Microgrid System with Circular Economy and Blockchain

Written by Vikas Khare, and Pradyumn Chaturvedi

In the present scenario, microgrid systems play a very vital role to enhance the performance of electricity generation. A microgrid is a small-scale electricity generation structure that can work independently or collaboratively with different types of renewable energy sources. Nowadays, analyses of microgrid systems are carried out through different types of emerging technologies, which also increase the performance of the microgrid system. Circular economy and blockchain are the icebreaking technologies which can be used for technical and financial assessment of the microgrid system. Microgrid systems, which are decentralized energy systems that can operate independently or in parallel with the main grid, can offer significant benefits to the environment and the economy. When combined with circular economy principles and blockchain technology, microgrid systems can provide even more opportunities for sustainability and efficiency.

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Figure 1. Different Component of the Microgrid System.

 

Microgrid systems need to be integrated with the main grid to ensure reliable and efficient operation. This can be a challenge, as the main grid is often designed for centralized power generation and distribution. However, there are both opportunities and challenges associated with their integration.

 

Opportunities

• Decentralization: Microgrids can operate independently of the main power grid, enabling communities and organizations to generate their own power and reduce their dependence on centralized energy systems.
• Circular Economy: Microgrids can support circular economy principles by integrating renewable energy, energy storage, and energy-efficient technologies, reducing waste and promoting resource efficiency.
• Transparency and Accountability: Blockchain technology can provide a transparent and secure way of tracking energy production and consumption, ensuring that energy is generated and distributed fairly and efficiently.

 

Challenges

• High upfront costs: Microgrids can be expensive to build and operate, especially in rural or remote areas.
• Regulatory Barriers: Regulatory frameworks may not be conducive to the implementation of microgrids, and there may be a lack of incentives or support for their deployment.
• Data Management: Blockchain technology requires a significant amount of data management and storage, which can be a challenge in the context of energy systems where data privacy and security are critical.

 

In the present scenario, circular economy and blockchain are the two main drivers for the microgrid system, and the combination of the two can help to create a more sustainable, efficient, and resilient microgrid system that is better able to meet the energy needs of communities and businesses. A circular economy is a framework for the production and consumption of electricity which involves sharing, reusing, repairing, and recycling different components of the microgrid system. Today, renewable energy system-based microgrids are becoming a viable alternative to conventional energy sources. A circular economy with a microgrid system focuses on producing circular goods, perfecting the use of sustainable energy sources, and managing the production, development, and management of microgrid system components. To create the most effective microgrid system, it is the requirement to apply the concept of circular economy at the design stage. Microgrid systems can promote a circular economy by facilitating the reuse and recycling of materials and products, reducing waste, and promoting sustainable growth. With that in mind, we can start to consider how microgrid systems work for a longer life and how to deal with waste material. In a microgrid system, the parameter of circular economy is called the circularity index and it is defined as how individual renewable energy sources fulfill the load demand and percentage of electricity generation from the waste material.

After the technical assessment of the microgrid system through the circular economy, it is also necessary to identify the financial and economic aspects of the microgrid system. In the scenario of “fintech”, which is the combination of financial management with recent technology, Blockchain is used to analyze the energy trading assessment of microgrid systems. Blockchain can enable decentralized energy trading, allowing for a more efficient and transparent system that benefits both producers and consumers.

Figure 2. Microgrid with Circular Economy and Blockchain

 

In the microgrid system, blockchain offers the most secure framework for peer-to-peer energy trading to identify the transaction of electricity between the microgrid and the consumer as a unit of energy. In the blockchain-based trading system, a consumer keeps a connection to the main grid and autonomously handles price and volume risk by buying or selling electricity to other equivalents directly. Key benefits include low entry investments needed by P2P traders, savings on the premium charged by Energy Retailers, awareness and control over consumption profiles (peak shaving), 100% certainty of sourcing green energy, and finally reduced exposure to market volatility as seen in the fall of 2021. To directly purchase green energy, huge industries are currently entering into power purchase agreements (PPAs) with large microgrid systems. These aren't particularly P2P trading instances on a platform, but they do demonstrate that there is a demand for direct transactions, because PPAs provide long-term contracts under which a trader agrees to purchase electricity directly from a microgrid system. For microgrid system trading to create a distributed application on the Ethereum platform. Blockchain-based microgrid energy trading uses “Solidity” an object-oriented language for contract development between electricity supplier and microgrid consumer. “Remix” based Blockchain platform is used for developing and testing microgrid energy trading contracts between supplier and consumer. This contract changes according to the types of resources and types of consumers.

While the circular economy and blockchain can bring many benefits to microgrid systems, there are also some risks to consider. One risk associated with a circular economy is the potential for increased costs. Implementing circular economy practices such as using renewable energy sources and energy storage systems can be more expensive upfront than relying on traditional energy sources. Additionally, there may be costs associated with the maintenance and repair of these systems. Another risk associated with blockchain is the potential for cybersecurity threats. Because blockchain relies on a decentralized network of computers, it can be vulnerable to attacks from hackers who may attempt to gain access to sensitive information or disrupt the system. Finally, there is a risk that the implementation of circular economy and blockchain in microgrid systems could lead to unintended consequences, such as increased inequality or environmental harm. For example, if the benefits of renewable energy and energy storage systems are not distributed equitably, some communities may be left behind. It is important to carefully consider the potential impacts of these technologies and ensure that they are implemented in a way that promotes sustainability, equity, and resilience.

Therefore, in the near future, the concept of circular economy and Blockchain will play a very crucial role in the field of microgrid systems. It is also necessary to apply different concepts of circular economy to each component of the microgrid system and their financial analysis will be done through R3 Corda and Ethereum-based blockchain techniques. Blockchain and circular economy can also be interlinked with artificial intelligence, machine learning, data analysis, and internet of things to enhance the performance of the microgrid system. The combination of microgrid systems, circular economy, and blockchain can provide several challenges and opportunities. While some challenges exist, the potential benefits of a more sustainable, efficient, and decentralized energy system make the integration of these technologies an exciting prospect for the future.

 

 

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Acknowledgement: This work is financially supported by the Department of Science and Technology (DST), Government of India, Under DST-SERB Project File No. IPA/2021/000048.

This article was edited by Gabriel Ordonez.

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