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Master Thesis

The Integration of Blockchain into Smart Grids

An exploratory study of enabling factors in the integration of blockchain into smart grids

University of Amsterdam, faculty of Economics and Business MSc. Business Administration - Entrepreneurship & Innovation track

Author: Michael Schwegler

Student number: 11921137

Date: 17th of August 2018, final version

First supervisor: Dr. Tsvi Vinig Second supervisor: Dr. Alex Alexiev

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1 Statement of Originality

This document is written by Student Michael Schwegler who declares to take full responsibility for the contents of this document. I declare that the text and the work presented in this document are original and that no sources other than those mentioned in the text and its references have been used in creating it. The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.

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Table of contents

Abstract 3 Introduction 4 Literature Review 6 Defining blockchain 7

Defining smart grids 11

Integrating blockchain and smart grids 15

Conceptual model 24

Methodology 31

Research design 31

Data collection and sampling 34

Data analysis 36

Reliability and validity 38

Results 42

Broad overview of the results 42

Deeper overview of the results 45

Discussion 53

Discussion of findings 53

Limitations of this study 59

Indications for future research 61

Conclusions 63

References 66

Appendix I – Privacy algorithm 72

Appendix II – Interview protocol 73

Appendix III – Transcribed interviews 74

A. Interview #1 – Bastiaan Bakker 74

B. Interview #2 – Lennart Verheijen 79

C. Interview #3 – Arjun Dhaul 87

D. Interview #4 – Laurentui Langa 93

E. Interview #5 – Simon Janssen 98

F. Interview #6 – Mathijs Romans 105

Appendix IV – Code overview 111

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Abstract

More and more people are self-generating their energy through renewable resources. This energy can be transported by integrating smart grids in the local neighbourhood (Siano, 2014). Simultaneously, blockchain technology is on the march of replacing traditional communication technologies (Güngör et al., 2012). Yet not much is known of the integration of these technologies. This thesis provides an analysis of factors that enables the integration of blockchain into smart grids. By asking the following research question “What factors play a

role in the integration of blockchain into smart grids?” In order to answer this question, an

exploratory study has been conducted. An exploratory method requires a literature review that provides a conceptual model of factors playing a role in the integration of blockchain into smart grids. Additionally, as part of the study, six experts have been interviewed in order to discuss the factors provided by the literature. These interviews have been analysed by using the deductive method of coding. The results showed that multiple factors, generated by the literature, were in correspondence with the interview data. These factors are divided into the components of microgrid setup, grid connection, information system, market mechanism, price mechanism, energy management trading system, and regulation (Mengelkamp et al., 2018). Due to the exploratory nature of this study, interviewees provided additional factors which have resulted in an altered conceptual model. The altered conceptual model can be used as groundwork for future researchers in order to further analyse possible factors that can integrate blockchain into smart grids.

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Introduction

The use of energy in the form of electricity is highly integrated in our daily lives. For example, electricity is used to power electronic devices such as smartphones and computers that are being used by each person on a daily basis. The access to electricity in the Netherlands has become self-evident. For instance, in the Netherlands, during the year of 2016, power outages occurred only for 21 minutes (Liander, 2018). To put this into perspective: the total downtime was 0.00004% in 2016 (Liander, 2018). It is expected that the consumption of electric energy will only increase in the coming years, amongst others, due the higher usage of electric vehicles (Siano, 2004). More and more car manufacturers such as Volkswagen, Volvo, and Jaguar Land Rover have decided to completely electrify their vehicle portfolio according to Williams (2018), which could imply that these car manufacturers are exploiting a perceived self-evident access to electricity. However, to be able to function, these electric vehicles need to consume energy and therefore can also run out of energy, thus these vehicles need to be recharged in order to become functional again. One method that can be used for charging these vehicles is by using smart grids. Smart grids can transport energy in an intelligent way. For example, smart grids will only charge an electric vehicle when the price is favourable. Furthermore, smart grids can be used to exchange electricity generated by Renewable Energy Sources (RES) in a local community. Thus, smart grids seemingly provide a great potential in the world of transporting energy (Siano, 2014). Following this line of thought, Siano (2014) states that due to the great potential of smart grids, the use of smart grids will rise simultaneously with the rise of the use of electric vehicles. Moreover, the world is on the brink of adopting blockchain into our daily lives. This technology possesses the ability to create cryptocurrencies that can be used as a payment method instead of traditional monetary currencies. An example of a cryptocurrency is the Bitcoin. Multiple authors mention that Bitcoin has the potential to disrupt the world and replace the traditional monetary paying methods, such as Euros and Dollars (Baur et al., 2015). Nonetheless, in 2017, the NRC Handelsblad published an article on the 23rd of October that

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mentions that one Bitcoin transaction consumes around 200 kWh of energy (van Noort, 2017). This news article was based on the findings of an article published in De Ingenieur (Wuench, 2017). In comparison, the average household in the Netherlands consumes around 250 kWh of energy per month, illustrating that an extreme amount of energy is consumed in this specific case of a Bitcoin transaction (van Noort, 2017). According to the supporters of blockchain technology, the use of blockchain will be self-evident, comparable to the way people consume energy nowadays (Baur et al., 2015). However, it is mentioned that the specific case of Bitcoin consumes a high amount of energy. While not all Bitcoins use the same amount of energy as described in the above-mentioned article, Bitcoins do use energy and the amount of energy consumed can vary enormously. What does this mean for the link between energy and blockchain? Can the two self-evident worlds of blockchain and energy integrate with each other? If so, is this idea feasible?

