register is updated approximately every 10 minutes by adding a block containing new transactions. Because it is built in the form of successive blocks, the still unknown creator named it "blockchain". Its integrity - that is, the fact that its content cannot be changed - is guaranteed by the multiplicity of participants who validate the transactions and by a unique cryptographic imprint, called a hash, added at the beginning and end of each new block. This "hash" allows participants to quickly verify at any time that the value of past transactions has not been modified in the register they share and update.

Since the creation of Bitcoin, other types of blockchains have emerged, broadening the application prospects beyond just cryptocurrencies. Some of them are based on coordination rules and register update rules that are less energy-consuming. Others, like the famous Ethereum blockchain, go beyond simple transactions: Ethereum thus allows decentralized execution of programs and recording of their states and results in its blockchain. These programs are referred to as "smart contracts". It is therefore possible, on these blockchains sometimes called "smartchains", to link users or addresses to computer scripts, and to program their execution. They pave the way for autonomous and decentralized regulation and management systems via the internet. This type of blockchain, which allows decentralized execution of programs, seems the most relevant for the deployment of energy management solutions. The Hyperledger or Corda platforms, well known in the industrial and financial sectors, also allow this type of program.

One very popular type of blockchain application in energy relates to microgrids (small independent networks) that serve as labs for future smartcities. Let's mention a few examples: the German project led by the startup Conjoule, which plans for Peer to Peer (P2P) exchange of photovoltaic energy; the Brooklyn microgrid project or the RENeW Nexus project, which use a blockchain with a cryptocurrency allowing the sale or exchange of surplus solar production.

In this emerging world of microgrids and smartgrids, several types of uses are envisaged:

The first is to use a blockchain to record and store energy transactions on these networks in a decentralized way. However, this type of use raises two questions: how to approach a "transaction" from an energy point of view? And why maintain a record of all past transactions? Indeed, energy consumption is a continuous process and requires ideally having a multitude of intelligent sensors and controls for each device to be interested in each state change, for each consumption or production point. Moreover, is it relevant to keep the history of these transactions? Such exhaustiveness could ultimately represent a lot of electricity consumption just for data sharing and unnecessarily complexifying the operation of the networks.

A second type of blockchain use involves allowing decentralized purchases and sales between individuals of a surplus of green production. In this case, the network and its connected objects are not globally optimized. It is the local production surplus that is sold without an intermediary from a production point to a consumption point. However, the P2P energy exchange does not solve the problems of anticipation and network balance, which have their own technical constraints. Thus, these blockchains must interface with the management tools of the electric operators, limiting their interest and decentralized nature.

We, therefore, believe that a blockchain associating each consumer and producer (or mixed actor) with an energy consumption and production statement, modelled on Ethereum, would offer more possibilities and flexibility. We will expand this reflection further at the end of this article.

Beforehand, it seems useful for us to talk about other types of applications.

One of them relates to network balancing.

This type of application is carried by the Sonnen project, associated with the "Flex Platform" program, which uses blockchain technology to facilitate network balancing via the use of storage batteries. This very interesting project is built on the Hyperledger blockchain, which is somewhat complex. An even more interesting improvement would be to interface these storage and balancing issues with a blockchain managing the states of consumption or production of the actors as we will develop later. The operating model of Ethereum could offer more flexibility in this respect. Alternatively, the development of generic protocols allowing the various energy blockchains to connect - modelled on Polkadot – could also be a solution to ensure this interface and optimize the management of energy networks.

Another application relates to energy trading, modelled on the Enerchain project, to cite but one, which aims to allow purchases and sales without the intervention of market operators. Nevertheless, unless I am mistaken, the currently thought solutions design these transactions, even if they are decentralized, from one actor to another only. Therefore, they face a real-time adjustment problem and require the exact meeting of an energy supply and demand, without allowing its optimization over time: indeed, some sources can be sold, then stored, then mobilized and billed afterward to a consumer. For this to happen without a network operator managing nominations and withdrawals, an interface with a blockchain managing the network's flexibility or storage, or even a more comprehensive blockchain solution, would once again deserve to be designed. Finally, without exhaustively listing all the possible applications of the blockchain, let's point out that a distributed register can also answer the transparency problems of renewable energy certificates, carbon credits, or effacement certificates.