Is blockchain a suitable platform for the transactive electricity market of the future?

The issue: The global energy transition is fast evolving, and two trends in particular seem poised to converge. On the one hand, the rapid transition toward decarbonization and decentralization in the power sector is prompting exploration of new transactive electricity market models. On the other, distributed ledger technologies such as blockchain are rapidly evolving beyond their initial financial applications to new use cases in sectors such as energy. Is blockchain a suitable platform for the transactive electricity market of the future, enabling distributed energy resources to transact with each other and capture value, while collectively helping balance the grid?

The blockchain tradeoff: In the context of transactive energy, the disintermediation of a central authority from a transaction platform—the fundamental goal of blockchain—is achieved at the expense of six costs:

  1. scalability
  2. efficiency
  3. certainty
  4. reversibility
  5. privacy
  6. governance

The degree of each cost varies by blockchain implementation, but never vanishes, so is the tradeoff justified? In their new report, Assessing blockchain’s future in transactive energy, Ben Hertz-Shargel and David Livingston argue that while blockchain has many other potential energy-relevant applications for which it may be a logical and valuable tool, this does not currently extend to serving as the key platform for transactive energy markets.

Why it matters: There are compelling reasons for energy markets, and their governance, to move in the direction of a more transactive energy system. Identifying the platform to underlie that system will be crucial, as its strengths and limitations will influence those of the system as a whole. To that aim, the authors conclude with a set of policy recommendations for advancing progress toward transactive energy models, and they lay out criteria by which blockchain—or any other platform—should be evaluated as a candidate foundation for what could be a societally-transforming future transactive grid.

Blockchain report infographic

Becca Hunziker is a program assistant at the Atlantic Council Global Energy Center.

Image: A worker checks the fans on miners, at the cryptocurrency farming operation, Bitfarms, in Farnham, Quebec, Canada, February 2, 2018. Picture taken February 2, 2018. REUTERS/Christinne Muschi