There are multiple academic articles that describe models that consider integrating blockchain into smart grids (Horta et al., 2017; Mengelkamp et al., 2017; Kounelis et al., 2017; Mihaylov et al., 2014). Each of these articles mentions a factor which should be considered integrated into a smart grid that operates on blockchain technology. However, the academic literature does not provide an overview of general factors that should be integrated into such a blockchain operating smart grid. For example, Kounelis et al. (2017) describe Ethereum as main blockchain technology while Mihaylov et al. (2014) opt for the use of a private blockchain. This thesis will research the alleged potential of smart grids and explore if and how smart grids can be linked to the world of blockchain. The goal of this thesis is to explore the possibility to provide an overview of general factors which should be considered when applying blockchain into smart grids since the existing academic literature does not provide such a general overview. This objective is represented in the following research question: “What factors play a role in

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multiple sub-questions need to be formulated and answered. Firstly, ”What is blockchain?”, to clarify what blockchain exactly is. Secondly, “What are smart grids?” which will indicate what is defined by the word smart grids. In order to answer the research questions, an exploratory method will be used. This thesis uses an exploratory study, because - as mentioned before - the current existing scope of academic knowledge in the field of the integration of blockchain and smart grids is either small or not existing. This method brings the advantage of bringing new insights around the phenomena of blockchain into smart grids, without providing conclusive answers. Meaning that this method can fill the present gap in the literature. Furthermore, the exploratory nature provides the possibility that this thesis can be used as groundwork for future studies (Robson, 2002; Sandhusen, 2000). Meaning that future researchers can use this study to further reduce the gap in the literature through gaining additional insights on the insights which already have been made. Additionally, in order to fit in the scope of an exploratory method, a literature review will be conducted, and experts will be interviewed (Saunders et al., 2012). Finally, deductive reason will be applied in order to analyse the data provided by the interviewees. This form of reasoning enables to link the obtained data with the literature provided by the literature review (Yin, 2003).

This thesis is structured as follows. A literature review will be conducted which will then be followed by the methodology. Hereafter, the results of this research will be presented. In the chapter discussion, the results will be analysed, and then the limitations will be considered. Afterwards, an indication for future research will be given. Finally, a conclusion will be drawn based on the findings that will be used to answer the main research question.

Literature Review

In this chapter, a literature review will be conducted based on scientific articles. This review will form the scientific base for this thesis. Numerous articles of different disciplines will be presented and linked to each other, thus forming an intricate web of knowledge. To fully

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understand the scope of this thesis, the literature review is separated into three parts. The first part focuses on the blockchain, providing a clear definition of this technology. The second part focuses on smart grids which will define what smart grids exactly are. Finally, the third part will consider the integration of blockchain with smart grids in which multiple models will be discussed, and empirical evidence of previous work will be represented.

Defining blockchain

The concept of blockchain is a concept which has risen in popularity in the last years and seems to be booming on the Internet. While many have heard of the concept, it can be difficult to conceptualize what it actually means. Blockchain seems to have a huge effect on corporations, banks, and governmental institutions, and of course seems to be inseparably linked to Bitcoin (Corten, 2018). But what is blockchain actually?

Satoshi Nakamoto (2008) started blockchain and has conceptualized the blockchain as the main component to enable the transaction of digital currencies, resulting in the creation of the cryptocurrency named Bitcoin. According to Zhao et al. (2016), the blockchain can literally be considered as a chain of blocks. Each of these blocks holds information that registers a transaction. For example, when person A makes a transaction of 1 Bitcoin to person B, this data is stored in one block. Yet, if person B decides to make a transaction to person C, with the same 1 Bitcoin, this information will be stored in another block, thus, creating a chain of blocks that hold information. Blockchain can be seen as a public ledger in which all transactions are stored. Furthermore, through algorithms, a set of rules have been determined that prevents the possibility of altering and deleting these blocks. The technology that can create, insert, and use these blocks of information is named blockchain. Corten (2018) and Swan (2015) add an important feature to the description of blockchain written by Zhoa et al. (2016), namely, the need for a verification of the correctness of a transaction by an intermediate party, such as a bank, is removed since the design of the blockchain will automatically do this verification.

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According to Cuccuru (2017) and Corten (2018), it is possible to create smart contracts based on the blockchain technology. The core function of this is the following: every asset or data can be translated into a computer code. For example, intellectual property rights, certificates, or personal data. All pieces of information can be digitalized into a computer code and stored in the blockchain. This concept of digitalization of pieces of information into a computer is first described by Szabo (1994). Szabo firstly described smart contracts in 1994 as a “computerized transaction protocol that executes the terms of a contract” (Szabo, 1994, p.1).” Additionally, Cuccuru (2017) describes smart contacts as a “computer protocols that formalize

the elements of a relationship and automatically execute the terms therein encoded once pre-defined conditions are met (Cuccuru, 2017, p. 7). Thus, both Szabo (1994) and Cuccuru (2017)

describe smart contracts as a computerized transaction that follows the agreements of a specific contract. Cuccuru (2017) added to the term that the transactions will happen automatically if the pre-defined agreements are met. Essentially, smart contracts follow the rule: if X occurs then Y needs to happen. For example, when someone has translated their Intellectual Property rights into a computer code (X), it can set up boundary (Y) which limits purchasing right to non-governmental organizations only. When this is the case, the blockchain will validate these X and Y requirements and the transaction will happen automatically through the blockchain. According to Iansati & Lhakani (2017), the rise of smart contracts can have a huge impact on trusted third parties who currently handle these contracts; as the rise of blockchain takes away the need for external verification of the correctness of a transaction, the rise of smart contracts, takes away the need of trusted third parties. This is in correspondence with the articles of Corten (2018) and Swan (2015) that describe the general potential of blockchain replacing third parties, such as a bank. Additionally, there are different types of blockchains, namely permissioned blockchains and permissionless blockchains. While according to Peters & Panayi (2015), in permissioned blockchains verification is carried out by numerous trusted parties and through a

