A Practical Guide to Trading and Tracing for the Energy Blockchain

Abstract

The residential sector accounts for approximately 30% of the electrical energy consumed in developed countries. This demand is currently covered not only by fossil fuels but also by renewable energy sources. In addition, the "Clean Energy Package" presented by the European Commission has promoted since 2016 through specific directives the use of renewable energy and energy efficiency with the objective of a production share of renewable energy sources of 32% in the EU's energy mix by 2030 and the increase of energy efficiency to 32.5% by 2030 as compared to the 1990 levels. More recently, as part of the "European Green Deal", the European Commission proposed to raise the 2030 greenhouse gas emission reduction target, including emissions and removals, from 40% to at least 55% compared to 1990. More recently, the European Commission has launched the first part of its operational measures in the "Fit for 55%" package that will be supportive of the European climate policy framework and put Member states on the right track for the ambitious reduction of 55% in carbon emissions by 2030, and net-zero emissions by 2050. An integrated planning of actions considering climate, land use, energy, transport and taxation will bring communities, regions and member states in line with the 2030 and 2050 targets already agreed in the European Climate Law. These directives encourage production from renewable sources, but at the same time they require a reduction in fossil fuel production, while contributing to the transformation of the electricity system from centralized to distributed. The increase in generation from renewable sources guarantees a reduction of polluting emissions, but due to its intermittent nature, such generation is difficult to manage and predict. This European framework requires the development of new energy policies at the national level able to reduce overall consumption and support the implementation of customer-centric control and management systems. It is thus necessary to study the feasibility of the different strategies available, especially for the involvement of residential users in services that can contribute to the management of the power grid. The advent of blockchain technology has allowed the development of new business models for the electricity market, opening this world also to end-users who previously did not have the opportunity to participate in energy trading and allowing the implementation of services to ensure the correct operation of the power grid. Thanks to its characteristics and especially thanks to the feature of being distributed over the grid, the blockchain could be the solution to the balancing problems caused by the penetration of unpredictable renewable sources and could make a significant contribution to achieving the 2030 and ultimately the 2050 targets. Out of all the applications in the energy sector, the most popular and developed so far are Peer-to-Peer, Vehicle-to-Grid, and Demand-Response applications. Peer-to-Peer energy trading concerns the direct energy exchange between end-users, Vehicle-to-Grid applications concern the exchange of energy between electric vehicles and the power grid for congestion resolution and ancillary services provision, while Demand Response is related to the possibility to modify the demand from end-users. Demand Response does not concern energy exchanges but, such as Vehicle-To-Grid, the solution of congestion problems and the provision of fast response ancillary services. Demand Response allows consumers to respond to market signals by increasing or reducing their energy consumption, with the aim of responding to peaks in electricity supply or demand, contributing to greater network flexibility and stability and more efficient use of infrastructures and energy resources. This service represents an important resource to achieve the objectives to be reached by 2030, as reducing peaks in demand avoids the use of peak generators wi