Regulatory Paradigm and Challenge for Blockchain Integration of Decentralized Systems: Example—Renewable Energy Grids

Abstract

Nowadays, fossil fuels are used in a clearly unsustainable way that can bring potentially catastrophic consequences. Electricity is currently delivered to end users by generation and energy transmission companies. Previous research shows that the development of modern circular economy sets a need for the re-orientation of socio and economic development of decentralized systems, including energy basis. In addition to being ecological, the use of renewable energy sources also has economic significance by contributing to energy independence. Citizens, industries, local and national authorities become interconnected within emerging novel renewable energy sourcing communities, through which they establish trade of energy and, most importantly, models of investing and reshaping the distribution of renewable energy. The modern portfolio management of renewable energy networking is aiming toward decentralized systems of trade, where the consumer becomes a producer (prosumer) within the network, itself managed by users. Excess energy produced in the micro-grid nets within the over-arching national and transnational energy grid should be accounted for and managed with blockchain technology for financial and structural security. The decentralization of the energy market requires the establishment of strict norms that will regulate the market and taxation of profits arising. The extensive literature review on blockchain in the energy sector reflects a very pragmatic and narrow approach to the topic, although it is evident that the distribution of energy within the blockchain would enable economic development through reducing cost and ensuring more secure energy trade. Blockchain technology embeds the related digital codes, in which information will be visible to all, but also secured from hacking and duplicating. However, there are challenges to this paradigm, not least the energy consumption of the extensive nodal mesh required to perform the necessary protocols. This paper aims to provide an overview of the application of blockchain technology and the need for the development of the regulatory system and of potential solutions to the challenges posed. By undertaking an energy consumption analysis of blockchain implementation from first electronic principles, which has not been constructed before in the literature, this paper’s conclusion stresses the future demand for reducing energy consumption and considers the latest findings in the quantum coupling of light signals as a potential for solving the enormous ledger duplication structure problem.