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central authority or through agreement of the current members, additional verification methods or parties can be added, permissionless blockchains do not operate in this way. In permissionless blockchains, no prior permission is needed to perform tasks such as verification. Both types of blockchains have specific advantages and disadvantages. Swanson (2015) rightly points out that permissionless blockchains protect against identity-forging attacks and offers a space of anonymity. With permissioned blockchains, all players are known, and information can be kept fully private.

As mentioned in the introduction, the downside of blockchain is the high energy consumption. O’Dwyer and Malone (2014) have researched the energy footprint of Bitcoin mining in Ireland. As mentioned before, Bitcoin is an example of a cryptocurrency based on the blockchain. However, in order to create Bitcoins, they need to be mined. Mining is based on the following Equation 1.

𝐻(𝐵. 𝑁) < 𝑇 (1) In which B represents the chain of recent Bitcoin transactions, N the nonce value, the dot (.) resembles the concatenation operator and H is the Bitcoin hash function. Basically, what Bitcoin miners do is searching for a suitable N until Equation 1 is satisfied. When this N has been found, it means that a new block has been found. When a person finds a new block, the finder will be rewarded in Bitcoins (O’Dwyer and Malone, 2014).

The process of mining happens on computers. Furthermore, these computers consume energy in order to run. According to O’Dwyer and Malone (2014), each computer runs on different types of hardware, resulting in different types of consumption of energy by each computer. Yet, the total power used by Bitcoin mining equals 0.1 GW to 10 GW. In comparison, the average demand for power in Ireland equals 3 GW. This illustrates the high amount of energy consumed linked to the mining of Bitcoin. Note, this article was written in 2014, thus,

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it could be considered outdated. It is mentioned 1 Bitcoin has a value of € 378.70. At the moment of writing this paper, the Bitcoin is fluctuating between € 6.000, - to € 20.000, - ("Bitcoin (BTC) price, charts, market cap, and other metrics | CoinMarketCap", 2018). Leading to the conclusion that probably much higher amounts of energy are currently linked to the mining of Bitcoin due to the increase of Bitcoin usage. Furthermore, this article only considers the consumption of energy linked to the mining process, while, as previously mentioned, the transaction of Bitcoins consumes large amounts of energy. Considering the fact that this article is quite outdated, it still gives an indication of the large amount of energy consumption that is related to the blockchain. As required, Vranken (2017) performed further research in the field of energy consumption in a blockchain. Vranken (2017) also describes the large consumption of energy in blockchain. As O’Dwyer and Malone (2014) indicated, Vranken (2017) agrees that the high consumption of energy is related to the fact that the process of mining is energy demanding. Yet, Vranken (2017) argues that the energy consumption of blockchain lies between 0.1 GW till 0.5 GW, which is a large contrast to the consumption of 0.1 GW to 10 GW written by O’Dwyer and Malone (2014). Considering that the article of Vranken is more up-to-date due to it being written in 2017, and its literature review based on articles which were published in the last three years, it is argued that the consumption of energy related to blockchain lies between the range of 0.1 GW and 0.5 GW. Vranken (2017) has taken developments of the last three years into account, which O’Dwyer and Malone (2014) refrained to do. Still, the range of 0.1 GW and 0.5 GW can be considered as a relatively large amount of energy consumption. To put things into perspective, medium-sized countries such as Bangladesh, Denmark, and Ireland consume between 3 GW to 6 GW (Vranken, 2017).

Summarizing, in order to clarify the sub-question of: ”What is blockchain?”, the blockchain can be defined as a technology that enables the transactions of cryptocurrencies. The blockchain can be seen as a chain of blocks in which different types of information is stored

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that enable the possibility of transferring coins and information. These blocks cannot be altered or deleted and follow a strict set of rules (Zhao et al., 2016). Additionally, there are multiple types of blockchains named permissioned and permissionless blockchains. In a permissioned blockchain, actions are validated by parties within the blockchain, while in a permissionless system, actions will not be validated (Peters & Panyani, 2015; Swanson, 2015). Furthermore, blockchain provides the implementation of smart contracts, that can be used to automatically transfer specific deals (Cuccuru, 2017; Iansati & Lhakani 2015). Finally, crypto coins are obtained through a process named mining. However, mining is considered an energy-intensive process which leads to relatively large energy consumption when utilizing the blockchain (O’Dwyer & Malone, 2014; Vranken, 2017).

Defining smart grids

Our power grids have not undergone many changes for many decades, but in the contemporary society in which everything is getting more fast-paced and smarter, the power grids could not be left behind. The concept of having a centrally controlled and hierarchical grid is struggling to deal with the wishes of the contemporary society (Güngör et al., 2011). Smarts grids have been established to a better system to respond to the current demand of energy.

