The energy sector is set to witness a paradigm shift, driven by innovations in blockchain technology. One such innovation is the concept of Local Energy Markets (LEMs), underpinned by peer-to-peer (P2P) energy trading. 

In this article, we explore learnings from the recently published paper, Singapore Local Energy Market (LEM) development using blockchain-enabled P2P trading. It compares LEM against the Business As Usual (BAU) approach. This case study had a total of 100 participants, further divided into 60 consumers, 20 prosumers equipped with solar PVs, and 20 prosumers equipped with BESSs and solar PVs. 

The results confirm the benefits of blockchain-based LEM for both network operators as well as customers. It not only reduces capital and operational expenditure for network operators, but also empowers consumers to play an active role in creating a sustainable and affordable energy future.

Evaluating Financial Feasibility

Comparing LEMs to the conventional "business-as-usual" (BAU) approach, the LEM study aimed to evaluate relative performance.

Under the LEM approach, all participants, including consumers and prosumers, observed reductions in their electricity costs. Notably, prosumers enjoyed substantial reductions in expenditure on electricity, with savings ranging from 15.7% to 22.4%. This outcome which was anticipated, was achieved through P2P trading, enabling energy exchange within the Feed-in Tariff (FiT) and grid purchase energy price range. 

Moreover, the incorporation of Battery Energy Storage Systems (BESSs) played a crucial role in LEM architecture and created a win-win situation for prosumers and network operators. By strategically controlling charging and discharging at regular intervals, BESSs significantly reduced the gap between maximum grid import and export. This helps foster both energy efficiency and grid stability. Compared with the BAU approach,  LEM with BESSs offered a reduction of nearly 34% of export and 37% of import in peak power buy/sell from the grid during afternoon/evening hours as shown in Figure 1. 

                                                           Figure 1: Comparison of grid import and export for LEM versus BAU

Empowering Energy Trading

Blockchain-powered LEMs bring the possibility of homeowners with solar panels and Battery Energy Storage Systems (BESSs) seamlessly trading excess energy with their neighbours.  

In this study, a smart contract-driven system managed services like bid collection, P2P trading, settlement records, and billing data on the blockchain platform. LEM matched locally generated energy supply and demand in pre-defined time intervals (i.e. 15 mins). The surplus energy was traded within the network in accordance with energy trading rules. As a result, the energy traded from P2P and supplied PV was cheaper than the standard grid price.

Benefits for Network Operators

Beyond individual benefits, LEMs also preserve the income of network operators. P2P trading improved the hosting capacity of the grid and potentially could lower their Capital Expenditure (CapEx) and Operational Expenditure (OpEx). 

Network operators saw an increase in monthly income, which comes from an additional fee that is paid for every kWh traded through P2P.  

Looking to the future, there is immense potential for further enhancement by integrating community BESSs and electric vehicles (EVs) for grid stabilisation, reducing energy demand peaks, and easing the burden caused by variable renewable energy sources.

The Role of Blockchain for successful LEM based approach: 

The LEM approach turned out to be a win-win-win for consumers, prosumers, and network operators. This success is underpinned by blockchain technology which  delivers transparency and clarity for all users and application hosts. Furthermore, it opens up opportunities for tokenisation in blockchain-based decentralised energy systems, creating more efficient and robust energy markets. 

However, there are considerations to keep in mind. The choice of the blockchain platform matters. Ethereum (Second-generation blockchain), with its lower transaction speed (approximately 15-17 transactions per second) and high transaction fees may not be the most cost-effective option.

This paper highlights that Polygon (Third-generation blockchain) exhibits faster transaction speeds and lower costs compared to Ethereum. However, it was observed that even with an average transaction fee of approximately $ 0.02 on Polygon, there is a notable impact on participants' electricity bills. This issue is expected to be resolved in future research, where the true-third-generation blockchain like Powerledger Blockchain or Solana will be introduced. Such a true-third-generation blockchain could offer a substantially lower average transaction fee (approximately 100x cheaper than Polygon), be more energy efficient, and have an extremely high throughput (>50-60k TPS).

Conclusion

This paper concludes that there is a potential for Blockchain-based Local Energy Markets (LEMs) to reduce power outages, drive clean energy adoption, and improve financial returns for both consumers and network operators. 

By implementing marketplaces to optimise distributed energy resources (DERs), Local Energy Markets (LEM) not only minimise the energy loss from existing DER capacity but also offer financial incentives for generating renewable energy off-site and boost savings and profits when compared to a business-as-usual scenario.

As we look ahead, there is a need for further investigation in deploying LEM frameworks on true-third-generation blockchain like Powerledger Blockchain for its high scalability with low cost per transaction. Blockchain-based LEMs are reshaping energy markets by empowering individuals, communities, and network operators to embrace renewable energy, foster sustainability, and contribute to a greener future.

Are you ready to adopt them?

Explore the full paper here:

ResearchGate Link

IEEE DOI Link

Authors: Dr. Liaqat Ali, M. Imran Azim, Jan Peters, Dr. Vivek Bhandari, Dr. Jemma Green, Anand Menon, Sanjeevikumar Padmanaban, S.M. Muyeen

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