Blockchain Use Case

Tata Power-DDL’s pilot project demonstrates the potential of the platform

Blockchain is a distributed digital ledger of transactions that are simultaneously stored and updated across several computers connected in a peer-to-peer network. Blockchain consists of distributed data storage, peer-to-peer transmission, a consensus me­chanism, an encrypted algorithm and smart cont­ra­cts. Some characteristics of block­chain are de­centralisation, openness, automatic execution of contracts, security credibility and ano­ny­mity. Amongst the various use cases for blockchain in po­wer utilities, one rece­nt initiative has been Tata Power Delhi Distribution Limi­ted’s (Tata Power-DDL) pilot project on peer-to-peer tra­ding in Delhi.

There are three types of blockchain, cla­s­­sified according to accessibility – public blockchain, private blockchain and consortium blockchain. Public blockchain is publicly accessible to all devices that have access to the internet. It is decentra­lised with no single point of control, like bitcoin. Private blockchain is confined with­in an organisation, restricting access and allowing only invited members to observe and undertake transactions.

Since a single authority manages the network, it is more scalable and effi­ci­ent, but less secure than a public block­chain. Consortium blockchain, meanwhile, is a hybrid of public and private blockchain, best suited to organisations that require both. In this set-up, more than one orga­nisation is responsible for providing acc­ess to the pre-selected players. Since there is no single authority controlling it, it maintains a decentra­lis­ed nature, and is hence considered ideal for deployment in utilities in India.

A look at potential use cases for block­chain in utilities, and in Tata Power-DDL’s pilot project…

Potential for power utilities

Peer-to-peer energy trading is block­chain’s most important and prevalent use case in the current scenario. It can also be used in trading of environmental commodities such as renewable energy certificates (RECs) and carbon credits. Through the use of a secure and immu­table digital ledger, providers can validate REC transactions automatically, which me­a­ns that they can avoid any double se­lling of energy credits, as dup­li­cate transactions are flagged as invalid and provi­ders can be sure of the origin of the RECs.

Moreover, blockchain can be used in microgrids. In the coming years, microgrids are expected to play a vital role in reducing transmission losses and deferring expensive network upgrades in the future. Blockchain technology provides an effective way of handling these inc­re­a­­singly com­plex and decentralised tra­n­sactions between users, who vary from large-scale producers and small-sc­a­le retailers to discoms and traders. Throu­gh this, households and businesses can trade directly and bypass any central authority, resulting in increased efficiency and lower costs.

Blockchain pilot in energy trading

Tata Power-DDL, in collaboration with the India Smart Grid Forum and Power Ledger, Australia, initiated a pilot project in peer-to-peer trading in November 2020, with the objective of testing the technical viability and value proposition of peer-to-peer energy trading. Curren­t­ly, development of a suitable business model that will benefit all stakeholders is being undertaken. The pilot utilis­ed Tata Power-DDL’s grid stations with so­lar photovoltaic (PV) and some real customers in its network to stand in as pilot prosumers, while other grid stations/ office buildings along with real customers stood in as consumers. The pilot utilised simulated trading to mirror the scenarios of real trading regimes, with no financial or energy transactions.

The pilot was divided into three phases. In the first ph­ase, from November to De­c­em­ber 2020, confi­gu­ration and deployment were completed. In the s­e­cond phase, from January to September 2021, the actual pilot run was undertaken, and in the thi­rd phase, after September 2021, recommendat­i­ons and submission of the final report will be made.

In the first phase, the company selected a list of prosumers and consumers to enrol in the pilot. Further, the company upgra­d­ed the meters of the participating members to net smart meters in order to capture data from the prosumer and consumer locations in real time. Sub­seq­u­ently, the meter data management was configured to capture the data from the new smart net meters. Tata Power-DDL formulated a blockchain advisory com­mittee with internal as well as external experts to put in place peer-to-peer trading rules regarding buy-sell limits, wheeling charges and other related factors. The company also developed a technical architecture incorporating a SAP billing system linking the sales data blockchain ledger to the monthly billing system.

In the second phase, Tata Power-DDL stabilised the platform and removed im­pe­di­ments, evaluated business cases from the perspective of different stakeholders, monitored and evaluated performance, and tested different trading rules. Fur­ther, it explored the development of an integrated ecosystem of grid-connected, distributed energy resources including electric vehicle charging stations and battery energy storage systems.