According to Siano (2014), smart grids can be seen as an electric grid that has the capability to transport electricity on an electric grid in a controlled and smart way, from the points of generation to consumers. Güngör et al. (2010) add to this definition by stating that through modern communications technologies and automated control, the smart grid establishes a contemporary electric power grid infrastructure which integrates alternative and renewable energy sources, while also improving safety, reliability, and overall efficiency. According to El-Hawary (2014), an additional outcome of smart grids is that they create a space where consumers can play a part in developing and improving the system and smart grids can give consumers more choices of supply and more information. In addition to the significance of

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consumers in a smart grid written by El-Hawary (2014), Siano (2014) states that consumers are considered a crucial and integral part of the smart grids due to their ability to modify their purchasing patterns and behaviour according to the received information in a smart grid. This phenomenon is captured in the concept of Demand Response, which refers to:” changes in

electric usage by end-use customers from their normal consumption patterns in response to changes in the price of electricity overtime, or to incentive payments designed to induce lower electricity use at times of high wholesale market prices or when system reliability is jeopardized (Siano, 2014, p. 462)”. This is illustrated in the following example. When a person generates

an excessive amount of solar energy at his or her house, this person can decide to sell this amount of excess energy. In this example, the person’s neighbour needs energy. A smart grid can see the price of the energy, determine if it is acceptable or not, and then decide if the person agrees to transport the energy from the person its house to the neighbour. People can thus decide to buy energy when the price is favourable. Demand Response will be an important factor in the implementation of smart grids onto the market. Smart grids bring the benefits of combing on-site generation of renewable energy with automatisation of distributing and selling energy in a local community. However, smart grids do require future research in the fields of information and communication technologies. Even more, further research is required to ensure non-discriminatory physical access to all parties, precise rules, defining roles and responsibilities of all players (Siano, 2014). El-Hawary (2014) agrees that more research is required in the field of information and communication technology due to the fact that smart grids need to obtain technologies that can ensure the security and privacy of users. Yet El-Hawary describes another issue of stakeholder engagement. El-El-Hawary (2014) mentions that it is important to explain the benefits of smart grids to its stakeholders in order to overcome negative perspectives of customers, due to the fact when customers perceive smart grids positively, this will facilitate the implementation of smart grids into society. However, Verbong

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et al. (2013) have taken another pad by researching what is needed to overcome these negative perspectives of customers. Verbong et al. (2013) have done this through an analysis of the practices and perceptions of stakeholders and users in smart grids experiments in the Netherlands. The authors have conducted in-depth interviews and multiple smart grids projects have been analysed through a Strategic Niche Management framework. This framework utilises a multi-level perspective on transitions, radical shifts, and socio-technical systems by analysing the internal and external pressure that influences these perspectives (Geels, 2004). Verbong et al. (2013) describe the electrification of the Dutch society in which the citizens of the society start utilizing more electricity through the increased use of electric vehicles, electric heating et cetera. According to Verbong et al. (2013), this will result in higher electricity bills in Dutch households. Due to the increasing use of electricity, Verbong et. al. (2013) argue that large investments need to be made in the infrastructure of electricity in order to make the infrastructure capable of transporting this increasing amount of electricity. Based on 37 interviews and 27 smart grid projects, the authors concluded that according to the interviewees, the smart grid can be seen as a solution for lowering the amount of transporting electricity through the grid. The interviewees argue that this will result in lower investments in the grid. Furthermore, smart grids contribute to the realization of a low carbon economy in the Netherlands. However, where Siano (2014) describes the concept of demand response as a tool that positively contributes to the implementation of smart grids, Verbong et al. (2013) recognize a few barriers when considering the implementation of smart grids in the Netherlands. The biggest barrier is considered to be the domestication of smart grids into the daily life of the electricity consumers. Most authors focus on creating a superb technology linked to smart grids but do not consider the social practices of users that are linked to smart grids, according to Verbong et al. (2013). El-Hawary (2014) contributes to this barrier by describing the fear of obsolesce. The fear of obsolesce, according to El-Hawary (2014), means that people are afraid

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of adopting new technologies in their daily lives because it may bring new additional costs. According to Verbong et al. (2013), the best way to tackle these barriers is through providing financial incentives. Through financial incentives, consumers become more likely to adopt smart grids in their daily routine. This is in line with the article of Siano (2014), that mentions that Demand Response is a critical factor for implementing smart grids into the market. Furthermore, Zhao et al. (2016) and Cuccuru (2017) describe the financial potential of the blockchain, which again can be an addition to the article of Verbong et al. (2013) due to the fact that blockchain can provide the financial incentives that facilitate the implementation of smart grids. As mentioned before, Zhao et al. (2016) and Cuccuru (2017) also describe the potential of the communication and information capabilities that blockchain possesses, which is needed for the successful implementation of smart grids according to Siano (2014). Furthermore, this is supported by the fact that Güngör et al. (2010) mention that modern communication technologies and automated control are required in a smart grid. Blockchain can operate as communication technology (Zhao et al., 2016), furthermore, blockchain can provide the use of smart contracts that should improve the automatisation in a smart grid (Cuccuru, 2017; Iansati & Lhakani 2015).

Summarizing, answering the sub-question of: “What are smart grids?”, smart grids can be defined as an electrical grid that has the capability of transporting energy from the points of generation to the consumers (Siano, 2014) while using modern communication technologies (Güngör et al., 2010) to ensure the fact that people can exchange energy locally. Whilst, El-Hawary (2014) describes the fear of obsolesce as potential barrier that limit the implementation of smart grids into the market, Verbong et al. (2013) contribute to this barrier by describing that the biggest barrier of implementing smart grids is the fact that consumers are not adopting smart grids into their daily lives. However, this can be overcome by providing financial incentives (Verbong et al. 2013). According to Zhao et al. (2016) and Corten (2018) blockchain provides

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the benefits of delivering these financial incentives which should facilitate the implementation of a smart grid.

