The German Ministry for Economic Affairs and Energy has funded a three-year project that would investigate the use of blockchain in energy trading.

The project BEST (Blockchain-based decentralized energy market design and management structures) launched in January 2021 aims to investigate the use of blockchain technology for trading in a decentralized energy system.

Reiner Lemoine, a non-profit energy research Institute, is handling the project. The institute is currently developing the electricity market bidding system working on blockchain technology as open-source software.

Some queries that arise out of concern include how a blockchain-based trading system needs to be designed to work or what auction mechanisms should be used. Several other questions were how the local networks in which electricity is to be traded are defined and what legal energy framework would such an electricity trading system require?

“Blockchain is interesting for the energy transition because it allows electricity to be traded directly between generating and consuming modules,” explains Norman Pieniak, BEST Project Manager at the Reiner Lemoine Institute.

“The entire energy system benefits from this peer-to-peer trading because it can respond to fluctuations in a much more flexible way. Thus, blockchain supports the decentralized approach of the energy transition and can help reduce the need for compensatory measures such as storage or grid expansion.”

The project will be carried out in four phases. The first phase deals with collecting the requirements for the electricity market bidding system and the software development. It will be later virtually prototyped before it undergoes further technical testing in the laboratory.

The final phase includes deployment in the real-world six-month test in the field, which happens in the supply area of the electricity utility e-regio near Bonn.

The German energy blockchain developer OLI Systems, the Fraunhofer Institute FOKUS research institute, software and systems engineers fortiss, and the Weserbergland University of Applied Sciences are some other partners listed in the project consortium.