In the last phase, the utility expects to submit the conclusions and feedback acquired from this project to the Ministry of Power, the Ministry of New and Rene­wable Energy, the Delhi Electricity Regu­la­tory Commission and the Central Ele­ctricity Regulatory Commission, so as to pave the way for its commercial execution with regulatory approval.

Operation of the pilot

In the daytime, establishments with solar rooftop PV generated electricity, which flowed to the grid. Net smart me­ters using RF mesh canopy captured data concerning the net import of electricity by prosumers. This data was then transferred to the meter data management system in Tata Power-DDL, which collated the data and transmitted it to the Power Ledger.

The Power Ledger acted as the block­chain platform where prosumers and consumers interacted through bids to complete their transaction. Prosume­rs placed the minimum selling price that they wished to receive, while consumers placed the maximum price that they were willing to pay for that energy. The bids were mat­ched through back-end algorithms and the elec­tricity was then transmitted to the consumers’ location, while being recorded through a smart meter. The completion of the electricity transmission to the consumer was noted and displayed on the platform. In the end, the data from the Power Ledger regarding the consumption and sale of electricity was taken into consideration and aggregated in their monthly bills. Sixty-two consumers and 55 prosumers traded in the pilot.

Trading paradigms and pricing models

The pilot project tested three trading paradigms – fixed price model, dynamic price model and dynamic pricing with preferential trading. These three different models were tested for two to three months each to identify the one most suitable for commercial adoption.

In the fixed price model, the price per unit of electricity was already fixed by Tata Power-DDL, and all trading happened at that price. The benefit of this model is that it provides certainty to all participants. However, the fundamental issue with this pricing model concerns the determination of a viable fixed price that is commercially acceptable for both the buyer and the seller. Moreover, the price inelasticity inherent in this model makes it inflexible to changes in dema­nd and supply dynamics.

Dynamic pricing is much more flexible as it allows prosumers and consumers to set their own price within a given window of floor (discom buyback) rate and ceiling rate. The matching mechanism in the blockchain platform will accordingly match up buyers and sellers with equivalent bids. In periods of excessive demand, prosumers will evidently auction their energy to the highest bidder, while in periods of excessive supply disproportionate to demand, consumers can quote the lowest prices possible. In case two or more entities offer the same price, the energy is split equally among them. The price can be altered in each trading interval, allowing both parties to adjust their bids continuously in accordance with  changes in demand and su­pply. In addition, the discom sets its own floor price and ceiling price at whi­ch it will complete the buyback in case of excess supply or excess unmet dema­nd, which generally acts as a range within which the price fluctuates.

Dynamic pricing with preferential trading is a model that resembles the dynamic pricing model in every respect, except this model allows prosumers to set a priority rule with their customers. It allows a prosumer to choose a consumer in ad­van­ce and offer them a percentage of ex­ce­ss energy at a specific price. This ensu­res that the trade is compulsorily carried out before any other trading occurs.

The pilot allowed both the fixed and dy­namic models in February 2021, and then experimented with dynamic pricing from March 2021 to June 2021, with the exception of May 2021, when it operated on the basis of fixed pricing. By the end of July 2021, around 165,565 units of electricity had been sold on a P2P basis, netting Rs 1.2 million for the prosumers.

The way forward

The pilot showed that blockchain trading can offer several benefits to stakeholders. It helps prosumers gain an additional stream of revenue by selling excess electricity, which would otherwise be squandered in vain. Further, it will incentivise increasing installation of rooftop solar. It helps consumers by providing them electricity at a lower cost than the discoms’ price, and promotes renewable energy. Discoms will have a new means of revenue generation for use of their network, that is, wheeling ch­­ar­ges earned by supplying the electricity from producers to consumers through the grid, and will also be able to profit by increasing rates in off-peak hours when the demand on the platform exceeds the supply provided by prosumers. Finally, the blockchain platform will earn a marginal commission for in­termediating between prosumers and consumers, which will become substantial after the platform is scaled up to include millions of participants. The pilot project thus provided a glimpse of the advantages that various stakeholders could potentially enjoy upon the ev­en­tual introduction of blockchain trading in the commercial sphere.

Over the coming years, regulatory agencies, consumer groups, prosumers and distribution companies will undertake comprehensive deli­berations to consider the introduction and ex­pansion of a blockchain-based trading platform, informed by the positive results derived from this project.

Based on a presentation by Shivansh Saxena, Assistant Manager, Tata Power-DDL, at a recent Power Line conference


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