Smart Contracts Enable New Transactional Energy Grid

The way we generate electricity and distribute it has changed over the last two decades. Instead of having centralised generation stations burning fossil fuels or using nuclear energy, more and more of our energy is coming from smaller scale renewable sources, either in the form of corporate owned solar and wind farms, or individually owned solar panels in our houses. Our energy grids were not developed for this type of production and distribution and are currently undergoing changes to cope with the evolving market, which includes changes in the demand side, such as supplying the needs of electrified vehicles. This scenario will get worse in the future as the number of private individuals generating energy continues to grow. In the near-term future, these “prosumers” – producers and consumers of electricity will be able to store their excess energy and choose when to sell it for the greatest profit, rather than have it sent directly to the grid as it is generated. Prosumers will no longer be passive customers of utility companies, but suppliers as well. To cope with this new scenario, new technologies will be require, which could include distributed AI, multi-agent systems or blockchain-enabled systems.

According to a group of researchers, smart contracts could also be the key to enable changes in the market and the grid. Smart contracts will allow individual prosumers to coordinate their generation and consumption in a distributed way, without relying on a central authority to record the transactions. The nature of smart contracts make them self-executing, customisable and tamper-proof - a key technology for enabling the transition to a more efficient, transparent and transactive energy system.

A major systematic review of the potential of smart contracts in energy systems was recently published in Renewable and Sustainable Energy Reviews by a team from Heriot-Watt University in Edinburgh, University of Edinburgh, CWI, National Center for Mathematics and Computer Science in Amsterdam, as well as a team at the Pontificial University in Santiago, Chile.

The lead author, Desen Kirli, researcher at the University of Edinburgh said: “Our study draws insights from 178 peer-reviewed scientific articles, as well as 13 industrial and demonstration projects that use this technology. The article discusses the applications of smart contracts into a number of smart fields in energy, including: smart electric vehicle charging, automated demand-side response, peer-to-peer energy trading and allocation of the control duties among the network operators. We develop a 6-layer architecture to classify the features that need to be considered when applying smart contracts in energy systems.”

Dr. Benoit Couraud, research fellow at Heriot-Watt University added: “Community energy and microgrids are an increasingly important part of energy systems, as also highlighted by our work in the Responsive Flexibility smart energy project in the Orkney Islands (UK), and the Community Energy Demand Reduction in India project. Smart contracts, along AI techniques are an important technology that can enable prosumers in such communities to trade energy with each other, as well as participate in the flexibility provision to the larger energy system.”

Dr. Valentin Robu, Associate Professor, concludes: “Smart contracts have attracted increasing interest recently from the energy community, both from academia and industry. Our study presents not only the potential advantages of smart contracts, but also some of the pitfalls and issues that parties interested in developing the technology need to pay attention to, such as security risks, computation costs or the carbon footprint of deploying blockchain-enabled smart contracts”.

https://www.sciencedirect.com/science/article/pii/S1364032121012764?via%3Dihub