This is the second in a Blog series titled: Blockchain Powered Smart Grid Evolution. In our previous blog we discussed electrical power distribution in economic terms and that both power and energy is a commodity to be bought, sold, and traded. 
While the present trading scheme is reliable, we pointed out that it has two serious weaknesses: a) long settlement times that can take 7-10 days to finalize the payment related to the transaction between partners and b) bank fees associated with settlement can be quite high.
We explored a future looking system in the previous blog for energy trading that will be powered by Smart Contracts over the Blockchain as shown in Figure 1 above. We looked at reducing the settlement time and trading fees through Smart Contracts over a private Blockchain network, owned and operated by the ISO, to interconnect the ISO server node with the partner nodes. In addition, we explored the possibility of an ISO creating its own cryptocurrency for settlement of the trading, thus reducing the settlement fee and removing large centralized banking institutions as intermediaries.
Energy Smart Meters, Switches and Microgrids
In this blog, we go beyond energy trading and expand into ideas for smart meters, smart switches and Smart Microgrids powered over the Blockchain for the distribution of energy. In today’s power grids the energy is distributed through a complex transmission system consisting of a large number of switches and meters some of which have to be manually operated when energy is shared between two utilities. Once the Trading Agreement is completed, there is a long planning process needed to determine the exact timing of switches being manually turned on and off. This process is complex and error prone and thus could lead to devasting consequences in the power grid if not performed according to the detailed plan of execution.
Now consider a next generation method of controlling the distribution of energy using Blockchain and Smart meters/switches as shown in Figure 2 below.
The ISO Server Node and Partner Nodes are all connected to the ISO Private Blockchain Network as was described previously. All the data exchange for energy trading proceeds through this Blockchain Network and all Trading Settlement Information is Inserted by the ISO Node on the Blockchain. Thus, the trading is decentralized and is done through the Smart Contract deployed on the Blockchain. As the trading is completed, the Smart Contract will also contain all the detailed information to determine how energy is shared between the Partners and the precise timing. Energy Sharing is then controlled through Smart Meters and Smart Switches triggered by the Smart Contract. The ISO Node is the Super-Node of the private blockchain and it consists of a high-availability cluster of nodes.
The architecture shown in Figure 2 can further be extended to Microgrids. A microgrid is a localized group of electricity sources and sinks (loads) that typically operates connected to and synchronous with the traditional centralized grid (Main Grid), but can disconnect and maintain operation autonomously as physical and/or economic conditions dictate. The Microgrid is a novel distribution network architecture within the Smartgrids concept, capable of exploiting the full benefits from the integration of large numbers of small scale distributed energy resources.
A future looking Blockchain Powered Smart Microgrid, as shown in Figure 3, can be managed and controlled by a Smart Contract. Storage devices and Transient Stability Control devices are all operated through the Smart Contracts. In addition to the control of storage and stability devices, the Microgrid is generally connected to the Main Grid via Smart “Point of Common Coupling” devices.
Artificial Intelligence and Machine Learning based control algorithms in concert with the Smart Contract over Blockchain ensure overall power system stability and reliability. These control algorithms are integrated within the Smart Contract.
In summary, Blockchain use cases are proliferating in the energy domain. The evolution will be gradual, but the organizations need to get started immediately. The trend is towards decentralized control of Energy Trading and Grid Operation. Eventually the Microgrid Architecture discussed in this blog can be extended to the Main Grid. Of course there are many regulatory issues that might have to be resolved depending on the regulatory climate in a country.
Ultimately, Smart Contracts running on a Private Blockchain Network will control overall operation of the smart grid as well as the main grids and private cryptocurrencies will be the mechanism for energy trading and settlement.
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