Is it possible to trade electricity without middlemen making a profit from the price difference?

At the end of 2019, State Grid Blockchain Company organized the first Energy Blockchain Ecosystem Conference and released the top ten application scenarios of State Grid blockchain technology and the "Central Enterprise E-commerce Alliance Chain".

At present, application scenarios based on blockchain technology can provide efficient and complete solutions for new energy cloud, power trading, integrated energy, data sharing, material management, finance, law, etc.

Currently, the new energy cloud platform led by the State Grid E-Commerce Company has been piloted in 14 provincial power grid companies including Ningxia, Xinjiang, Jilin, Shandong, and Jiangsu. Through the application of blockchain technology, more than 200,000 new energy photovoltaic power stations have signed grid-connected contracts, trade settlements and other information on the blockchain, with more than one million pieces of data. At the same time, the average time limit for grid-connected business has been shortened by 16 days, and the electricity bill settlement cycle has been shortened by 4 days.

At present, State Grid has completed the integration of blockchain applications in ten major business scenarios. Currently, the cumulative amount of data uploaded to the chain in the ten major application scenarios is close to 5 million.

In this article, Xiannenghui will combine the specific application of blockchain technology in electricity trading to deeply explore the future electricity trading model.

In early 2016, the US energy company LO3 Energy and the blockchain technology company ConsenSys took the lead in launching a microgrid electricity sales project based on blockchain technology in New York. In this project, local residents can sell their excess electricity through a blockchain prototype.

How is this transaction completed? The principle is actually very simple, that is, using the network as a distributed mechanism, on this basis, directly selling units of electricity through smart contracts. Settlement can also be directly traded in US dollars. At present, the project has been successfully applied to the sale of electricity in photovoltaic microgrids.

Energy + blockchain development prospects are promising

The comprehensive Internetization of energy is a trend. The decentralized characteristics of blockchain fit the characteristics of distributed energy. The advancement of blockchain technology can drive the energy revolution and build a new energy trading model. The energy industry is an important field for the implementation of blockchain technology.

In May 2019, State Grid E-Commerce published an article in the State Grid News, proposing the application prospects of blockchain in the energy industry.

What can blockchain do in the energy sector?

Blockchain technology can realize the mutual dispatch between different energy sources, such as the dispatch between thermal power and new energy, and achieve complementary advantages. Blockchain can turn data into assets because of its recording function. In the field of carbon trading, it can digitize carbon assets and use the characteristics of node sharing and traceability to make carbon trading transparent and orderly. At the same time, blockchain uses P2P technology to achieve real-time trust establishment of various transaction information and data, and improve transaction and settlement efficiency.

Germany has no middlemen to earn the difference in trading model:

Conjoule, founded in Germany, has developed a P2P market for producers and consumers of renewable energy. On this market platform, users who install photovoltaics at home can sell surplus electricity to local consumers, and all transactions will be recorded on the blockchain platform.

Through this platform, they develop a peer-to-peer trading market for renewable energy producers, consumers and energy owners, eliminating the previous middleman trading model. The platform is currently being piloted in two German cities, allowing users who install solar photovoltaic systems at home to sell excess electricity to other local consumers.

The advantage of this platform is that it is not only a future-oriented digital energy allocation system, but also a decentralized trading platform. Its trading method is more flexible and the consumer experience is better. Users can purchase excess energy directly from their neighbors through the platform without going through any third-party centralized channels.

In addition to the field of power trading, blockchain can use technical means such as data encryption, timestamps, and distributed consensus to build blockchain energy trading and supervision for the full chain interaction of sources, networks, loads, and storage, and achieve real-time tracking and precise management of large-scale sources, networks, loads, and storage. Because blockchain algorithms keep data immutable, they can control risks and create a diverse portfolio of energy financial assets.

At present, the market-oriented electricity trading is facing constraints

The marketization of power trading has developed, and spot trading has begun trial operation. A new round of power reform has begun, and the marketization of power trading is the focus of this reform. At present, 34 power trading institutions have been established across the country, including 2 national power trading centers (Beijing and Guangzhou) and 32 provincial power trading centers.

From January to November 2019, the national electricity sales volume was 5404.9 billion kWh, a year-on-year increase of 5.9%. The electricity consumption of the operating industry accounted for 58%. From 2016 to 2018, the proportion of national electricity market transactions increased year by year, and the accumulated reform dividends exceeded 180 billion yuan.

The new round of electricity reform requires the restoration of the commodity attributes of electricity and the construction of a competitive electricity spot market with "multiple sellers and multiple buyers" under the decentralization of trading. However, the development of the electricity spot market faces many constraints, and the electricity spot market transactions need to be more intelligent, real-time and secure.

The electricity spot market emphasizes the real-time and autonomy of transactions. However, under the constraints of the existing unified dispatch planning mechanism, it is difficult to achieve rapid response and real-time transactions in the electricity market. It is necessary to give the market greater flexibility and openness under partial compliance with dispatch management, that is, autonomous, intelligent and partially decentralized transactions.

To establish a competitive electricity spot market, it is necessary to strengthen the unified supervision and security protection model of electricity spot market transaction records, financial settlements, and operating data. It is necessary to prevent the transaction parties or third-party intruders from tampering with transaction data or obtaining privacy data, and ensure the security, authenticity, integrity and reliability of the data.

What problems can blockchain solve in electricity market transactions?

Electricity spot trading under blockchain technology can realize real-time dispatching transactions and regulatory models

The operation of the electricity spot market is subject to many constraints. For many provinces in developed regions, the supply of electricity in the province is less than the demand, and electricity needs to be transferred from other provinces. When the electricity price in the province is high and the electricity price outside the province is low, the sales of electricity in the province will be affected. For underdeveloped provinces, the supply of electricity in the province exceeds the demand, and there is a phenomenon of power hoarding. There is an urgent need to export the excess electricity to developed regions for power supply, but the inter-provincial transmission distance is long, the loss is large, and the transmission and distribution costs will also increase the transmission cost. At the same time, the current electricity spot transaction mainly adopts direct purchase of electricity by large customers, which is the result of bilateral game negotiation, and is not a global optimal negotiation solution.

The clean energy consumption mode based on policy subsidies is not conducive to the long-term development of the electricity market. In addition, the operation of the electricity spot market also has problems such as bilateral transaction security, real-time power distribution, selection of power sales companies and government supervision, and real-time electricity price calculation.

Because the characteristics of blockchain can just make up for the problems in spot transactions:

1. Decentralization - distributed storage, without the need for third-party intervention, enables peer-to-peer transactions and interactions between people.

2. Global circulation - Blockchain assets can be circulated wherever there is Internet.

3. Anonymity - Only transfer records can be found on the blockchain network, but the transferor cannot be known.

4. Open and transparent - it can be reviewed by nodes across the entire network, enabling transaction traceability and data synchronization across the entire network.

5. Information cannot be tampered with - once data is written into the block, it will be stored permanently and cannot be changed or revoked.

6. Autonomy - jointly maintain the reliability and security of the entire blockchain information.

Each node in the blockchain has equal status. There is no completely centralized node. Normal operation is maintained through a consensus mechanism.

Therefore, under the blockchain architecture, each node in the electricity spot market negotiates and reaches a spot electricity price plan, transmission and distribution path plan, and transaction priority allocation plan in chronological order, which improves the fairness and effectiveness of real-time transactions.