2019 IEEE 4th Advanced Information Technology, Electronic and Automation Control Conference (IAEAC 2019)
Application of Blockchain Technology in Distributed
Generation Marketized Transaction
Hu Yan1, Bibin Huang1,Qionghui Li1 ,Yang Zhang 2
1. State Grid Energy Research Institute Ltd
2. Zhejiang Electric Power Ltd
yanhu916@126.com, huangbibin@sgeri.sgcc.com.cn, liqionghui@sgeri.sgcc.com.cn , zhangyang@zj.sgcc.com.cn
Abstract—In open market environment, the number of
prosumers is huge, and their self-interest makes them more
demanding on fairness, privacy and non-discrimination.
Blockchain technology has characteristics of decentralization,
transparency, security and credibility. Introducing ideas and
technologies of blockchain into distributed generation
transactions, makes transactions based on the principle of
cryptography, so that the whole transaction will be transparent,
safe, non-discriminatory and fully automated, effectively
avoiding problems such as low efficiency, high cost and low
transparency of centralized transactions. This paper first
analyzes the traditional distributed generation transaction
architecture and characteristics. Secondly, it proposes a
distributed generation transaction architecture based on
blockchain technology. Then it describes the specific application
mechanism of blockchain technology in intelligent power
purchase contract and measurement certification. At last,
conclusions of this paper are given.
Keywords—distributed generation; block chain;
decentralization; intelligent power purchase contracts; metrological
certification
I. INTRODUCTION
Distributed generation uses clean energy resources nearby,
energy production and consumption are nearly completed, and
it has the advantages of high energy efficiency and low
pollution emissions, and represents a new direction and new
business form of energy development. In recent years, China's
distributed generation has developed rapidly. It is expected that
the proportion of total power supply will be 10% in 2020,
including 60 million kilowatts of distributed photovoltaics and
15 million kilowatts of distributed natural gas. In October 2017,
the National Energy Administration issued the Notice on
Launching a Pilot Program for Distributed generation
Marketization (hereinafter referred to as the “Pilot Notice”),
which proposed to allow distributed generation owners to
directly conduct electricity trading with 110KV internal
distribution network users. That is to say, distributed
generation owners can directly sell electricity to nearby
neighbors. At this point, in addition to the traditional "Self-
consumption, surplus to grid ", "Full to grid " mode, China's
distributed generation has added a direct transaction mode
“Peer-to-peer”, greatly expanding the scope of transactions. It
can be seen that in the future, China's distributed generation
will have broad market trading prospects, but how to build a
cost-saving, efficient real-time, secure and credible, open and
transparent trading environment is the primary consideration..
978-1-7281-1907-6/19/$31.00 ©2019 IEEE
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Blockchain is an innovative application mode of computer
technology in the era of Internet in distributed data storage,
point-to-point transmission, consensus mechanism, encryption
algorithm, etc. It is considered as a subversive innovation of
computing model after mainframe, personal computer and
Internet [1], It has the characteristics of decentralization, open
and transparent, safe and credible, and traceability of
transactions [2,3]. The blockchain was originally used in the
financial sector, including bitcoin, asset trading, cross-border
payments, bill and supply chain finance, securities issuance and
trading [4]. At present, the application of blockchain has been
extended to many fields such as medical, Internet of Things,
intelligent manufacturing, supply chain management, digital
asset trading, and energy internet. In the field of energy, there
are preliminary practical applications in foreign countries.
German energy storage supplier Sonnen cooperates with
transmission system operator TenneT to integrate solar energy
and batteries into German energy network using blockchain
technology [5], LO3 Energy, USA The blockchain energy
microgrid project was launched, and 50 owners' point-to-point
energy transactions were realized in Brooklyn, with a target of
1000 users in 2018 [6]. In 2016, the Ministry of Industry and
Information Technology released the “China Blockchain White
Paper” to actively explore the application of blockchain. The
literature [7~11] studied the blockchain in energy internet,
virtual power plant, auxiliary service, application of transaction
blocking management, but there has not been thoroughly
researched and applied in the field of distributed generation..