Integrating blockchain and smart grids

In this thesis blockchain has been defined, furthermore, an elaboration has been given on the term smart grids. As mentioned before, blockchain provides the opportunity to function as communication technology while smart grids are used to transport energy from points of generation to consumers. The previous chapter already provided an insight into how blockchain and smart grids can benefit each other. In this chapter, the integration of blockchain into smart grids will be further analysed. The integration of blockchain into smart grids enables the creation of a product which will be named blockchain smart grid in this thesis. In the coming chapter, multiple articles will be discussed that have focused on creating such a blockchain smart grid. Multiple models will be analysed and compared with each other in order to determine what factors are required in a blockchain smart grid.

As also already mentioned in the research of Verdong et al. (2013), Horta et al. (2017) mention that the electricity grid is not designed to deal with the increasing amount of energy due to the increased usage of electric vehicles and RES. Especially in the case of RES, the amount of electricity fluctuates. For example, in the summer, there will be more energy generated by solar panels than in the winter due to the increasing hours and strength of sunshine. The (growth of) the use of solar panels can result in an excessive amount of energy in the grid. As the grid is not capable of containing such a large amount of energy, this excessive amount of energy needs to be transported and stored. A possible consequence of transporting the excessive amount of energy could possibly lead to a blackout. This is the reason why according to Horta et al. (2017), Distribution System Operators (DSO) need to rely on flexible Distributed Energy Resources in order to keep the grid and supply stable, which is essential in the functioning of a smart grid (Siano, 2014). Horta et al. (2017) have proposed the creation of

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Virtual Distribution Grid (VDG), which is a smart grid based on blockchain technology, that can tackle this problem. According to Horta et al. (2017), this VDG should have the following functionalities:

Local energy balancing. Local energy production to be balanced with the local distribution,

such as a village or neighbourhood.

Distribution system operators “reserves”. DSO to be enabled to influence flexible RES

behaviour in order to collaborate with voltage control and congestion management.

Wholesale Market participation. In order to maintain the global grid balanced, collaboration to

be maintained with actors participating in the wholesale markets, for example, aggregators and suppliers.

Value to customers. All the previous functionalities should be focussed on the prosumer side of

the VDG. The mechanisms to be optimized for the prosumers (producers that also consume). For example, ensuring privacy and increase ease of use.

A VDG should also be reliable, flexible, scalable, trustworthy, and efficient. Based on these functionalities and requirements, the VDG is designed. Basically, in a local grid, there are multiple virtual machines that control a specific physical object in the electric infrastructure. Yet, every machine requires an Operating System (OS). This OS will hold algorithms and application programs that can monitor resources and allocate them appropriately. When this occurs, the transaction of money will be made. Horta et al. (2017) mention that the blockchain technology named Ethereum is considered most useful for the VDG due to its compatibility with smart contracts. When energy is distributed through the smart contract, the transaction of Ethereum coins will take place automatically. The distribution of energy through a blockchain market brings the following benefits, according to Horta et al. (2017): 1) a public accessible ledger of all transactions, 2) requires minimal network infrastructure, 3) transaction could be

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sent through any network, 4) the billing mechanism is embedded, which reduces operational costs, 5) flexibility to adapt to the fluctuating of grid transactions, 6) untrustworthy transactions will not be made. Nonetheless, the drawbacks are that validating the transaction requires a lot of energy. Furthermore, in the case of Bitcoin, only 7 transactions can be made per second. Finally, there is no empirical evidence of the VDG working in reality. Mengelkamp et al. (2017) contribute to the VDG through focussing on the application of blockchain as OS in the grid. Mengelkamp et al. (2017) agree with the Horta et al. (2017) that the market calls for new approaches to distribute and price locally generated energy. Mengelkamp et al. (2017) describe the concept of Local Energy Markets (LEM) in which consumers and prosumers can trade energy within their local neighbourhood. The main focus of this article is to design a LEM in such a way in that the blockchain technology is the main information and communication technology (ICT). The authors have conducted an experiment in which 100 residential household exchange energy in a LEM. Based on this experiment, multiple advantages and disadvantages are linked to the use of blockchain as the main ICT. The advantages are that there is a distributed and secure data basis, which is transparent and reliable. Also, there is no need for central intermediaries, meaning that transactions become more efficient since occurring automatically. Moreover, blockchain provides a distributed decentralized system and transactions are irreversible, and therefore, ensuring the security of users. These advantages are line with the functionality of value to customer mentioned by Horta et al. (2017), that mention that security and privacy should be ensured by users.

