Applying the Blockchain to Energy Trading

The enerchain project has started with an initial book chapter written by Michael Merz. The article is written in German, an English translation will be available in early August. Stay tuned!

The Book has been published in October 2016 by de Gruyter publishing.

Energy trading is a subspace of commodity trading with a complex set of roles and market participants: traders, brokers, exchanges, clearing houses, price agencies, and network operators for the distribution of electricity and gas. As renewables gain higher shares in production, new market roles appear like aggregators, prosumers, marketplaces for flexibility and microgrid operators.

Due to the increasing volatility of supply energy-related processes need to be accelerated and made more efficient should they cope with a future real-time transaction rate a magnitude higher than today. The article argues that current trading-related processes (specifically OTC) such as nomination and clearing, and specifically future processes such as the management of flexibility will reach their limits as the cost of the underlying IT architecture increases with every step towards real-time processing. Small market participants of the future will not be able to carry IT cost as large organisations do today.

The blockchain technology promises a way out of this dead end as its very basic foundation for data communication has proved to be cost-efficient, available, near-real-time capable, and also prepared for integrating an efficient instantaneous settlement mechanism. However, new process designs need to cope with inherent features as the high level of content transparency and proof-of-stake / proof-of-work mechanism of blockchain implementations.

The article first analyses the impact of the blockchain technology generally on industrial processes. Then the focus is set on energy processes and how they could evolve towards a blockchain based infrastructure. Later-on, more disruptive scenarios are analysed where certain market roles are made obsolete. The “scenario 2030” finally sketches a blockchain-based ecosystem that integrates “EnerCoin” - an energy currency which allows to trade micro-transactions within or across local power grids.

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