Blockchain-based Mechanisms for Local Energy Trading in Smart Grids

Abstract

Managing the energy demand and supply during peak hours is a challenging prospect, especially in areas where the energy demand grows rapidly. To alleviate the shortage in energy supply, an increasing number of renewable energy sources (RES) are being integrated into the main grid. However, the unpredictability and intermittency of energy generation in power systems may lead to unforeseen demand peaks. To address this issue, we propose two blockchain-based Local energy market (LEM) mechanisms that assist prosumers (i.e., users with RESs that can either produce or absorb energy) and consumers to trade energy securely, balance demand and supply in a decentralized approach, and sell surplus energy to the main grid. Specifically, this paper presents the concept of Proof of Energy Generation (PoEG) to increase energy production by rewarding a prosumer as a validator to add a block in the blockchain. Also, we propose the concept of Proof of Energy Consumption (PoEC) to incentivize a user to reduce energy consumption at peak hours. To validate the proposed mechanisms, we implement a blockchain-based transaction system that consists of five nodes, a wallet, and real price and consumption data from Ontario Electric Board. The results of our experiments show that prosumers could increase their probability to win as a validator with increased energy productions and decreased consumption. We simulate two case studies, and the results show that an increase of 20% generation increases wallet balance by 10% followed by PoEG algorithm while a reduction of 20% consumption increments the balance by 9% employing PoEC algorithm.