This essay will describe how blockchain has the potential to revolutionize the energy industry by changing the way electricity consumers and generators can trade. A current problem is that consumers are limited in their choice of who they get their energy from, and while they are able to choose between different energy providers, this traditionally only allows for them to decide between the majority of their
supply coming from renewable or from fossil fuel sources. Purchasing from a certain generator in particular is not easily possible for them. This causes certain problems that will be outlined next. Using a blockchain-based energy trading platform that directly connects electricity consumers and generators could solve these problems in 3-5 years. rnFirst, people are not incentivized to become generators themselves, through the purchase of a small on-site facility, because they cannot sell the excess energy that they produce. Only large producers can be profitable currently, in part thanks to many regions lacking feed-in tariffs, often meaning a return on investment often only occurring 2 decades later in residential prosumers. rnFurthermore, only giving consumers the ability to purchase from energy providers prevents them from supporting a local generator, for example if they had neighbors with on-site generation. This also presents a particular problem for sustainability-minded consumers, who are not able to exclusively support their preferred source of sustainable generation. They are limited to generating just what they demand, and any surplus has to be discarded. rnAdditionally, one of the main issues faced by the modern electrical grid is the lack of real-time energy pricing, which presents a true demand-side management challenge. Through the further
electrification of the transport system in particular (EVs), demand will only increase, and the problem will only become evermore hard to solve later. This problem also impacts the customers: consumers presently cannot optimize their consumption schedule to have high demand coincide with the cheapest prices and vice versa. rnAlso problematic for their customers are the utility companies. A lack of transparency exists for customers from utilities, that is, customers cannot know which specific generator was the source of their electricity or how the utility company is investing their money. The providers just present them with a periodic billing system that they usually find both unclear and surprising, failing to adequately detail their energy use during the billing period. rnWe propose a blockchain based electricity trading platform that would directly connect consumers and generators to combat these issues. The grid operators would be compensated for their grid upkeep costs directly through the platform. Customers could choose their generator directly from a list. rnSuch a system would have the advantage of eliminating many parties in the traditional
energy trading market. Using smart meters to measure consumption and production of electricity, which is then traded through the fulfillment of cryptographically secure, predefined, agreed-upon smart contracts that are executed automatically on the blockchain when a certain requirement has been met (i.e. the meter measures has successfully measured an amount being supplied), a completely decentralized market could be formed. Banks, energy traders, and energy companies would not be necessary any longer. This means less middleman fees would exist, translating to a saving for consumers and additional profit for generators (We think it is reasonable to assume that a compromise between both of them would naturally arise, in which the saving on middlemen would be split; not necessarily perfectly even). This system would be able to alleviate many of the current pains faced by customers of the grid, i.e. both consumers and generators: For one, prospective prosumers would be provided with feed-in tariffs, offering a severely needed financial incentive to purchase their own on-site generation (solar and wind farms are not cheap to implement for private consumers or for small businesses). The feed-in tariffs would be paid simply as a result of fulfilling a predefined condition of a
smart contract. rnMoreover, the issue of the lack of generator choice would be solved, allowing local renewable generators to be supported if desired. Even a consumer preference for electricity from molten salt solar farms instead of photovoltaic solar farms could be accommodated by the platform. In like manner, the mystified operation of the providers would be replaced with a transparent blockchain based system to consumers using the system. No longer would consumers be begged to keep switching between providers only to learn that their rates have unexpectedly suddenly increased after a provider offered them a welcome discount that expired once they were enrolled for a period of time. Their obscure periodic bills would be replaced by instantaneously executing smart contracts between them and the generator they have selected. Of course, as previously mentioned, prices would be lower due to the absence of many middleman fees. These prices would also be real-time, continuously adapting to the naturally available supply and arbitrary consumer demand peaks, which optimizes the market efficiency, and reduces energy storage requirements.