Benefits of Blockchain-Enabled Microgrids

Posted January 3, 2024 | Technology |
Benefits of Blockchain-Enabled Microgrids

Modern energy systems are increasingly integrating independent, local, decentralized power systems known as “microgrids.” Microgrids offer better operational efficiency and higher resilience than conventional power systems. Further benefits can be obtained through a cooperative microgrid ecosystem comprising clusters of multiple microgrids.

In these collaborative ecosystems, each microgrid can supply loads from the excess generation capacity of other microgrids and sell its power surplus to other microgrids. Achieving this requires a system architecture that facilitates cooperation among microgrids by providing appropriate cross-market rules and transaction infrastructure.

Blockchain has the potential to decentralize systems in various applications, including power-distribution networks, providing a secure platform for optimal network operations. In addition, blockchain can facilitate information sharing and transactions among blockchain platforms without the need for intermediaries. These capabilities can be leveraged for implementation of decentralized distribution networks with multiple interoperable microgrids (IMs).

With this type of architecture, users can view the power surplus and electricity rates in other microgrids, send bids, receive offers, and complete energy transactions on the blockchain using designated market rules. This provides a transparent infrastructure for monitoring the carbon footprint and share of renewables in the energy composition of each microgrid; it can even be used to establish market mechanisms for carbon pricing.

IMs can enable better ancillary service provisions and improved dynamic management of the network by providing better access to other microgrid resources. IMs also bring resilience to the network by adding redundancy to the system topology due to their decentralized architecture. This has the potential to reduce operational costs and increase the reliability and efficiency of power-distribution networks.

However, IMs can also create challenges for decentralized distribution networks. First, the interoperability of the transaction infrastructure must be accompanied by well-designed, cross-market rules to facilitate marketplace interoperability. Second, effective governance structure and standard protocols must be developed to ensure the compatibility of various consensus mechanisms across platforms. Third, there are several technical challenges, including ensuring transaction atomicity, improving transaction speed, securing data transmission, ensuring universality of cross-chain protocols, and implementing user- and developer-friendliness of the blockchain.

We are encouraged by recent technological developments in the interoperability of blockchains and the decentralization of distribution networks. In our view, interoperable microgrids enabled by blockchain can offer more choices to consumers, improve market efficiency by eliminating middlemen, increase resilience by decentralizing the network topology, and enable new marketplaces, such as carbon markets.

IMs should be part of the grand strategy of the utilities for decarbonization, decentralization, and digitalization of the smart grid.

[For more from the authors on this topic, see: “The Sustainable Energy Grid: Blockchain’s Role in Addressing Transition Pain Points.”]

About The Author
Ali Arabnya
Ali Arabnya is Research Professor of Electrical Engineering at the University of Denver. He is an expert leader in energy infrastructure and climate finance and works at the interface of engineering, finance, and policy. Dr. Arabnya has over 15 years’ experience working with global financial institutions, management consulting firms, academia, energy companies, public sector organizations, and technology start-ups. Previously, he was Climate… Read More
Amin Khodaei
Amin Khodaei is Professor of Electrical and Computer Engineering (ECE) at the University of Denver, where he has also served as Department Chair. In this capacity, Dr. Khodaei doubled the department’s undergraduate enrollment, launched a professional corporate master’s degree program in systems engineering (with specializations in system and space) in collaboration with Lockheed-Martin, initiated multiple industry relationships, and led the… Read More