Residential energy trading with blockchain technology

Abstract

Blockchain technology is a peer-to-peer value transfer technology that guarantees the safety and correctness of transactions between parties who do not trust each other without a universally trusted entity. Because of this characteristic, we study possible integration of blockchain technology with a local neighborhood power grid, to design a truly decentralized energy trading market. The proposed design allows energy producers within the local power networks to safely transact with neighborhood households. In other words, the users who have a redundant amount of power can sell it to users who need power at a fairer price, than is offered by a utility company. We show that such local trades provide benefits to both electricity buyers and sellers. This paper does two things: (1) establishes a mathematical game theory model for the users’ decision to buy or sell power in the peer-to-peer energy market and (2) discuss blockchain software stack for deploying such a system. For the first part, we use a smart algorithm built upon KKT conditions to solve the multi-level game theory model. Secondly, we show how the electricity price offered by the central company is influenced by the introduction of the blockchain to the power transaction system. As supporting evidence we provide experimental data—the simulation of the market and its infrastructure using blockchain Hyperledger’s Fabric framework. Finally, we found that the electricity price can decrease dramatically by allowing peer-to-peer transactions among prosumers and consumers unless the amount of generating power from prosumers is much lower than their demand. We foresee a great future for the applications of blockchain technology in this area with the increasing mass adoption of solar and renewable generation at the consumer level. However, these processes will enact more discussions on power delivery grid ownership and its public access, usage, and management.