Peer-to-Peer energy trading using blockchain technology

1. Blockchain Application for Peer-
to-Peer Energy Trading
Amit Kumar Vishwakarma
PhD: IIT Kanpur, India
Visiting Research Scholar
Tsinghua University, China

2. Content
 What are the possibilities of blockchain in energy and utilities?
 What are energy companies doing globally with the technology?
 What is the role of blockchain in the broader energy transition and
what are the limitations of the technology?

3. Introduction
 2008, Satoshi Nakamoto
 Like the Internet, blockchain is an open, global infrastructure upon which other
technologies and applications can be built. And like the Internet, it allows people to bypass
traditional intermediaries in their dealings with each other, thereby lowering or even
eliminating transaction costs- by World Economic Forum
 The Problem: How to perform digital currency transaction between users directly, without
an intermediary.
Blockchain Technology

4. Blockchain Technology
 A decentralized peer-to-peer system with no central authority.
 No user-client based model.
 It work on consensus mechanisms.
 Consensus is a dynamic way of reaching agreement in a group.
Keywords
 Open: Accessible to all
 Distributed ledger: No single party control
 Verifiable: Everyone can check the validity of information
 Permanent: The information is persistent
Blockchain Terminology
 Double spending problem? Bitcoin network shares a data base of all the transactions.
 Identity revealed? A random number- Bitcoin address:31uEbMgunupShBVTewXjtqbBv5MndwfXhb
 Use of others bitcoin? Digital Signature
 Publishing fake history of transaction? Cryptographic Hash Function
 Compute next block? Proof of work

5. Core Component of Blockchain

6. How Blockchain Works?

7. Block Structure:
 A block is a container data structure, which brings together transactions for inclusion in the
public ledger, known as the blockchain.
 The block is made up of a header; containing metadata, followed by a long list of
transactions.
 There is a reference to a previous block hash, which connects present block to the previous
block, lying in the blockchain.
 Mining competition; the difficulty, timestamp and nonce.
 Merkle Tree root; a data structure used to summarize all the transactions in the block in an
efficient manner.

8. Block Header

9. Blockchain Constructing Technologies

10. Ethereum
 Ethereum is decentralized software platform that allows you to build smart contracts and
decentralized applications.
Smart Contract
 A computer protocol that enforces the negotiation between two exchanging parties
 Self-operating computer program that automatically executes when specific conditions are met
 It makes smart grid scalable, resilient, secure, and even resist the SDN attacks

11. Basic Principle
 Distributed Database: No single party controls the data or the information. Every party can verify
the records of its transaction partners directly, without an intermediary.
 Peer-to-Peer Transmission: Communication occurs directly between peers instead of through a
central node. Each node stores and forwards information to all other nodes.
 Transparency: Every transaction and its associated value are visible to anyone with access to the
system.
 Irreversibility of Records: Once a transaction is entered in the database and the accounts are
updated, the records cannot be altered, because they’re linked to every transaction record that came
before them (hence the term “chain”).
 Computational Logic: The digital nature of the ledger means that blockchain transactions can be
tied to computational logic and in essence programmed. So users can set up algorithms and rules
that automatically trigger transactions between nodes.

12. Main Types of Blockchains Segmented by Permission
Model

13. Evolution of Blockchain Technology in Energy and Utilities
 Introduction: Over the past few years, developers have begun using Bitcoins underlying
technology, blockchain – for creative new applications
 Decentralized Networks: Decentralized networks redistribute power from a central server,
enabling peer to peer communications
 Smart Contract: Smart contracts are account holding objects on the blockchain containing
code that can interact with other contracts, make decisions and store data
 New Blockchain Platforms: New platforms, such as Ethereum allow developers and
consumers to take advantage of decentralized networks.
 Applications: A decentralized application is a piece of software consisting of a user
interface and a decentralized blockchain backend.
 Energy Opportunity: Globally, current energy pilots range from P2P trading, IoT
appliances level control, and crypto enabled bill pay.

