NATIONAL INSTITUTE OF

TECHNOLOGY, KURUKSHETRA

Seminar Report
On
Power Energy Trading using Blockchain

Bachelor of Technology, Electrical Engineering

Submitted by- Guided by-

Sanyam Nahta Dr. Yash Pal
11914152 Professor, EE Dept.
EE-B-8 NIT, Kurukshetra
INTRODUCTION

In recent years, the world has seen a significant increase in the demand for electricity due to
the growing population and rapid industrialization. This has led to a rise in energy prices,
creating a need for efficient and cost-effective energy trading systems. Traditional energy
trading systems have been criticized for their lack of transparency and inefficiency.
However, with the advent of blockchain technology, the energy trading industry has been
revolutionized.
Blockchain technology provides a decentralized, secure, and transparent platform that
enables energy trading without the need for intermediaries. It allows participants in the
energy market to trade energy directly with each other, creating a peer-to-peer energy
trading system. This system ensures that the energy transactions are transparent, secure,
and tamper-proof.
Power energy trading using blockchain has the potential to transform the energy industry,
making it more efficient, secure, and sustainable. The technology can enable real-time
tracking of energy generation and consumption, optimizing energy use, and reducing carbon
emissions. It can also facilitate the integration of renewable energy sources into the grid,
enabling the creation of decentralized energy networks.
This seminar report aims to provide an overview of power energy trading using blockchain
technology. It will explore the benefits and challenges of the technology and its potential
impact on the energy industry. It will also discuss the different use cases of blockchain in
energy trading and the regulatory framework governing the technology. The report aims to
provide a comprehensive understanding of the technology and its applications in the energy
industry.

POWER ENERGY TRADING

Introduction[1][2]-
Power energy trading is the buying and selling of electricity between buyers and sellers in a
market. It involves the transfer of electricity from one party to another at an agreed-upon
price. The purpose of power energy trading is to balance the supply and demand of
electricity in a given market and to ensure the efficient utilization of available resources.
Power energy trading came into the picture as a result of the deregulation of the energy
industry. Before the 1990s, most energy markets were regulated, with a single utility
company controlling the generation, transmission, and distribution of electricity in a given
area. This meant that consumers had no choice but to purchase electricity from a single
provider at a fixed rate.
However, in the 1990s, many countries began to deregulate their energy markets, allowing
multiple providers to compete with each other. This led to the creation of energy trading
markets, where buyers and sellers could trade electricity and other energy products such as
natural gas and oil.
Today, power energy trading is a complex and dynamic market that involves a wide range of
participants, including generators, utilities, traders, and consumers. The market operates on
a 24/7 basis, with electricity prices varying depending on the time of day, season, and
location.
In recent years, power energy trading has faced several challenges, including increasing
demand for electricity, the need to reduce carbon emissions, and the integration of
renewable energy sources into the grid. Blockchain technology has emerged as a potential
solution to these challenges, enabling a more efficient, secure, and sustainable energy
trading system.

Net Meter Concept -

Net metering is a billing system that allows owners of renewable energy systems, such as
solar panels, to receive credit for the excess energy they generate and feed back into the
grid. Under net metering, homeowners with renewable energy systems can install a two-
way meter that records both the energy they consume and the energy they produce. If a
homeowner produces more energy than they consume, the excess energy is fed back into
the grid, and the homeowner receives a credit for the excess energy produced. This credit
can be used to offset future energy bills.
Net metering has several benefits, including reducing the cost of energy for homeowners,
promoting the use of renewable energy sources, and reducing greenhouse gas emissions.
The concept of net metering has gained popularity in recent years, and many countries now
have laws that require utilities to offer net metering to their customers.

P2P Power Energy Trading:

Peer-to-peer (P2P) power energy trading is a concept that allows consumers to trade
electricity directly with each other without the need for intermediaries, such as utilities or
energy retailers. P2P power energy trading utilizes blockchain technology, which provides a
secure and transparent platform for energy trading.
In a P2P power energy trading system, homeowners with renewable energy systems, such
as solar panels, can sell excess energy they produce directly to other homeowners in their
local area. This creates a decentralized energy market, where energy is traded on a peer-to-
peer basis, without the need for intermediaries.
P2P power energy trading has several benefits, including reducing the cost of energy for
consumers, promoting the use of renewable energy sources, and creating a more efficient
and transparent energy market. However, P2P power energy trading also faces several
challenges, such as regulatory issues and the need for a reliable and scalable energy trading
platform. Nevertheless, P2P power energy trading has the potential to revolutionize the
energy industry and create a more sustainable future.
Challenges of P2P Power Energy Trading[1][3][4]:
● High Transaction Costs: P2P power energy trading requires a secure and reliable
platform for energy trading, which can be expensive to develop and maintain. The
transaction costs of setting up and maintaining such a platform can be high, which
may make P2P power energy trading less attractive for consumers.
● Lack of transparency: Without a centralized entity, such as a utility or energy
retailer, overseeing energy transactions, P2P power energy trading may lack
transparency. Consumers may not have access to information on energy prices,
supply and demand, or the source of the energy they are purchasing.
● Balancing Local Generation and Demand: P2P power energy trading relies on local
generation and demand, which may not always be balanced. In areas with high
renewable energy generation, such as solar panels, there may be excess energy
produced that cannot be absorbed by local demand. This can lead to wastage or
require the transportation of excess energy to other areas, which can be expensive.
● Developing Pricing Mechanism: P2P power energy trading requires the
development of a pricing mechanism that accurately reflects the cost of energy
production and the supply and demand of energy in a local area. Developing such a
mechanism can be challenging, as it requires access to accurate and timely
information on energy production and consumption.
● Secure Transactions: P2P power energy trading relies on secure transactions, where
consumers can trust that the energy they are purchasing is genuine and has been
generated from renewable sources. Without a centralized entity overseeing energy
transactions, ensuring the security of transactions can be challenging.

