Energy-What is a peer to peer (P2P) energy market and how does it work on a blockchain ?

By: Antoine Palloteau, Thomas Sarkis, Chiara Montoya Zanella

Sub question : What is the added value of blockchain in a P2P energy market ?

Peer to peer (P2P) energy market

What is a peer to peer (P2P) energy market ?

A peer-to-peer (P2P) energy market is a decentralized energy trading system where individuals, businesses, or communities can directly buy and sell electricity among themselves, without relying on traditional energy suppliers or centralized grid operators. In this model, participants who generate their own electricity, often from renewable sources like solar panels or wind turbines, can become “prosumers,” meaning they both produce and consume energy. Instead of feeding their surplus electricity back into the grid at standardized prices set by utilities, they can offer it to other users at competitive rates they negotiate themselves. This local, flexible exchange allows for more personalized energy choices, promotes the use of renewable energy, and can make the energy system more resilient, efficient, and democratic.

For example, in a neighborhood using a P2P energy platform, a household with rooftop solar panels could sell its excess midday solar power directly to a nearby café that needs more electricity at lunchtime, agreeing on a price that benefits both sides.

How it works on a blockchain

Blockchain technology enhances P2P energy markets by providing a secure, transparent, and automated way to facilitate transactions. Here’s how it works:

Decentralized Energy Trading
- Households or businesses generate electricity (e.g., via solar panels or wind turbines).
- They can sell their surplus energy to neighbors or other users instead of selling it back to the grid at fixed rates.
- Buyers can choose from whom they buy electricity based on price, source (e.g., 100% solar), or other preferences.

Smart Contracts for Automated Transactions
- Smart contracts (self-executing contracts on a blockchain) automate the buying and selling process.
- Once energy is supplied and the agreed-upon conditions are met, payments are automatically processed.
- This removes the need for intermediaries like energy suppliers.

Real-Time Monitoring via IoT Devices
- IoT-enabled smart meters track energy production, consumption, and exchanges in real-time.
- Data is recorded on the blockchain to ensure transparency and prevent fraud.

Tokenized Payments & Microtransactions
- Blockchain allows for tokenized energy credits or direct cryptocurrency payments.
- Users can engage in microtransactions, paying only for the exact amount of energy used.
- This makes energy trading more efficient, especially for small-scale transactions.

Grid Optimization & Demand Response
- Blockchain-based P2P markets can dynamically match supply and demand, reducing grid congestion.
- They can also support demand response programs, where consumers adjust their consumption based on real-time price signals.

Main advantages of the using the blockchain in a P2P Energy Market

Trustless environment: Blockchain removes the need for users to trust a central authority, as the technology guarantees that all transactions are verifiable and tamper-proof.
Improved market access: Small-scale energy producers who would otherwise struggle to access traditional energy markets can easily participate, making the energy economy more inclusive.
Enhanced data security: Energy usage and production data stored on blockchain is encrypted and decentralized, significantly reducing the risk of data breaches compared to traditional centralized databases.
Auditable energy origins: Blockchain can record detailed provenance information, allowing buyers to verify that the energy they purchase is genuinely renewable or locally sourced.
Reduced transaction costs: By cutting out intermediaries and automating verification processes, blockchain minimizes overhead costs typically associated with energy trading.
Resilience against failures: A decentralized blockchain network can continue operating even if parts of the system fail, increasing the reliability of energy transactions during grid disturbances.
Incentivization of sustainable behavior: Blockchain can integrate reward mechanisms that automatically grant tokens or discounts to users who engage in energy-saving or eco-friendly behaviors.

Examples of Blockchain-Based P2P Energy Markets

Power Ledger (Australia) – Uses blockchain for energy trading, carbon credit tracking, and EV charging.
LO3 Energy (USA) – Developed the Brooklyn Microgrid, where neighbors trade solar energy via blockchain.
WePower (Europe) – Aims to tokenize renewable energy contracts for better market efficiency.