Nonetheless, multiple disadvantages are also linked. The technology is complex due to its immaturity. Many developments still need to be considered in a blockchain smart grid in order for it to become mature (Horta et al., 2017; Mengelkamp et al., 2014). Furthermore, because it is an immature technology, most people show social resistance to the use of this type of technology due to the fact that they are not used to it (Verbong et al., 2013). This is further

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acknowledged by El-Hawary (2014) that describes the fear of adopting new technologies into users their life due to the fact that these technologies might bring additional costs. Additionally, blockchain provides scalability issues due to the fact that it can only process a specific amount of transactions in a smart grid (Horta et al., (2017). Furthermore, blockchain technology is linked to the high consumption of energy (O’Dwyer and Malone , 2014; Vranken, 2017)). If blockchain consumes large amounts of energy, it can be seen as futile due to the fact that the large energy consumption may have an influence on the actual transport of energy in a smart grid. Both Horta et al. (2017) and Mengelkamp et al. (2017) have concluded that further research is required in the context of blockchain and smart grids. This is where Kounelis et al. (2017) become applicable. The authors of this article have done research on fostering consumers’ needs on the energy market through smart contracts. In order to do so, the authors have created a model named Helios, which is a solar distribution system controlled by a smart contract, which again runs on the technology of the Ethereum blockchain. Where Horta et al. (2017) mostly described the functionalities of a blockchain smart grid, and Mengelkamp et al. (2017) provided an analysis of using blockchain as main ICT, the Helios model of Kounelis et al. (2017) describes five requirements of which a blockchain smart grid should fulfil to operate correctly. First of all, produced energy should be stored in-house, in a battery so that it can be locally consumed. Secondly, the in-house stored energy should be consumed first. Thirdly, when someone has an excessive amount of energy, this should be released to the local grid in exchange for virtual coins. Fourthly, these virtual coins need to be transferred to the right place. Finally, the virtual coins should be redeemed in exchange for energy. According to Kounelis et al. (2017), these five requirements should guarantee the fact that a blockchain smart grids keep on operating. Also, this article mentions the advantages of blockchain that have been mentioned before. Namely the fact that blockchain offers a trusted and decentralized connection between two parties. Furthermore, blockchain follows a strict set of rules which makes it impossible to

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change or delete the blocks (Zhao et al., 2016; Mengelkamp et al., 2017). However, the Helios model uses a different approach to smart contracts. Previous articles mention the fact that smart contracts can be used to trade energy live (Siano, 2014; Horta et al., 2017). For example, on day 1, a person would get 10 Bitcoins for 1 kWh. On day 2, the same person will receive 5 Bitcoin for 1 kWh. This discrepancy in price is based on the fact that the demand and supply differ on each day, thus influencing the price (Siano, 2014). In the case of the Helios model, if the person receives 10 Bitcoin for 1 kWh on day 1, this value will remain. This means that the value remains the same in following exchanges as well. Thus, this person can exchange these 10 Bitcoins on day 2, 3 ,4 et cetera. for exactly 1 kWh. However, if another person decided to exchange its energy on the second day, it can happen that this person will only receive 5 Bitcoins for 1 kWh. Meaning that this person will always receive 5 Bitcoins for 1 kWh in the coming days (Kounelis et al., 2017). This concept will be introduced as the time fixed value in this thesis. Other models such as the VGD do not consider the application of a time fixed value in a blockchain. According to Horta et al. (2017), the price in a blockchain smart grid should represent the demand and supply of energy in that specific moment. Meaning that the price of energy can variate in the course of time.

Mihaylov et al. (2014) made an addition to the Helios model written by Kounelis et al. (2017). Mihaylov et al. (2014) created a model named NRGcoin, which focuses on trading energy and crypto coins through smart grids, such as the Helios model. However, the NRGcoin enables the fact that coins can be mined through delivering energy to the grid, instead of consuming large amounts of energy during the mining process, which has been described by both O’Dwyer and Malone (2014) and Vranken (2017). Yet, Mihaylov et al. (2014) do not agree with Kounelis et al. (2017) that energy should be stored in-house. According to Mihaylov et al. (2014), the generated energy that is not consumed immediately, should be implemented into the grid, in order to enable the mining process of obtaining NRGcoins. Mihaylov et al.

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(2014) also describe the use of DSO which has been mentioned by Horta et al. (2017). This DSO should be able to direct produced energy directly into the grid in order to mine NRGcoins. The produced energy is used to power the NRG protocol that enables the creation of NRGcoins. According to Mihaylov et al. (2014) smart meters are used to measure the consumption and production of energy in a local community. Again, the DSO stores this data. Every 15 minutes, the DSO determines the price of energy. For example, when demand is high while supply is low, the price of the NRGcoin will be high and vice versa. This is in correspondence with multiple functionalities that have been written by Horta et al. (2017), such as the wholesale market participation that enables the balancing of energy through integrating multiple actors in the market.

Where Mengelkamp et al. (2017) describe the advantages of a blockchain smart grid that it is capable of providing a distributed and secure data basis, which is transparent and reliable, and Horta et al. (2017) describe the functionality of value to customers, for example, through ensuring privacy of users that leads to value increase, Knirsch et al. (2017) do not agree with the security and privacy that is provided in these blockchain smart grids. According to the authors, a blockchain smart grid is a form of pseudo-privacy. All the data that is stored in the blockchain is publicly available to all users of a specific cryptocurrency. In most cases, ownership of a specific coin is claimed through a private key that has been generated randomly once and can only be linked to one person. Even though the coins are owned by a specific person, the information related to the sender, the receiver, the amount of data, as well as the state of the information are all available to the public. In the case of exchanging energy in smart grids, load profiles of people are publicly accessible. Load profiles consider the consumption of energy of a specific person during the day. The privacy issue of these load profiles is the fact that they can be used to obtain personal information, such as lifestyle, sleep-wake-cycles, and activities. For example, energy providers can raise energy prices when they know that a person

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always watches television when he or she comes home. However, according to the authors, there are multiple ways to strengthen the privacy of processing data in the blockchain. The authors have conducted a protocol that relies on using blockchain and smart contracts. Multiple algorithms have been written that can be used in order to ensure the privacy of users. For example, a commitment scheme is used to prevent other parties from learning the load profile of a specific user. These algorithms are given in Appendix I. Thus, Knirsch et al. (2017) made an addition to the advantages written by Horta et al. (2017) and Mengelkamp et al. (2017), that describe the security and privacy provided by a blockchain smart grid. However, the algorithms that are written by Knirsch et al. (2017) guarantee that the previously mentioned advantages by Horta et al. (2017), and Mengelkamp et al. (2017) remain.