These challenges highlight the need for a reliable and efficient energy trading platform that
can overcome the limitations of a decentralized system. While blockchain technology offers
a solution to some of these challenges, it also faces its own set of challenges, which must be
addressed for successful implementation.

BLOCKCHAIN TECHNOLOGY

Introduction[3][5]-
Blockchain technology is a distributed ledger technology that allows the secure and
transparent transfer of data and digital assets between parties without the need for
intermediaries. The technology was first introduced in 2008 as the underlying technology
for Bitcoin, a decentralized digital currency.
The basic concept of blockchain is that data is stored in a decentralized network of
computers, called nodes, which work together to validate and record transactions. Each
transaction is grouped into a block, which is then added to the existing chain of blocks,
forming a blockchain. Once a block is added to the blockchain, it cannot be altered, making
the system immutable.
Here, Each block in the blockchain contains
● Timestamp,
● Hash of the previous block,
● List of transactions (Data).
● Hash generated by SHA-256 Algorithm

The security of blockchain technology comes from its use of complex algorithms and
consensus mechanisms, which ensure that transactions are validated and recorded in a
secure and transparent manner. This makes it an ideal platform for applications that require
a high level of security, such as financial transactions or sensitive data storage. In recent
years, blockchain technology has found applications beyond digital currencies, including in
the energy industry. The technology has the potential to revolutionize the energy industry
by enabling a decentralized and transparent energy trading system, where energy can be
traded directly between parties without the need for intermediaries.
Blockchain Transaction Process[10]:
The transaction process in blockchain involves several steps. First, a transaction is initiated
by a user and broadcasted to the network of nodes. The nodes validate the transaction by
verifying its authenticity and ensuring that the user has the necessary funds to complete the
transaction. Once the transaction is validated, it is added to a block and broadcasted to the
network for further validation. Once a block is validated by the network, it is added to the
existing chain of blocks, forming a blockchain. The process is immutable, meaning that once
a transaction is added to the blockchain, it cannot be altered.
Public Blockchain[10]:
A public blockchain is a decentralized ledger that is accessible to anyone who wishes to
participate in the network. In a public blockchain, anyone can validate transactions, add new
blocks to the chain, and view the entire transaction history. Public blockchains are often
used for digital currencies, such as Bitcoin and Ethereum, where transparency and
decentralization are important.
Private Blockchain[10]:
A private blockchain is a distributed ledger that is limited to a specific group of users or
organizations. In a private blockchain, access to the network and transaction validation is
restricted to a predefined set of users, making it more secure than a public blockchain.
Private blockchains are often used for enterprise applications, where data privacy and
control are important.

P2P ENERGY TRADING USING BLOCKCHAIN

P2P energy trading with blockchain technology enables individuals and organizations with
renewable energy generation to sell excess energy to others in the same community.
● This allows prosumers (consumers who are also producers of energy) to receive
instant payment for the energy they generate, rather than selling it back to the grid
at a lower rate.
● Customers who buy renewable energy through P2P trading can also benefit from
lower prices compared to purchasing energy from traditional sources. This creates a
competitive advantage for innovative retailers who can offer customers renewable
energy at a lower cost than traditional energy providers.
● The use of distributed ledger technology in P2P energy trading provides a
transparent, secure, and instant platform for electricity transactions. This reduces
the need for intermediaries and enables direct transactions between parties.
Transactions are recorded on a decentralized and immutable ledger, ensuring
transparency and security.
● In addition, P2P energy trading with blockchain technology allows for a better return
for excess energy compared to supplying it back to the grid. This provides an
incentive for prosumers to invest in renewable energy generation, further promoting
the adoption of renewable energy.
● Furthermore, P2P energy trading with blockchain technology enables more informed
usage decisions by providing real-time data on energy production and consumption.
This allows consumers to make more informed decisions about their energy usage
and to optimize their energy consumption.

