Tech Insights

Blockchain Could Make Smart Grids Even Smarter

May 17, 2024 by Liam Critchley

In a decentralized smart grid, blockchain technology can facilitate operations, strengthen security, and aid sustainability. 

While smart grids have many benefits, network interconnectivity poses challenges in security and privacy, especially when many digital systems are installed on outdated infrastructure without data security robustness. The multiple nodes within the network, such as smart meters and renewable energy, provide entry points for cyberattacks.

Blockchain technology may be a way to fortify the infrastructure to ensure secure, transparent, and autonomous operations. Blockchains could provide security against cyberattacks by introducing more autonomy and secure grid processes and transactions.


Blockchain technology could ease renewable energy integration

Blockchain technology could ease renewable energy integration. Image used courtesy of Adobe Stock


Blockchain in Decentralizing Smart Grids

Blockchain could function as a transparent and decentralized smart grid platform to facilitate secure peer-to-peer transactions, efficiently manage distributed energy resources (DER), and integrate renewable energy. Blockchain's ability to secure transactions and provide reliable grid management could reduce the risk of cyber threats and ensure data confidentiality.

Blockchain is a distributed database allowing for secure, transparent, and tamper-proof transactions. It could enable decentralized energy trading and autonomous smart contracts for grid management. Blockchain’s decentralization is the core area for smart grids because each grid transaction is recorded as a distributed ledger—a database that consensually shares and synchronizes data across the network. Blockchain could prevent failure points in the synchronization process.

The decentralized ledger also allows transactions with a public “witness” to tighten the network’s security. Any breach in a single system would have to breach the collective ledger held by all participants. Using blockchain offers more data transparency for any transaction between producers, consumers, and storage systems without a central authority.


Smart Contracts for Grid Management

Smart contracts in the blockchain are self-executing contracts where the terms of the contract are directly written into lines of code. The contracts can be programmed into smart grids to autonomously execute transactions under specific conditions, such as adjusting energy flow when a consumer’s energy production exceeds their consumption, validating energy transactions, or distributing energy resources.


Blockchain grid contract model

Blockchain grid contract model. Image used courtesy of National Renewable Energy Laboratory


Blockchain acts as a platform to manage contracts securely without needing an intermediary. Smart contracts automatically distribute energy to those in need, control energy loads in response to supply and demand, delay household energy usage during peak demand to off-peak times, and balance grid loads to prevent blackouts. Blockchain’s transparent nature ensures these transactions are recorded and compensated accurately.


Improving Sustainability in Smart Grids

Blockchain could play a key role in preventing energy waste in distribution and making smart grids more sustainable. First, blockchain can facilitate integrating and certifying renewable energy sources into the grid via transparent and verifiable transactions between producers and consumers. The energy traceability within the blockchain also gives customers control in choosing renewable energy sources over fossil fuels, so it could help drive the energy market toward a cleaner, more sustainable future through customer-led decisions. 

Secondly, during peak demand, the blockchain can be programmed to reduce non-critical loads and flatten the load curve, reducing the need for energy-intensive peaking power plants. 

Additionally, blockchain technology in smart grids can facilitate peer-to-peer energy trading. This enables consumers with excess energy to directly sell it to other consumers without going through the traditional transaction through a utility company.

Grid sustainability is closely linked to using energy resources efficiently and minimizing waste. Using blockchain could streamline transactions and enable direct energy trading, which reduces transmission losses associated with long-distance energy distribution and allows supply and demand balancing in real time, eliminating waste.


Securing the Smart Grid Against Cyberattacks

While blockchain technology can better facilitate energy resources, it could also help keep smart grids safe, especially when they lack robust cybersecurity protocols. Blockchain’s distributed nature increases grid robustness against single-point failures, and the cryptographic algorithms ensure all transactions are securely encrypted to protect sensitive data, such as energy usage and consumer information data.


Distributed smart grid structure with blockchain.

Distributed smart grid structure with blockchain. Image used courtesy of the authors 


Blockchain also provides greater stability and reliability to the overall energy infrastructure. Since blockchain is distributed, it is a strong deterrent for cyberattacks, which often target centralized entry points. In a decentralized blockchain smart grid, even if a single node becomes compromised, the rest remains intact, and the affected node becomes isolated from the full network. This means the compromised node cannot affect the integrity of the grid or influence the transaction ledger.


Blockchain Adaptation for Smart Grids

Using blockchain in smart grids shows promise in many areas, including securing energy transactions, managing DERs, and establishing a decentralized market adaptable to modern-day energy demands. Sustainability is also important, but blockchain processes are known for being energy-intensive and don’t traditionally align with the smart grid's sustainable values. To align better with sustainability goals, the algorithms within the blockchain are being re-engineered for the smart grid. They are being utilized more widely for smart grid applications because they prioritize energy efficiency compared to other blockchain algorithms.