Journal of Energy Markets

Expanding the use of digital technologies to enable decentralized mechanisms and market access is a broad priority effort with the aim of delivering transparent, secure, reliable and timely flexibility options to consumers and communities so that they can take an active role in energy systems and markets. Blockchain technologies promise transparent, tamper-proof and secure systems that will encourage novel business solutions, especially when combined with smart contracts.

Blockchain applications in the energy sector are being represented as information assets characterized by a high volume, velocity and variety of data that requires specific technology and analytical methods to transform it into something of value. The integration of these diverse data sets is fundamental for many of the core technological areas identified as being the key to the success of the next generation of market participation, where novel ways of converting information into knowledge for effective decision making as well as sustainable business models will be required.

In this special issue of The Journal of Energy Markets, we provide a prologue from a regulated authority followed by four research papers, giving a comprehensive overview of the fundamental applications that underpin blockchain technologies, such as system architecture and distributed consensus algorithms, as well as blockchain governance and its impact on retail tariffs.

In “Blockchain: transparency for energy markets in Chile”, the prologue to the issue, Kiumarz Goharriz presents Chile’s open-data platform. Chile’s energy regulator is the first in the world to use blockchain to allow multiple parties to access information that was previously restricted or proprietary. Their Energía Abierta (open-energy) platform aims to increase the security and authenticity of data; boost integrity; allow traceability of information and transactions; and provide more transparency to all stakeholders, from planners to utilities and consumers.

In our first research paper, “In pursuit of good governance for the energy industry blockchain”, Ana S. Trbovich interprets the principles of good governance and corporate governance in the context of distributed ledger technologies, specifically looking at how these principles apply to a blockchain-enabled energy market.

Governance is being increasingly recognized as a critical challenge in the future development of blockchain-enabled marketplaces to foster opportunities for equity and inclusion. Our second research paper, “Decentralized bottom-up energy trading using Ethereum as a platform” by Muhammad Faizan, Thomas Brenner, Felix Foerster, Christof Wittwer and Barbara Koch, contributes to this discussion with the simulated environment of a hierarchical energy trading market using Ethereum’s

smart-contract technology. This creates a proof-of-concept using blockchain technology in energy trading. A dynamic grid fee based on the power network loading is calculated as an economic incentive for agents to have flexible load demand and to promote local resource utilization.

The uptake of digital technologies will need to be paired with a reengineering of associated costs and processes. In the third research paper in the issue, “Transaction cost analysis of digital innovation governance in the UK energy market”, Colin Nolden analyzes a set of goals and their governance impact within the UK market setting. The introduction of digital technologies such as blockchain is analyzed, and the author discusses how they improve energy efficiency, increase local sustainable production, provide a fair deal to all consumers and improve a network’s health and predictive maintenance.

In the issue’s final paper, “Community energy retail tariffs in Singapore: opportunities for peer-to-peer and time-of-use versus vertically integrated tariffs”, Jesus Nieto-Martin, Ai-Lin Blaise and Liz Varga present a comparison of retail tariffs – time-of-use (ToU), default vertical and peer-to-peer (P2P) tariffs – in fully competitive markets. This study focuses on the recently liberalized Singaporean market, where each district is balanced as a microgrid. A Kelly iterative double-auction mechanism is designed to calculate a distributed P2P tariff, looking to maximize the benefit for stakeholders. This tariff is then cleared and compared with a bespoke retail ToU tariff as well as Singapore’s default monopolistic regulated vertical tariff.

The authors in this issue of The Journal of Energy Markets present their findings in an engaging and accessible way, and it is our belief that each paper will motivate discussions about the market barriers to implementing the necessary technology, and about how blockchain applications can overcome these challenges, in order to prove their commercial viability and finally allow them to be adopted into the mainstream.

Jesus Nieto-Martin and Sarah Hambridge
London Business School and Grid Singularity