Decentralized Energy Grids: A Protocol for Peer-to-Peer Electron Markets

Abstract

This paper specifies an open protocol for peer-to-peer electricity trading across existing distribution grids. Producers and consumers clear bilateral trades every 15 minutes using a double-auction mechanism, with metering and settlement verified cryptographically at the edge.

1. The Case for Electron Markets

The distribution grid was designed for one-way power flow: central plant to passive consumer. Rooftop solar, home batteries, and electric vehicles have broken that assumption. Millions of prosumers now push power upstream into infrastructure that prices them as if they were still passive.

The result is a tragedy of mispriced electrons: surplus solar is curtailed at noon while gas peakers spin up at dusk. A peer-to-peer market layer fixes the price signal without rebuilding a single wire.

2. Protocol Overview

The protocol has three layers:

• Metering layer. Edge devices sign interval readings with hardware keys. Readings are anchored to a public ledger every epoch.
• Market layer. A continuous double auction clears in 15-minute delivery windows. Bids are sealed until clearing to prevent front-running.
• Settlement layer. Cleared trades net against physical flows; imbalances are priced at the local marginal signal rather than a punitive fiat rate.

3. Field Pilot

A 140-home pilot ran for nine months on an existing feeder. Participation required no hardware beyond a smart meter with firmware signing enabled.

Outcomes: self-consumption of solar rose from 31% to 68%; evening peak imports fell 22%; participant bills dropped an average of 14% while producer revenue rose 19%. The utility collected unchanged distribution charges on every traded kilowatt-hour.

4. Open Problems

Scalability of the clearing engine beyond ~10,000 participants per feeder, regulatory treatment of behind-the-meter trades, and privacy of consumption metadata remain active research areas. All pilot data is published with this paper.

5. Conclusion

The grid's future is not a bigger central brain — it is a market of a million small ones. The protocol is patent-free and reference implementations are open source.

References

1. Parag, Y. & Sovacool, B. Electricity market design for the prosumer era. Nature Energy 1, 16032 (2016).
2. Mengelkamp, E. et al. Designing microgrid energy markets. Applied Energy 210, 870–880 (2018).