Blockchain for a smart ener­gy mar­ket: Three-year research project starts

The research project “BEST – Blockchain-Based Decen­tral­ized Ener­gy Mar­ket Design and Man­age­ment Struc­tures” began in Jan­u­ary 2021 with a vir­tu­al kick-off meet­ing of the project part­ners. The project, fund­ed by the Fed­er­al Min­istry of Eco­nom­ics and Ener­gy, will spend three years research­ing how blockchain tech­nol­o­gy can be used in the best pos­si­ble way to trade elec­tric­i­ty in the con­text of the ener­gy transition.

In blockchain, many peo­ple think of bit­coins and cryp­to sys­tems first, but the tech­nol­o­gy behind this buzz­word is basi­cal­ly avail­able for trans­ac­tions of all kinds – includ­ing elec­tric­i­ty trad­ing. Trans­ac­tions are grouped into blocks and pro­vid­ed with a unique sig­na­ture, result­ing in a decen­tral­ized con­trol sys­tem that does not require author­i­ties such as banks or bro­kers. “Blockchain is inter­est­ing for the ener­gy tran­si­tion because it makes it pos­si­ble to trade elec­tric­i­ty direct­ly between gen­er­at­ing and con­sum­ing plants,” explains Nor­man Pieni­ak, BEST project man­ag­er at the Rein­er Lemoine Insti­tute. “This peer-to-peer trad­ing ben­e­fits the entire ener­gy sys­tem because it can respond much more flex­i­bly to fluc­tu­a­tions. Blockchain sup­ports the decen­tral­ized approach of the ener­gy tran­si­tion and can help reduce the need for com­pen­sato­ry mea­sures such as stor­age or grid expansion.”

Elec­tric­i­ty trade must be adapt­ed to the ener­gy transition

In con­ven­tion­al pow­er gen­er­a­tion, util­i­ties buy and sell elec­tric­i­ty on whole­sale elec­tric­i­ty mar­kets for every quar­ter of a day. If bot­tle­necks occur, or sup­ply and demand become out of bal­ance, trans­mis­sion sys­tem oper­a­tors are out­num­bered with bal­anc­ing ener­gy – this means, for exam­ple, that pow­er plants are pow­ered up or down in the short term, pumped stor­age pow­er plants are con­nect­ed or large con­sumers are dis­con­nect­ed from the grid.

As a result of the ener­gy tran­si­tion, elec­tric­i­ty gen­er­a­tion is becom­ing increas­ing­ly decen­tral­ized and volatile – elec­tric­i­ty gen­er­a­tion can fluc­tu­ate great­ly local­ly. There­fore, ener­gy should be con­sumed as direct­ly as pos­si­ble in the future where it is also pro­duced and, above all, when it is cur­rent­ly avail­able. On the one hand, peo­ple need intel­li­gent elec­tric­i­ty meters, so-called smart meters, which mea­sure and com­mu­ni­cate pow­er con­sump­tion in close inter­vals. On the oth­er hand, they need local elec­tric­i­ty mar­kets, where sur­plus­es and bot­tle­necks can be auto­mat­i­cal­ly com­pen­sat­ed with each oth­er. This would relieve the over­all bur­den on the elec­tric­i­ty grid. The BEST project there­fore cre­ates an elec­tric­i­ty mar­ket bid­ding sys­tem (SMBS) based on a blockchain, which sup­ports this local trade in the sense of the ener­gy transition.

From sim­u­la­tion to lab­o­ra­to­ry to test operation

First, under the lead­er­ship of the Rein­er Lemoine Insti­tute, which also coor­di­nates the BEST con­sor­tium, the require­ments for the SMBS are col­lect­ed, a con­cept is cre­at­ed and the soft­ware is devel­oped on this basis. OLI Sys­tems GmbH, for­tiss GmbH and the Fraun­hofer Insti­tute FOKUS are also involved in the pro­gram­ming. This is fol­lowed by the pro­to­type phase, in which the basic func­tions of the SMBS are first vir­tu­al­ly test­ed. The SMBS is then con­nect­ed to real tech­ni­cal equip­ment, con­sumers and pro­duc­ers in a lab­o­ra­to­ry envi­ron­ment and test­ed there. At the end of the devel­op­ment is a six-month prac­ti­cal oper­a­tion in the sup­ply area of the elec­tric­i­ty provider e‑regio, west of Bonn, where cus­tomers test the sys­tem under real con­di­tions. At the same time, a knowl­edge trans­fer with the ener­gy indus­try under the lead­er­ship of Energieforen Leipzig GmbH and a legal exam­i­na­tion of the SMBS by the Weser­ber­g­land Uni­ver­si­ty of Applied Sci­ences are tak­ing place.

“With the blockchain elec­tric­i­ty trad­ing sys­tem that we are devel­op­ing in BEST, we are mak­ing an impor­tant con­tri­bu­tion to dig­i­tiz­ing and accel­er­at­ing the ener­gy tran­si­tion,” says project man­ag­er Pieni­ak. “It is also impor­tant to us for research that the SMBS is devel­oped as open source soft­ware – the tech­nol­o­gy behind it is ful­ly dis­closed and can be reviewed and repro­duced by all inter­est­ed parties.”