The disruptive potential of blockchain technologies in the energy sector

Panel: 5. Smart and sustainable communities

This is a peer-reviewed paper.

Authors:
Beatrice Marchi, Università degli Studi di Brescia, Italy
Simone Zanoni
Ivan Ferretti
Lucio Enrico Zavanella
Marco Pasetti

Abstract

The rapid transition of energy markets from centralized to distributed models entails several challenges, such as the management of bi-directional energy flows and complex transactions, increased volatility, the exponential growth of the number of players and of data volume, legacy issues for players, cyber security and data privacy. Direct peer-to-peer trading based on the blockchain technology applied to the virtual power plant concept can create a direct connection between suppliers and consumers of energy and represents a viable solution to meet these challenges. Blockchain can be defined as an immutable distributed ledger that verifies and records, in a safe and secure way, peer-to-peer transactions without a central authority. In recent years, blockchain is acquiring an increasing relevance, since it guarantees transparency for every transaction, creates trust through a shared database, and increases the efficiency of the transactions.

Furthermore, blockchain reduces the number of third-party intermediaries, simplifies market processes and architectures, and increases the operational efficiency. Blockchain technology has an extensive range of use that can disrupt the energy sector. For instance, it has the potential to speed-up an open energy market also for small customers, where electricity prices come from the balance of demand and supply like other tradable commodities. Peer-to-peer energy trading platforms also open-up the possibility to distinguish where energy is coming from (i.e., renewables, coal, oil, and gas), which allows environmentally conscious consumers to choose renewable energy.

The aim of this work is to investigate how blockchain can transform the current energy market in order to highlight advantages and disadvantages and to understand the related potentials and risks for prosumers and grid operators. Moreover, managerial insights will be provided for supporting stakeholders and regulators in the management of the future energy market enabled by the blockchain.