Where, Horta et al. (2017), Mengelkamp (2017), Kounelis et al (2017), and Mihaylov et al. (2014) have written multiple perspectives on what a blockchain smart grid should consist of, none of these authors provides empirical evidence that supports their findings. This is where the Hahn et al. (2017) can bring clarification. Hahn et al. (2017) agrees with Verbong et al. (2013) and Horta et al. (2017) that the current grid is not capable of integrating renewable energy sources. Furthermore, it is agreed on that this challenge can be tackled through the blockchain (Horta et al., 2017; Mengelkamp et al., 2017; Hahn et al., 2017). As mentioned before, the blockchain provides a public accessible ledger which stores all data related to the exchange of energy (Mengelkamp et al., 2017). Furthermore, smart contracts can be implemented for more security (Cuccuru, 2017; Iansati & Lhakani 2015).

This technique provides the following advantages according to Hahn et al., (2017). First of all, prosumers do not depend on third parties concerning to set up and operate the market. Secondly, blockchain provides more resilience due to the impossibility of a single failure point. Finally, prosumers do not need to have pre-existing trusts with other actors in the market, due to the public ledger holding the data if other entities are trustworthy or not. These advantages

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are in line with the advantages mentioned by Horta et al. (2017) and Mengelkamp (2017) that describe the potential of a public and secure ledger that enables the exclusion of third parties, single points failures, while including verification of users within the grid. Hahn et al. (2017) have conducted an experiment at the Washington State University campus in which two buildings were operable. During this experiment, the authors have introduced a smart contract system, based on Ethereum, that enables energy exchange through an auction in which the highest bidder gets rewarded. The energy was generated through a 72-kW photovoltaic array. The results are represented in Table 1. The eleven rows represent consecutive 15 minutes time periods. The first column shows the amount of energy generated in kWh by the solar panels. The second and third column represents the bids of two buildings. The fourth and fifth column shows how much energy is transported to each building. Finally, the last two columns show the temperature of the two rooms in Fahrenheit showing the necessity of acquiring energy in order to heat these buildings.

As can be seen in the results above, the smart contract system is working. Energy is awarded to the building that has the highest bid. It, therefore, can be concluded that Ethereum provides the Table 1 the results based on the article of Hahn et al. (2017).

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technology of successfully implementing smart contracts into smart grids. However, this article only proves the practicality of the Washington State University campus, thus further research is required to analyse the scalability of this blockchain, which also has been acknowledged by Horta et al. (2017), and Mengelkamp et al. (2017). Yet some empirical evidence is provided in the implementation of Ethereum as blockchain technology into a smart grid, which is an addition the articles of Horta et al. (2017), Mengelkamp et al. (2017) and Kounelis et al. (2017), that all utilise Ethereum as main blockchain technology in their models.

The articles of Horta et al. (2017), Mengelkamp et al. (2017), Kounelis et al. (2017) and Mihaylov et al. (2014) each mention a specific model of integrating blockchain with smart grids. These models are named respectively, VDG, LEM, Helios, and the NRGcoin. All the articles mostly agree with the advantages of the blockchain, yet they do not consider the privacy of users in the blockchain. This is where the article of Knirsch et al. (2017) will be an addition through providing multiple algorithms that ensure the privacy of users in a blockchain smart grids. Furthermore, the article of Hahn et al. (2017) provides empirical evidence of implementing a blockchain based smart grid into a campus, where energy is exchanged through a smart contract-based auction. Meaning that it provides algorithms which can be useful for the previously mentioned models.

Summarizing, through analysing the previously mentioned models, already a slight clarification has been given on what factors are required in a blockchain smart grid. There are multiple models that describe these requirements. Most of these models coincide with each other. For example, the utilization of Ethereum as main blockchain technology is acknowledged by multiple models (Horta et al. 2017; Mengelkamp et al. 2017; Hahn et al. 2017). On the other hand, Kounelis et al. (2017) introduced the concept of time fixed value in a blockchain smart grids instead of using a variable price. This is an example of a statement where the literature disagrees on. Since there are multiple views considering the factors that enable the integration

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of blockchain into smart grids. In the next chapter, an elaboration will be given on these factors. Based on this analysis, a conceptual model will be constructed that will provide the factors that enable the integration of blockchain into smart grids.

Conceptual model

It has been clarified what blockchain is, and what smart grids are. Furthermore, the previous chapter has given some insight into what factors are required in a blockchain smart grids. In this chapter, the literature review will further focus on the factors that should be considered when integrating blockchain into smart grids in order to give a form of clarification to the research question: “What factors play a role in the integration of blockchain into smart grids?”. At the end of the chapter, these factors will be represented in a conceptual model.