This paper first analyzes the traditional distributed
generation transaction architecture and characteristics.
Secondly, based on the blockchain technology, a new
distributed generation transaction architecture is designed and
the transaction flow is elaborated. Again, describes the
application mechanism of blockchain technology in
measurement certification and intelligent power purchase
contract, finally gives the conclusion of this paper.
II. TRADITIONAL DISTRIBUTED GENERATION TRANSACTION
ARCHITECTURE AND FEATURES
At present, all transaction settlement of distributed
generation in China is handled by the grid enterprise. The Pilot
Notice proposes that distributed generation transactions under
marketization are handled by a separate distributed generation
trading platform. The platform functions include: applying for
participation in distributed generation transactions, submitting
bilateral power transaction contracts, and accepting electricity
sales from distributed sales parties, transaction qualification
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review, transaction electricity measurement and settlement.
The trading platform is a typical centralized trading structure,
as shown in Fig.1. All transaction related matters are completed
by the trading platform, which can greatly facilitate the
participation of the distributed generation market participants.
However, under the normalization of direct transactions in the
future, the centralized trading structure has the following
disadvantages:
 Single point bottleneck. Under the marketization, the
distributed generation transaction will increase by 100
times, which will directly challenge the transaction
processing capability of the trading platform. When the
trading platform fails, all transactions will be forced to
stop.s
 Low transparency. The trading platform is similar to a
black box for all market trading entities, which is prone
to falsification of electricity metering, electricity price
settlement, subsidies, etc.
 Low security. On the one hand, the transaction process
lacks a security verification mechanism and has low
security; on the other hand, all data is centrally stored
and maintained by the trading platform and is
vulnerable to attack.
 High construction costs. The construction of the trading
platform requires investment in infrastructure, hardware
and software, personnel, etc., which increases the
overall transaction cost.
 More manual participation. Applying for participation
in distributed generation trading, submitting bilateral
power trading contracts, and reviewing the
qualifications of both parties to the transaction, all
require a large amount of manual participation, low
level of automation, and reduced transaction efficiency.
Fig. 1. Centralized trading architecture.
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III. DESIGN OF NEW DISTRIBUTED GENERATION
TRANSACTION ARCHITECTURE BASED ON BLOCKCHAIN
A. Basic Principles of Blockchain Technology
From a transaction perspective, blockchain technology
implements peer-to-peer transactions based on P2P networks,
and any party in the transaction can directly trade with the
other party in the blockchain network without the need for third
party intermediaries. From the perspective of data structure, a
blockchain is a data link table in which a series of data blocks
are linked, as shown in Fig.2. The transaction data is stored
locally, and all the transaction nodes in the network store the
same data, that means the data is a full-node backup and
localized storage.
 
Fig. 2. Data structure of block chain
At every 10 minute interval, a new block is generated to
record all transaction records within 10 minutes. After the new
block is verified by all nodes and time stamped, it is actually
added to the block list. It can be seen that the data is
maintained by all nodes together. In addition, the data block
ensures that each transaction is not tampered by using
asymmetric encryption algorithms, digital signatures, and so
on. In addition, Blockchain 2.0 introduces a programmable
framework that allows users to implement the required
functionality through code, greatly extending the range of
blockchain applications. Blockchain technology is widely
used in transactions, tangible/intangible asset registration,
smart contracts, etc. due to peer-to-peer, sharing, anonymity,
security, and programmability.
B. Architecture Design
The peer-to-peer, secure, credible, and transparent technical
features of the blockchain can seamlessly connect to demand of
distributed generation market transactions. Therefore, this
paper introduces blockchain technology to reconstruct the
distributed generation transaction architecture, as shown in
Fig.3. The top half of the figure is a simplified trading model
with a few points to note:
  All entities, including distributed generation owners,
grid enterprises, users, etc., are abstracted as separate
trading nodes, each node holds all transaction data, and
all nodes jointly maintain transaction data. In the past,
power grid enterprises were centralized nodes. Now,
grid companies are also treated as a peer node.