McAfee's Double Auction Model [6][7]

McAfee’s Double Auction is a market-based mechanism for P2P energy trading, which uses a
double-sided auction to determine the price of energy traded between buyers and sellers.
The model was developed by John McAfee, the founder of the McAfee antivirus software
company, and is designed to be used in a decentralized energy market, such as a P2P energy
trading platform.
In the McAfee Double Auction, both buyers and sellers submit their bids for the amount of
energy they want to buy or sell, along with the price they are willing to pay or receive. The
auctioneer then matches the bids of buyers and sellers, and the transaction is completed at
the market-clearing price.
The market-clearing price is determined by the intersection of the supply and demand
curves, which represent the quantity of energy offered by sellers and the quantity of energy
demanded by buyers at different prices. The auctioneer uses an algorithm to find the
optimal market-clearing price that maximizes the welfare of all participants in the auction.
The McAfee Double Auction model has several advantages over traditional pricing
mechanisms, such as fixed or time-based pricing. It enables buyers and sellers to set their
own prices based on their willingness to pay or receive, which can result in a more efficient
and equitable allocation of resources. Additionally, the double-sided auction ensures that
both buyers and sellers have equal bargaining power in the negotiation process, leading to a
fairer and more transparent market.
Overall, the McAfee Double Auction model provides a promising solution for P2P energy
trading, as it can facilitate a more decentralized, efficient, and equitable energy market.
However, the success of the model will depend on its implementation and adoption by
stakeholders in the energy industry.

The Benefits & Limitations of Using Blockchain for Power

Energy Trading

The Benefits of Using Blockchain for Power Energy Trading:

● Increased Transparency: Blockchain technology offers a high level of transparency
by enabling all participants to access and view the same ledger. This ensures that
energy transactions are secure, transparent, and tamper-proof, reducing the
potential for fraud and enabling greater trust between parties.

● Reduced Transaction Costs: With the use of blockchain technology, there is no need
for intermediaries, such as energy retailers or utilities, which can reduce transaction
costs. This means that consumers can purchase energy at a lower cost, and
producers can sell energy at a higher price, ultimately increasing profit margins for
both parties.

● Improved Data Security: Blockchain technology is highly secure, as each transaction

is verified by multiple nodes in the network. This ensures that energy data is
protected from hacking and other forms of cybercrime, which can be particularly
important in the energy industry, where sensitive data is frequently exchanged.
 ● Enhanced Efficiency: Blockchain technology can streamline energy trading processes
by enabling automatic execution of smart contracts, reducing the need for manual
intervention. This can significantly increase the efficiency of energy trading and
reduce the potential for errors.

● Increased Accessibility: Blockchain technology enables energy trading to occur

between parties who may not have been able to access traditional energy trading
platforms. This can increase accessibility and enable smaller energy producers to
participate in the energy market.

The Limitations of Using Blockchain for Power Energy Trading [8][9]:

● Low throughput and high latency: Blockchain technology has low throughput and
high latency, meaning that it can process only a limited number of transactions per
second, and transaction processing can take longer than in centralized systems. This
could be a limitation for power energy trading, where transactions need to be
processed quickly to ensure the reliability of the energy supply.

● Lack of scalability: Blockchain technology has scalability limitations, which could pose
a challenge for power energy trading. As more participants join the network, the
scalability of the blockchain network can decrease, leading to slower transaction
processing times and higher transaction costs.

● Security risks: Although blockchain technology is generally considered secure, it is

not immune to cyber-attacks or other security risks. The distributed nature of the
blockchain network makes it difficult to hack, but if a hacker gains control of a
significant portion of the network's computing power, they can potentially attack the
network.

● Unwanted transparency and defective privacy: The transparency of blockchain

technology could be an advantage in some applications, but for power energy
trading, unwanted transparency could be a limitation. Consumers and energy
producers may not want their energy consumption or production data to be visible
to other participants on the network.

● Lack of regulatory mechanisms: The lack of regulatory mechanisms for blockchain-

based power energy trading could be a limitation. There is a need for clear guidelines
and standards for the use of blockchain technology in the energy sector, as well as
regulatory oversight to ensure compliance.
 ● Implementation of the physical layer: Blockchain technology can provide a platform
for energy trading, but the actual transfer of energy still requires physical
infrastructure. This includes energy transmission and distribution networks, which
may not be able to handle the increased demand resulting from blockchain-based
power energy trading.

● Environmental challenges: The increased demand for energy resulting from

blockchain-based power energy trading could have environmental implications. The
increased energy consumption required for blockchain transactions could lead to
higher carbon emissions and other environmental impacts.

These limitations highlight the need for careful consideration and planning when using
blockchain technology for power energy trading. While the technology has the potential to
provide a decentralized and transparent energy trading system, addressing these limitations
will be crucial for its successful implementation in the energy sector.

CONCLUSION

Theoritically, Blockchain technology has the potential to change how we get energy in the
future. However, it is still early days, and there is a lot that needs to happen before it can be
used widely. Technological advancements, laws, and regulations will all play a role in
shaping how blockchain technology is used in the energy sector. But it is likely that it will
lead to new and innovative business models in many different industries. The adoption of
blockchain technology in energy trading is still in its early stages, but there are promising
signs of growth and interest from industry stakeholders

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