Peer-to-peer Energy Trading through Blockchain
There are multiple origin stories for the barter system, and consequently for the Peer-to-peer ecosystems. Whatever the origin may be, the fact that they will become a mainstream technology in the future is inevitable.
Peer-to-peer energy trading is buying and selling of energy between two or more power grids, often in the form of excess energy that is either sold or transferred through a secure platform. Blockchain is often used as a secure platform to trade energy, a database technology that stores energy credits that can be seamlessly traded. The term used to a consumer who both sell and buy energy is called the ‘Prosumers’.
Blockchain-based peer-to-peer (P2P) energy trading platforms allow the consumer to share excess energy and this is distributed and controlled through microgrids. This type of trading is popular in the form of solar energy where a consumer can benefit even if they do not have the source of renewable energy. In simple terms, even if one does not have a solar panel, they can procure from their neighbor who has excess energy from their panels.
Why Blockchain for Trading Energy?
Trading energy is overly complex because of the number of variables that are aligned with it, from the amount of electricity that is generated to its nuances such as quantity, time generated, source, etc. All the current energy trading systems are centralized, and all the procedures rely on a single system which has many drawbacks. Blockchain solves this problem because it is robust and public, moreover, it is tamperproof and immutable since each block in the chain is tightly connected. Each block is connected by a hash code that is based on their respective content and any trivial change to the block with disrupt the entire Blockchain making it almost foolproof. Some of the advantages of Blockchain-based P2P trading are:
- Blockchain allows consumers to buy directly from the prosumer with no third-party involved in the transaction
- All transactions are available as records in public that is accessible to everyone, thus avoiding any discrepancies
- Since each block is linked to the previous block it prevents any alter of content and thereby reducing fraud and manipulation
- The contract clauses are determined by the involved parties and transfer of assets is smooth through predetermined procedures
What are the constraints?
The success of P2P based electricity trading depends largely depends on the adoption of microgeneration as a concept. Grid management is a key factor in the success of this format of trading. Provision to measure energy imported from one grid and exported to another must be established and the investment to do so is extremely high. Assuming the former is addressed, many countries still do not have a regulatory framework to permit trading P2P energy digitally. As of today, only Australia and the UK are showing some inclination towards solar energy trading through P2P blockchain technology, which is a very minuscule representation.
For Example: in the UK electricity fed to the grid is billed based on a feed-in tariff that is agreed between the prosumer and the service provider. However, the P2P based transactions are still a challenge in many places including the UK primarily because of the non-availability of robust trading platforms that are fair and allows the prosumer to determine the cost.“Peer-to-peer ecosystems have made many regulators sit-up and take notice, especially where commercial implications are involved. The present catch-22 situation of “regulating” a technology that focuses on “deregulation” and “decentralization” is a considerable challenge. Once we are past this, the possibilities are limitless and will put power literally in the hands of the consumer and producer. Blockchain-based P2P ecosystems are inevitable. The question is not “why”, it’s “when”! “ says Navin Kumar, Managing Director, Navsar Engineering International Pte. Ltd.
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Article References: Energycentral