14. Use case 1: P2P Energy Trading Using
Blockchain

15. DSO Level Steps
 Step 1. Customer to DSO: The customer will announce into network that he wants to purchase
energy
 Step 2. Blockchain Network: Miner nodes will check the credibility of customer, request, and
requirement
 Step 3. Blockchain Network: Find the seller based on the distance and credit
 Step 4. Blockchain Network: Creating the shared wallet and public-private keys for smart contract
 Step 5. Network to Customer and Seller: Share the generated key pairs to customer and seller
 Step 6. Seller to Customer: Cryptographically exchange of smart contract between buyer and seller
 Step7. Seller to Network: Blockchain Network will verify the credibility of seller and the amount of
energy
 Step 8. Seller to Buyer: Cryptographically agreement on smart contract
 Step 9. Seller to Buyer: Energy transfer
 Step 10: Blockchain Network: Update the ledger

16. Grid Level Steps:
 A transaction wanted to be carried out between two persons of the same microgrid
according to the rules of the smart contract (A and B), “A” wants to send 3 kWh to “B”.
 The DSO checks whether it is possible to perform a transaction, based on the electrical
routing and the power line support.
 Once the routing is validated, the microgrid allows “A” to transmit the amount of energy to
“B”, concerning the capacity of the lines to support the transmission.
 The DSO demand 1kWh left for “B” to the utility service provider for meeting conditions
of the transaction.
 The utility network provides the remaining 1kWh to the DSO.
 Finally, the DSO sends to “B” the 1kWh.

17. Use case 2: Credit based P2P energy trading

18.  The system adopts a modified PoS based consensus algorithm.
 The price is decided by an auction process and it is done once in every epoch, at the time of
transaction miners will have the responsibility to transfer few percent's to the main utility
company (this amount will be decided by government regulatory body).
 Each user submit his/her bids in terms of smart contract to buy or sell rate for a round of
transaction.
 DSO matches the prosumer and customer based on the smart contract. If there is mismatch then
nodes can submit revised contract.
 Once matching achieved, DSO checks for if buyers have the sufficient credit to pay for
purchase and the overhead to network operator.
 Once confirmed smart contract proposed to each user appends confirmation and digitally sign
the confirmation.
 Finally the DSO at miners will sign and then contracts will be bind in the ledger.
 The system will reduce the cost of operation and time of the trade.

19. Emerging Energy Blockchain Use Cases

20. What are energy companies doing globally
with the technology?

23. What is the role of blockchain in the broader energy
transition and what are the limitations of the
technology

24. Benefits and Challenges of Blockchain Technology
in Energy and Utilities
Benefits of Blockchain Technology
 Faster transactions and lower
transaction costs
 Disintermediation and trustless
exchange
 Empowered users
 High quality data
 Reliability, longevity and durability
 Process integrity
 Immutability and transparency
 Market and eco-system
simplification
…..Challenges of
blockchain technology
 Standards needed
 Nascent technology
 Uncertain regulatory status
 Integration concerns
 Cultural adoption
 High data storage
 Incentive problem

25. Broader Context – Anticipatory Policymaking
 Blockchain may lead to questions about the choice of law and jurisdiction for the
adjudication of the relevant disputes.
 Various issues will need to be considered such as the legal enforceability of smart
contracts, and liability and accountability issues, as distributed ledgers currently lack the
legal personality that is necessary for them to be assigned with responsibilities and
liabilities.
 Decentralized blockchain-based systems may be open to co-option by external powers and,
in the absence of sufficient institutional protection, the platforms could evolve into
oligarchies.
 Encrypted qualities of blockchain technology may eliminate the possibility for legitimate
forms of surveillance used for prosecution and law enforcement.
 Consumer protection will also be a key concern of regulators, as the contractual clauses
and redress measures may not be clear to consumers and, given their automated character,
not easily adjustable to a possible change of circumstances.
 Security concerns of a regulatory nature, as it could be possible to trace or deduce a
party's identity from transactions.

26. Do we actually need a blockchain?

29. Email: amitvec1014@gmail.com