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Smart Contracts to Emerge as a Groundbreaking Technology for the Energy Sector

Energy systems are experiencing rapid development that is needed to house an increasing amount of renewable energy sources, as well as new kinds of loads like those obtained from decarbonized transport.

Smart Contracts to Emerge as a Groundbreaking Technology for the Energy Sector.
Six layers of smart contracting in energy systems. Image Credit: Heriot-Watt University.

Furthermore, energy is becoming more decentralized, with several prosumers-consumers with their generation and storage - gaining control of their generation, instead of being passive customers of huge utility companies.

But these changes need new technologies to allow this energy revolution to take place, like those from distributed AI, blockchain-enabled systems or multi-agent systems.

Smart contracts are one such primary method that will prove to be highly significant in the near future. Smart contracts allow separate energy prosumers to arrange their generation and consumption in a distributed method, without depending on a central authority to record the transactions.

As a result of their self-executing, tamper-proof, and customizable nature, smart contracts are regarded as a primary technology for allowing the transition to a highly efficient, transparent and transactive energy system.

In energy systems, a significant systematic review of the potential of smart contracts was recently reported in the top-ranked Elsevier journal Renewable and Sustainable Energy Reviews by a group from Heriot-Watt University in Edinburgh, University of Edinburgh, CWI, National Center for Mathematics and Computer Science in Amsterdam, as well as a research group at the Pontificial University in Santiago, Chile.

Our study is the most comprehensive review of smart contracts in energy. It draws insights from 178 peer-reviewed scientific articles, as well as 13 industrial and demonstration projects that use this technology.

Desen Kirli, Study Lead Author and Researcher, University of Edinburgh

Kirli added, “The article discusses the applications of smart contracts into a number of smart fields in energy, including: smart electric vehicle charging, automated demand-side response, peer-to-peer energy trading and allocation of the control duties among the network operators. We develop a 6-layer architecture to classify the features that need to be considered when applying smart contracts in energy systems.”

Dr. Benoit Couraud, a research fellow at Heriot-Watt University added, “Community energy and microgrids are an increasingly important part of energy systems, as also highlighted by our work in the Responsive Flexibility smart energy project in the Orkney Islands (UK), and the Community Energy Demand Reduction in India project.

Smart contracts, along AI techniques are an important technology that can enable prosumers in such communities to trade energy with each other, as well as participate in the flexibility provision to the larger energy system.”

Our team effort resulted in a comprehensive study of smart contracts - a technology that has attracted increasing interest recently from the energy community, both from academia and industry. We aim to provide a timely review of the state of the art accessible to a wide audience.

Dr. Valentin Robu, Associate Professor, Heriot-Watt University

Robu added, “Our study presents not only the potential advantages of smart contracts, but also some of the pitfalls and issues that parties interested in developing the technology need to pay attention to, such as security risks, computation costs or the carbon footprint of deploying blockchain-enabled smart contracts.”

Journal Reference:

Kirli, D., et al. (2022) Smart contracts in energy systems: A systematic review of fundamental approaches and implementations. Renewable and Sustainable Energy Reviews.


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