The German Ministry for Economic Affairs and Energy is funding a three-year project to investigate use of blockchain in energy trading.
The project BEST (Blockchain-based decentralised energy market design and management structures), which began in January 2021, is aimed to investigate how blockchain technology can best be used for trading in a decentralised energy system.
The project under the leadership of the non-profit energy research Reiner Lemoine Institute is focussed on developing an electricity market bidding system based on blockchain technology as an open source software.
Several key questions on energy trading are of interest, such as how a blockchain-based trading system needs to be designed to work and what auction mechanisms should be used.
Other questions are how the local networks in which electricity is to be traded are defined and what legal energy framework would such an electricity trading system require?
“Blockchain is interesting for the energy transition because it allows electricity to be traded directly between generating and consuming modules,” explains Norman Pieniak, BEST project manager at the Reiner Lemoine Institute.
“The entire energy system benefits from this peer-to-peer trading because it can respond to fluctuations in a much more flexible way. Thus, blockchain supports the decentralised approach of the energy transition and can help reduce the need for compensatory measures such as storage or grid expansion.”
The project will take place in four phases. First, the requirements for the electricity market bidding system are being collected and the software will be developed. This will then be prototyped virtually, before undergoing further technical testing in the laboratory.
Finally, the system will be deployed in a real-world six month test in the field, which will take place in the supply area of the electricity utility e-regio, near to Bonn.
Other partners in the project consortium include the German energy blockchain developer OLI Systems, software and systems engineers fortiss, the Fraunhofer Institute FOKUS research institute and the Weserbergland University of Applied Sciences.