microgrids & blockchain

Microgrids and Blockchain: The Future of Decentralized Energy

Centralized energy production first took over independent delivery systems as a more efficient and cost-effective alternative. Over time, it became a relatively reliable form of electric generation. Yet many countries, especially within Europe, are moving towards decentralized systems. The most common contender behind this is the success of microgrids and blockchain technology, supplementing decentralized energy. 

With over 10MW capacity, centralized energy generation operates at the national and regional level under strict regulations under federal control. Theoretically, this makes for a better energy distribution system. The technological and regulatory barriers to distributed energy resources have kept many from making the shift. 

Energy systems based on centralized production have traditionally relied on infrastructure development and extensions to expand access to growing urban populations. Extensions to the electric grid keep the supply chain going. However, given the high infrastructure cost and diminished production capacity, the future must look to more efficient energy supply systems.

Environmental Concerns Pushing Shift to Decentralized Energy

The environmental impact alone of centralized energy systems make it less than a desirable generation and distribution setup. The growing concern around its economic and environmental cost raise the issue of whether alternative approaches need to be looked into. 

A centralized power system may well be based on clean energy, but it still has a significant harmful impact and can cost economies and environments in equal measure. These range from large-scale regional impact to localized concerns in the area surrounding the plant. 

The power sources naturally play a huge role in the impacts they create. Energy-based on non-renewable sources creates a hazardous future. What many fail to consider is that, even with clean energy, the process of extraction and transportation can leave an environmental footprint. 

The major concern with a centralized energy system is the grand scale of electric issues. Air pollution emission occurs at much higher levels during the transportation and production phase in non-renewable energy production. In a world already plagued by global warming and water scarcity, greater quantities of water are being used at plants as coolants, returning to water bodies at a warmer temperature and usually contaminated. 

There is also the issue of proper waste disposal generated during production. Some argue that centralized systems generate excessive waste that falls down to a single organization for clean up, leaving room for errors and incompetence. The cost of untreated waste to biological life is extensively documented throughout history.

The Cost of Staying Centralized 

In addition to rising environmental concerns, keeping up a centralized system is simply not economic anymore. The system works by implementing extensions whenever the need arises. Other than the infrastructure cost, extension into rural communities is more costly to the supplier. Without subsidization, it becomes impossible to make fruitful energy transactions in an area with very low average monthly incomes that can rarely afford rising energy costs. 

Without enough supply in-store, even the very best infrastructure cannot create an effective and reliable energy supply. The system also relies heavily on proper transmission and infrastructure planning and keeping strict quality and maintenance regulations to make the entire system worth the investment. 

Creating better access to energy has limited benefits when most of a targeted area cannot even afford the electricity. Rural populations may often forgo energy usage in favor of keeping electric bills down, thereby reducing the usage and efficacy of a reliable power supply.  This system cannot be implemented without adequate foresight and planning. Electrification monitoring and regulations fall under the government’s domain, as the high-risk system is rarely taken up by private companies. Given the rising concerns surrounding centralized electricity, more governments are looking into a more reliable, economic- and environment-friendly option.

Microgrids in Distributed Energy

Microgrids are the face of a decentralized energy future. They make way for improved energy efficiency with zero-emission sources. Their reduced greenhouse impact makes them a more viable option. Microgrids are able to combine renewable power, such as solar, with distributed generation from other sources such as natural gas to create a better production-and-distribution model. Microgrids also have a key role to play in battery energy storage which balances out production and usage.  

Much energy is simply lost in a centralized system as it is transported over vast distances by DOW transmission lines. Instead, establishing localized microgrids will make use of the on-site total electric generation, reducing the amount of energy production that is needed to make up for the lost electric supply. Rather than releasing the heat generated during production into the environment as greenhouse gasses, it can be used communally in the area surrounding the microgrid. Reduced energy requirements and a reduced environmental impact have made microgrids feasible options for distributed generation.  

Microgrids provide an easy solution where the cost of centralized systems and grids is concerned. Under local management, they take away the burden of centralized regulations and checkpoints, also enabling better management of power supply in the energy market. Alleviating grid congestion with demand management reduces the economic burden on suppliers and consumers, almost eliminating peak power needs.

The need for new investment into transmission lines, substations, and energy storage facilities are nearly eliminated with energy delegation to microgrids.  As a result, reliability and efficiency are improved, no longer requiring additional planning or causing costly delays. Microgrids may also be hooked up to the local distribution network, where they can efficiently manage supply excess and shortage, importing or exporting from a single node to maintain a persistent supply to all surrounding areas.    

Electricity theft and natural weather extremes are both major and common threats to any energy technology. Microgrids are known to substantially reduce that risk, by enhancing grid resilience. Islanding enables the microgrid to function independently of the macrogrid, providing an uninterrupted power supply in the event of a major outage. It also reduces exposure risk in case of a cyberattack, ensuring surrounding neighborhoods and even entire cities are supplied even in an emergency. Their storage capacity also enables them to transmit energy to the macrogrid once it is back online. 

Blockchain Technology in Decentralized Energy 

In the world of energy production, blockchain technology has emerged as a promising management tool facilitating an energy transaction. Most common in the global attempt to involve blockchain in the energy sector is the peer to peer (P2P) electricity trading which enables the usage, rather than waste, of excess energy production through smart contracts. Several platforms have been developed that equip energy production with energy storage. Excess supply can then be sold back to the grid through blockchain-based platforms.

To avoid the issues of double claims, blockchain is also used to award renewable energy certificates. It tracks energy production in real-time, with an automated process that keeps a record of all energy transactions. The real-time validation system is being used around the globe to reduce carbon emissions and become more environmentally conscious. 

Blockchain-based P2P is also applicable for use in electric vehicles. It allows connecting users of electric vehicles with electric charging stations to make way for energy sharing among users through the station. Tackling the issue of running out of charge over long-distance commutes, P2P EV charging allows private users to share their chargers with others when they are not being used, making charging available without needing extensive planning. Meanwhile, users sharing their EV charging are able to make some money off the shared use.    

Supply and demand factors require a precarious balancing act when trying to maintain efficiency and reduce wastage. Blockchain technology is being used for automated control of power and storage flows along grid lines to balance demand and supply. This is being increasingly used in the renewable energy sector to connect renewable energy resources with local energy centers to create and maintain a balanced distribution system.

When it comes to energy production and distribution, there is no one solution that fits all in the matter of energy production and distribution. Distributed energy can take care of many of the concerns associated with conventional systems, but it does give way to other concerns that must be addressed. 

  • A distributed system is ineffective without the proper protection and planning. 
  • An effective method should be developed that can address the safety concerns regarding sourcing energy from multiple sources. 
  • Proper development and planning strategies are needed to establish connections and contacts to make decentralization effective.


A fully decentralized blockchain-based system can improve smart grid resilience with reduced consumption costs and environmental impact. With local energy production using microgrids and P2P trading, renewable energy sources are utilized and their product distributed in the most efficient manner. Based on smart contracts that lay down the rules of energy transactions, blockchain-based systems can be set up that make decentralized energy more useful and evenly distributed. While electricity shortage is a concern, it is often supplemented by excess supply elsewhere. This system creates a more balanced market, distributing energy based on its need and usage.     

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