Decentralization of Energy Systems with Blockchain: Bridging Top-down and Bottom-up Management of the Electricity Grid

Abstract

For more than a century, the grid has operated in a centralized top-down fashion. However, as distributed energy resources (DERs) penetration grows, the grid edge is increasingly infused with intelligent computing and communication capabilities. Thus, the bottom-up approach to grid operations inclined toward decentralizing energy systems will likely gain momentum alongside the existing centralized paradigm. Decentralization refers to transferring control and decision-making from a centralized entity (individual, organization, or group thereof) to a distributed network. It is not a new concept - in energy systems context or otherwise. In the energy systems context, however, the complexity of this multifaceted concept increases manifolds due to two major reasons - i) the nature of the commodity being traded (the electricity) and ii) the enormity of the traditional electricity sector's structure that builds, operates, and maintains this capital-intensive network. In this work, we aim to highlight the need for and outline a credible path toward restructuring the current operational architecture of the electricity grid in view of the ongoing decentralization trends with an emphasis on peer-to-peer energy trading. We further introduce blockchain technology in the context of decentralized energy systems problems. We also suggest that blockchain is an effective technology for facilitating the synergistic operations of top-down and bottom-up approaches to grid management.