Traditional two trading modes can be transformed into
point-to-point transactions.
 All transaction execution is done directly by both
parties without any third party involvement.
 Any transaction is based on an intelligent contract. The
intelligent contract pre-determines the transaction
power, settlement price, settlement time, etc. in the
form of code.
 Automated execution. All trading operations are
performed automatically when conditions are met and
no manual intervention is required.
 When multiple transactions occur in the network at the
same time, as the broadcast mode is adopted, it is easy
to cause network congestion. It can be solved by
priority + queue mode, that is, each transaction is set to
priority and then added to the public buffer queue, and
then taken out of the queue in order and broadcast to the
network.
Fig. 3. Distributed generation transaction architecture based on blockchain
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The lower part of the figure is a system hierarchy structure,
which is divided into seven layers, including a blockchain data
layer, a P2P network layer, a core technology layer, a unified
interface layer, an application adapter layer, an application
layer, and a user APP layer from the bottom up. The
blockchain essence is a database that preserves the full backup
of historical transaction data, so that all historical transactions
can be traced. All transaction nodes in the P2P network are
exchanged through the P2P network protocol. There is no
central node, which is resistant to attack and high fault
tolerance. Characteristics: After a node fails, it has little impact
on other nodes; the core technology layer is the key technology
for blockchain transactions, including encryption algorithms,
consensus mechanisms, smart contracts, etc.; interface layer is
a series of common APIs, such as blockchain data read and
write; application adapter is a series of functional components,
providing interfaces and SDKs for upper-layer application
development, reducing the difficulty of application
development due to the complex logic of the blockchain itself;
the application layer is the most abundant and constantly
changing, such as intelligent power purchase contracts,
distributed generation transaction settlement, historical
transaction audits, big data analysis, transaction coins, etc.; all
market entities install various client APP to perform various
transaction operations.
C. Transaction Process
Under the blockchain-based distributed generation
transaction architecture, distributed generation owners and
users directly conduct peer-to-peer transactions, and the
transaction process is fully automated. Fig.4 shows the
transaction process of distributed generation owners A and B.
The specific steps of the transaction are as follows:
1) Distributed generation owner A broadcast the sales
information on the P2P network through the client
APP, and all nodes will receive this information.
2) User B intends to purchase the electricity sold by A,
then user B sends the purchase information to A.
3) The distributed generation source owner A and user B
sign the intelligent power purchase contract, which is
written in the form of code, including transaction
related information such as power, price, time, etc.
4) At a certain time, according to the agreed time of the
purchase contract, the distributed generation owner A
generates a transaction slip containing the transaction
related information and the digital signature itself, later
broadcasts it to the network.
5) All trading nodes will receive the transaction
information, and all nodes will obtain the right to
create transaction block by solving a math problem.
When a node is successfully solved, it creates a
transaction block with time stamps, and then
broadcasts it to the network.
6) Each node in the network verifies the correctness of
the transaction block. When all the nodes have passed
 the verification, the transaction block is added to each
node in the local blockchain to form a legal blockchain.
7) At this point, the distributed generation owner A and
user B complete the transaction, and user B pays the
distributed generation owner A through the digital
currency, and electric quantity is also sold to the user B
by the distributed generation owner A.
It can be seen that the entire transaction process of the
distributed generation is full automation.
Fig. 4. Distributed generation transaction process based on blockchain
IV. APPLICATION MECHANISM OF BLOCKCHAIN
TECHNOLOGY IN DISTRIBUTED GENERATION TRADING
SERVICE
A. Measurement Certification
Measurement is the basis for the settlement of distributed
generation transactions, and the measurement data must be true
and reliable. The blockchain ledger is safe, transparent, non-
tamperable, and easy to track. It can be applied to distributed
generation measurement and certification, as shown in Fig.5.
 The distributed generation trading platform based on the
blockchain is docked with the smart meter data.