Advantages of P2P Energy Markets on Blockchain

Decentralization – Reduces dependence on centralized utilities.
Cost Savings – Eliminates middlemen, leading to lower transaction fees.
Transparency – Immutable blockchain records ensure fair pricing and tracking.
Energy Sustainability – Encourages local renewable energy generation.

Challenges

Regulatory Uncertainty – Many countries have strict energy market regulations.
Grid Integration – Managing decentralized energy flows can be complex.
Scalability Issues – High transaction volumes may slow down blockchain networks.

Power Ledger Analysis

I – Project Description

Utility

The POWR token is used to access the Power Ledger platform, stake for participation, and generate Sparkz tokens used in local energy trading.
The POWR token acts as an access permission token, necessary to interact with the platform. It allows users and Application Hosts (such as utilities or EV-charging businesses) to access the platform’s features and generate Sparkz tokens for localized energy trading. Without POWR, Sparkz cannot be created, meaning no energy transactions can occur.

Incentive Mechanisms

Users are encouraged to hold POWR through staking requirements and platform access benefits. There are no direct staking rewards or yield mechanisms, but participation is incentivized through functional access. The Sparkz dual-token model reduces volatility for end users and limits speculative manipulation of POWR in localized energy trading.

Governance

Token holders do not have voting rights over protocol decisions—there is no decentralized governance in place. The governance model is currently semi-centralized, managed by the Power Ledger team and its foundation. While input from partners and stakeholders is valued, core decision-making remains internal.

Liquidity & Market Dynamics

POWR is listed on major exchanges such as Binance, KuCoin, Gate.io, and Bittrex.
The token is moderately to highly liquid, with daily volumes varying across markets.
Since the ICO occurred in 2017, most lock-ups have likely ended, meaning market availability is not significantly constrained by vesting.

POWR is available on both Ethereum and Solana blockchains, with a token swap mechanism ensuring that whenever a POWR is created on Solana, an equivalent token is locked on Ethereum. This prevents inflation and maintains supply integrity.

II – Power Ledger Tokenomics Analysis

Token Supply:

Total Supply: 1,000,000,000 POWR tokens
Circulating Supply: Approximately 429.7 million POWR tokens (according to the website Token Insight). CoinMarketCap says 567,65 millions circulating POWR.

Dual-Token System:

POWR Token: Used for accessing the Power Ledger platform and participating in its ecosystem.
Sparkz Token: Used for energy trading within specific jurisdictions, facilitating smoother and more efficient transactions pegged to local currencies.

Distribution and Allocation :

Tokens were initially distributed through a public ICO in 2017, which raised $13.2 million. Token distribution is given by the graph below (according to the TokenInsight website).

Inflation and Deflation :

The POWR token has a fixed total supply—no additional tokens will be minted.
This fixed-supply model avoids inflation but lacks deflationary measures like token burns.
Price stability depends on demand for platform use and token staking, not on monetary policy.

Blockchain Integration:

POWR tokens are available on both Ethereum and Solana blockchains
A token swap mechanism ensures that for every POWR token minted on Solana, an equivalent amount is locked on Ethereum, preserving the total token supply and preventing inflation.
Power Ledger also developed its own private Proof-of-Stake blockchain, called EcoChain, specifically for internal energy transaction settlement.
Currently, the platform is transitioning toward a more sustainable public Proof-of-Stake blockchain model to reduce environmental impact

Smart Bonds & Consumer Protection

When Sparkz are issued, an equivalent amount of POWR is escrowed in a Smart Bond.
If an Application Host (such as a utility) fails, consumers can redeem their Sparkz against the POWR tokens locked as surety, protecting users in case of counterparty risk.

Additional Ecosystem Incentives

Transaction fees on the platform are partially used to fund POWR token buybacks, which support the Green Energy Loyalty Rewards program.
This creates additional organic demand for POWR and reinforces sustainable behavior among users.

Initial Coin Offering (ICO):