Japan’s Mitsubishi Electric Corporation and the Tokyo Institute of Technology have partnered to develop a blockchain platform to facilitate peer-to-peer (P2P) energy trading. The system will be reviewed in April and the organizations aim to commercialize it soon after. The platform is not an application based on an existing blockchain but instead a new type of blockchain designed specifically for P2P energy trading.
In 2012, Japan introduced feed-in tariffs (FIT) to incentivize investment in renewable energy sources by enabling solar and other renewable electricity producers to sell power to utilities at a fixed price. Consumers effectively subsidize renewable energy.
However, since late 2019 the law is being phased out. This means the contracts that energy producers had with utilities will end so that market prices will prevail and they need to find new buyers.
The Mitsubishi Electric system aims to enable P2P energy trading, allowing prosumers (energy suppliers) to trade their surplus solar energy easily.
The initiative creates a trading environment by optimally matches buy and sell orders between energy suppliers and households. The way it’s designed, in some cases sellers might receive more than their offer price and buyers could end up paying less than their bid price.
Mitsubishi Electric designed the P2P energy trading system and transaction-completion functions and Tokyo Tech worked in the blockchain’s R&D and in the clearing algorithm.
The solution developed is particularly innovative because standard computers can be used to share and trade data to find the optimal match between buyers and sellers instead of the usual high-performance machines.
The whole trading process has four steps. First, buyers and sellers share their orders during a predetermined time frame. Then, a computer server matches buy and sell orders according to the common trading goal. It shares the results with the involved parties. Finally, all servers receive the results and generate a new block by selecting trades that meet the shared goal.
The shared goal can be adjusted according to changes in the market environment, such as maximizing surplus energy in the market, maximizing profits or raising the lowest profit. Maximizing surplus energy may seem counterintuitive, but at certain times of day, a consequent drop in prices could stimulate demand, such as for recharging electric vehicles. This aspect enables flexible trading and benefits buyers and sellers.
Last year, Australian firm Power Ledger initiated a trial in Japan with similar purposes. In the test, households were given direct access to Power Ledger’s platform to trade excess solar electricity among each other.
Meanwhile, Japan’s Ministry of Economy, Trade and Industry is working on a blockchain project that targets surplus electricity from solar power generators. Furthermore, Japanese firm Ricoh recently announced the development of a blockchain platform that tracks renewable energy consumption and generation in real-time. And the Energy Web Foundation recently completed a joint test of blockchain renewable markets with a Japanese utility company.