 Distributed generation owner A and user B conduct
electricity trading, and the smart meter feeds the actual
trading power data to the blockchain trading platform;
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 The blockchain trading platform has a unique ID for the
transaction and is time stamped;
 The transaction record is added to the measurement
certification blockchain and cannot be tampered,
providing basic data for settlement payment;
 Users can retroactively search for any historical
electricity transaction.
Fig. 5. Measurement certification based on blockchain
B. Intelligent Power Purchase Contracts
Programmable framework and scripts are introduced in
Blockchain 2.0. Distributed generation owners and users do not
have to sign a paper purchase contract. Both parties can write
an intelligent purchase contract through code form. The
execution of the program can be automatically executed when
the agreed conditions are met. The technical features of the
blockchain ensure storage, reading and execution, so that the
entire execution process is transparent, traceable, non-
tamperable and efficient. The intelligent power purchase
contract not only has a unique advantage in terms of cost
efficiency, but also avoids the interference of human malicious
acts on the normal execution of the contract. The specific
application method is shown in Fig.6.
1) The distributed generation owner broadcasts a piece of
electricity sales information in the P2P network,
including information such as electricity sales amount,
intentional selling price and so on.
2) The user voluntarily quotes to the owner according to
his actual situation, and the quotation information
includes purchasing power, intention purchase price,
etc., and the quotation information is confidential.
3) The distributed generation owner determines one or
several contract parties according to the quotation
information of each user, and signs an intelligent
power purchase contract with the corresponding user,
including the agreed transaction power, the agreed
 transaction price, the contract execution period, the
deposit, etc. The owner and the user need reserve a
certain margin in their respective accounts. After the
contract is signed, the margin account is frozen.
4) The intelligent power purchase contract will be
automatically executed when the specified time limit is
reached.
5) The intelligent power purchase contract is settled
according to the actual power generation amount of the
electricity meter. If the actual power generation
amount is less than the agreed power generation
amount, the distributed generation owner needs to
compensate the user for additional power purchase cost,
specifically for deducting from the user's margin
account. C1 amount to the distributed generation
owner account, deducting the C3 amount from the
distributed generation owner account to the user
account; otherwise, directly according to the agreed
power generation amount, deducting the C2 amount
from the user margin account to the distributed
generation owner account.
6) Here, C1 is equal to actual power generation * agreed
transaction price; C2 is equal to contracted transaction
power* agreed transaction price; C3 is equal to
contracted transaction power - actual transaction power)
* user external purchase price.
7) The margin account is thawed and the remaining
margin is returned to both, and transaction is over.
Fig. 6. Intelligent power purchase contract based on blockchain
V. CONCLUSIONS
In the future marketization of distributed generation,
transactions require a peer-to-peer, open and transparent,
secure and credible trading environment, and blockchain
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technology can well construct this trading environment. In the
blockchain-based distributed generation transaction
architecture, the transaction entity can automatically establish a
trust mechanism, sign an intelligent power purchase contract,
realize point-to-point real-time transaction settlement, and the
shared transaction data is also transformed into a new asset
through data analysis into value-added services, expanding
profit channels and improving service levels. However, due to
the breakthrough of related technologies such as blockchain,
this paper proposes that the distributed generation transaction
architecture based on blockchain still has the following
limitations: First, the transaction scope is still limited to a small
community, and the future needs to be considered in a larger
scope. Second, the payment method of the transaction only
proposes to use digital currency, but digital currency needs to
consider the initial source and the acceptance of the transaction
subject. Third, the digital transaction behavior should be
unified with the physical power flow, when the transaction
payment is completed, how to ensure that the power is truly
transferred, it requires a visit mechanism between intelligent
power purchase contract and metering device.
ACKNOWLEDGMENT
The work is supported by Science and Technology Project
of State Grid Corporation of China - Research and verification
on key technologies of intelligent power consumption new
business service under the environment of open
market(SGTYHT/17-JS-199). The authors thanks State Grid
Corporation of China, State Grid Zhejiang Electric Power Ltd
for funding the project.
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