This paper examines the hurdles that Blockchain technology must overcome to dominate and become the de facto standard distributed ledger technology in the energy sector. Renewable energy (RES) initiatives appear to be a driving force in the adoption of BC-related technologies in the power sector and the replacement of legacy systems.
Introduction to Blockchain
Distributed Ledger
Blockchain
Blockchain consensus mechanism
Blockchain in the Energy industry
Blockchain helps with price control, supply and demand, accountability and client privacy in peer-to-peer (P2P) sharing (Hrga et al., 2020). Researchers are also working on a blockchain platform and consensus mechanism for the energy industry (Hrga et al., 2020).
Smart contracts Blockchain and RES (Renewable Energy Sources)
At the time of the research for this thesis, the literature lacks concrete and systematic overview of the critical success factors that will drive the adoption of blockchain technology in the energy industry by all relevant domains. It also contributes to a thorough and comprehensive list of challenges, risks, problems and obstacles that blockchain technology must overcome in order to become mainstream in the energy industry.
Regulatory issues
- Energy industry regulation
- Lack of Energy industry standards
- Blockchain governance
- Smart contracts development
The lack of international consensus on market mechanisms such as carbon trading is also an obstacle (Ahl et al., 2020). While certain popular public platforms, such as Ethereum and Bitcoin, are feasible architectures, they are not the only ones (Y. Wu et al., 2022).
Security - Privacy
- Cyber-security
- Anonimity/Privacy/GDPR
However, it is likely that a single interest group controls more than 51% of the computing power in the energy industry, putting the security of the Blockchain at risk (Hou et al., 2020;). Blockchain technology's ability to hide personal information can lead to criminal operations that avoid regulatory authorities if left unchecked (Baashar et al., 2021). On the other hand, most networks use Blockchain to store important data, yet user privacy is often ignored (Baashar et al., 2021).
Nevertheless, confidential consumer or business sensitive information, such as the prices agreed between the energy supplier and the consumer in the smart contract, should remain stored in the ledger (Andoni et al., 2019).
Technology & IT integration issues
- Scalability
- Consensus
- Integration
- Legacy system interoperability
- Data storage
- IoT (Internet of Things)
- Smart meter technology
- Mining process computational overhead
Lack of scalability also limits the number of people who can participate (Doan et al., 2021). Ahl et al., 2019) point to the challenge of migrating from the current digital smart grid infrastructure to blockchain-based P2P microgrids. IoT applications in the Blockchain are related to big data and massive amounts of information to be exchanged between different nodes (Hasankhani et al., 2021).
The acceptance and deployment of technology faces administrative and legal hurdles (Ahl et al., 2020; Baashar et al., 2021).
Business - Market and Social issues
- Lack of clear business model
- Monopoly issues
- Social awareness and alignment
- Lack of expertise and skills
The energy sector lacks motivation to implement blockchain technology for energy-related deployments on a large scale (Brilliantova & Thurner, 2019). Another argument comes from China, where energy blockchain implementation is limited by an industrial monopoly. The growth of blockchain technology applications in the energy business will largely depend on the changing monopoly status of the energy generation industry (Cao, 2018).
The need to introduce public marketing to increase public knowledge of the benefits of using DLTs in distributed systems has been raised by (Zia et al., 2020).
Costs
- Cost of mining
- Cost of technical development - equipment
- Collection of surcharges
- Investments/Incentives
Data integrity increased security and the elimination of the need for a trusted intermediary may necessitate expensive new infrastructure, such as customized ICT equipment and software (Kumari et al., 2020; Teng et al., 2021). These costs must be offset by the benefits of data integrity, increased security, and elimination of the need for a trusted intermediary (Kumari et al., 2020). There is a general lack of economic opportunity and underinvestment in the private sector (Brilliantova & Thurner, 2019) and a complete lack of incentive systems (N. Wang et al., 2019).
Due to a lack of basic infrastructure, financing technologies remain unaffordable, dramatically increasing the cost of investment (Levi-Oguike et al., 2019).
Use cases specific issues
- Electric Vehicle (EV) operations
- Prosumer - P2P operations
Due to social concerns about the use of new technologies, it is difficult to motivate consumers to become prosumers and be part of the decentralized energy market (Hasankhani et al., 2021). Because prosumers in a transactive microgrid can purchase energy from each other, transactions can falsely reveal the specific energy consumption trends of prosumers to other prosumers in the microgrid (Laszka et al., 2017). Due to incumbent utility monopolies' concerns about intermittency and network capacity, limited network connectivity is hurting microgrid and prosumer business models (Ahl et al., 2019).
Power grid control and exclusive rights limit the exploitation of energy resources and limit market competition and participation potential of P2P microgrids (Ahl et al., 2019).
Selecting Relevant Studies
Study Selection & Evaluation
Some studies were excluded due to their highly specialized focus on technical details, while others were excluded for vague or incomplete references to the current article's topic. Finally, some articles were excluded due to their generic or introductory character in blockchain technology and architecture. Some of the articles not included were used in the Introduction section of this article.
Analysis and Synthesis
Renewable energy sources and their importance for the adoption of blockchain technology in the energy sector are well documented in the literature. Further research is due to identify and prioritize the most important critical success factors in the literature. The studies that provide a broader perspective regarding the hurdles, obstacles and challenges faced in adopting blockchain technology in the energy sector are the following:
Kumari et al., 2020) examines the main challenges of adopting blockchain technology in the energy industry, but only in relation to connectivity with AI integration with BC technologies, thus no mention is made of key technical challenges such as scalability, data storage, consensus issues . Researchers agree that Blockchain is a promising technology, but several challenges need to be addressed before it becomes mainstream in the energy sector. As the Power Ledger case study shows, a major barrier to the adoption of BC technologies not addressed in the literature is the case of local or national governments holding back renewable energy initiatives (also known as decarbonization initiatives) or completely prohibited from being implemented.
Brooklyn Microgrid BC model description
Challenges faced by Brooklyn Microgrid
The researchers concluded that the most important obstacle to overcome as a result of the case study finding is the lack of regulatory framework to allow the full implementation of a customer model. Another aspect that emerged as a barrier that needs further research is socio-economic and public awareness and support. The lack of adequate research in the given field is considered a source of risk that must be addressed.
The small scale of the pilot does not allow verification of technical implementation issues such as scaling issues cited in the literature as barriers.
Power Ledger BC model description
The scope of the Santa Clara implementation is to charge electric vehicles in a large parking garage with solar panels and batteries and create "digitized tokens" of the charging value that are tracked and recorded. Specifically, the first result is to monitor the production and consumption of energy in a six-storey parking garage in the heart of the city's entertainment district, which is powered by solar energy and batteries, as well as the energy consumption of electric vehicles parked in the parking lot. garage's 48 Level 2 chargers and one DC fast charger. Second, these EV charging transactions will be “digitalized,” allowing the utility to earn credits under the California Air Resources Board (CARB) Low Carbon Fuel Standard, which is currently in effect.
When properly implemented, this program offers electric vehicle fleet owners and electric vehicle charging network operators a potentially profitable way to sell credits to refiners and fossil fuel producers—if they can manage the administrative costs and accounting challenges associated with meeting its requirements, which can be significant.
Challenges faced by Power Ledger
Other politically related choices include low EV penetration in Ontario, which results from the provincial government's inability to provide incentives for expanding the province's EV fleet (Hurtado, n.d.). This applies to the US and Australia, the two countries where the case studies were conducted, but as the literature review showed, this also applies to most countries around the world that would be interested in using BC technology in the energy sector . Since policies and practices differ at the national level, relative research could focus on studying companies' willingness and possible plans to use BC technology in the Greek energy industry.
Hrga et al., 2020) focuses mainly on the use of DLT technologies in the energy sector and examines BC as one of the emerging solutions compared to DAG and other non-blockchain DLT technologies; therefore the challenges in this study reflect more the obstacles of the DLT concept as a whole rather than BC in particular. In this context, an ideal DLT for the energy sector is decentralized, secure and scalable (Hrga et al. – 2020). Exploring blockchain for energy transition: Opportunities and challenges based on a case study in Japan.
Compare common findings of the 2 case studies
Limitations and future directions
New research could interview energy industry executives directly to verify findings and potentially add new ones. The collection of surcharges for third party institutions, such as council taxes and national TV fundraising through energy service bills, could be a subject of further investigation. Research on this topic may be particularly interesting in relation to markets such as the Greek one, where no alternative mechanism exists for the collection and surcharges are significant bills.
This dissertation provided a comprehensive and detailed list of all the challenges, issues and barriers preventing the energy sector from adopting BC as a mainstream technology and verified the findings against current commercial implementations in the US and Australia by two companies.
Discussion
The analysis lists technical and technological challenges from a DLT perspective, not mentioning regulatory, governance or market issues. Andoni et al., 2019), while thoroughly examining most aspects of regulatory issues, focuses on the energy industry, network management, prosumer model and legal validity of smart contracts, while BC governance issues are not mentioned. Technical and IT issues are generally mentioned but not further analyzed, mentioning scalability and the development of consensus algorithms while not mentioning other important issues such as IoT integration and data storage challenges.
Gaur, 2019) focuses on the market approach and business model considerations, not research on regulatory, legal, monopoly issues, and partially only touches on technical and integration issues, etc.
Conclusions
The lack of industry regulation and blockchain governance issues are also considered extremely important and strongly linked to privacy and security and the relevant regulatory framework, which is further complicated by the fact that it varies from nation to country. Security and privacy in decentralized energy trading through multi-signatures, blockchain and anonymous message streams. Peer-to-peer energy trading in smart grid through blockchain: A double auction-based game-theoretic approach.
Peer-to-Peer energy trading mechanism based on blockchain and machine learning for sustainable electric power supply in Smart Grid.