Mengelkamp et al. (2018) have done research on the basic required components of a blockchain based smart grid. According to them, there are seven requirements in total. The first requirement is the microgrid setup. The second component is a grid connection. Thirdly, an information system is required. The fourth requirement is market mechanism. Fifthly, a pricing mechanism should be implemented. Sixthly, energy should be exchanged through an Energy Management Trading System. Finally, everything should be regulated. The authors have tested these seven requirements with the aid of a case study in Brooklyn, New York. In this area, citizens were enabled to exchange energy through the blockchain for a time period of three months. Based on the results, the first six requirements have been implemented in the case study. The grid balanced the supply and demand of energy while the blockchain secured the grid and enabled the transactions of user set price limits. Nonetheless, the seventh requirement (regulation) was not successfully tested. The utility company responsible for the grid in Brooklyn did not accept to alter the regulation in the grid. Still, the authors managed to test the requirements of a blockchain based smart grid into reality and provided seven needed components in the integration of blockchain with smart grids. The seven required components

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of Mengelkamp et al. (2018) can be seen as the key constructs of the conceptual model. The reason for using the article of Mengelkamp et al. (2018) as a foundation for the conceptual model is because Mengelkamp et al. (2018) managed to provide some form of an overview of factors which blockchain smart grids should follow. These are the of the above-mentioned components. Additionally, these components written by Mengelkamp et al. (2017), enable to answer the main research question to some extent, due to the clarification of the required components. This is another reason why the article of Mengelkamp et al. (2018) is used as a groundwork for the conceptual model. Furthermore, in contrary to the articles of Horta et al. (2017), Mengelkamp et al. (2017), Kounelis et al. (2017), and Mihaylov et al. (2015), Mengelkamp et al. (2018), managed to implement the formulated components into the energy market of Brooklyn, New York in order to derive the significance of these components. Where the other models did not have data, Mengelkamp et al. (2018) provided a theoretical model that is proven by data, which again can be seen as a justification of utilising the article of Mengelkamp et al. (2018) as groundwork for the conceptual model. Still, the previous articles discussed in the literature review can be seen as an addition to each of these components written by Mengelkamp et al. (2018). By linking the components written by Mengelkamp et al. (2018) with factors written by articles in the literature review, it is possible to formulate a conceptual model that provides factors that enable the integration of blockchain into smart grids. An elaboration is given below.

The first component is named microgrid setup. A microgrid should consist of a sufficient number of market participants that trade energy with each other. A part of these participants should also produce energy through solar panels. This market should only be accessible for residents within a community. Furthermore, the form of energy that will be traded needs to be defined, which in this case will be electricity due to smart grids only being capable of transporting electricity. Finally, it is assumed that participants are self-interested and rational

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(Mengelkamp et al., 2018). Kounelis et al. (2017) contribute to the component of microgrid setup. As mentioned by Mengelkamp et al. (2018), a subgroup of participants should produce energy. In addition, Kounelis et al. (2017) specify the requirements of a blockchain smart grid more precisely. First of all, participants need to produce energy and store it in their house (e.g. a battery) enabling local energy consumption. Second, when energy is required, the stored energy needs to be consumed with priority. When excessive amounts of energy are generated in a household, then this energy should be released to the microgrid. Fourthly, the microgrid should be capable of transferring energy. Finally, the exchange of energy should enable the option of redeeming cryptocurrency coins.

The second component is grid connection. One or multiple connection points connecting the local grid to the main grid are required. These connections need to be thoroughly coordinated in order to balance energy generation and demand. At these connection points, the main grid can measure the performance of the local grid. Although, the distinction needs to be made between a physical grid and virtual grid. A physical grid consists of physical components that transfer energy among participants and obtain energy from the main grid. A virtual grid links the participants in a microgrid through an information system. Physical grids only have a limited number of connection points, yet they can separate themselves from the main grid in the case of a power outage. In order to “survive” the power outage, local physical grids should balance the supply and demand of energy in this grid in order to prevent another blackout in this grid. A blackout is prevented through the virtual grid, which obtains information such as energy generation and consumption of the participants and then decides how to balance the level of energy in the grid. Thus, the physical grid that is built within neighbourhoods needs to be complemented with virtual grids and create a symbiosis between these grids (Mengelkamp et al., 2018). Horta et al. (2017) contribute to the component of grid connection through providing the framework of a virtual grid, named the Virtual Distribution Grid (VDG). Horta

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et al. (2017) add to the virtual grid that is should be capable of dealing with the volatility of energy generation through renewable resources. Furthermore, the virtual grid should be capable of distributing energy through a market-based approach where local households can transfer their shortage or abundance of energy with each other.

The third component is the information system. This system should be able to connect all the market participants, provide market access, monitor all market activities through a market platform. This can only be done through a blockchain protocol based on smart contracts, due to the fact that smart contracts grant every participant equal opportunity to fairly trade energy without any form of discrimination (Mengelkamp et al., (2018), which is in correspondence with the articles of Cuccuru (2017), and Iansati & Lhakani (2015). Cuccuru (2017), and Iansati & Lhakani (2015), state that smart contracts enable to transfer automatically which should lead to exclusion of possible discrimination in a blockchain smart grid as formulated by Mengelkamp et al. (2018). Additionally, the use of smart contracts is also supported by the article of Mengelkamp et al. (2017), as the authors have conducted an experiment in which the Ethereum is used as blockchain technology in a smart grid, due to the fact that this blockchain technology is based on the smart contract protocol.

The fourth and fifth components are named market and price mechanism. The market mechanism should be implemented through the third mechanism; information system. This mechanism is responsible for the payment rules, creating a bidding language and format, and finally for the allocation of the market. The main objective of this mechanism is to deliver the right amount of energy to buyers and sellers their orders. The pricing mechanism stems from the market mechanism and its function is the allocate energy supply and demand efficiently. Price signals should resemble the amount of energy that is available. When levels of energy are low, prices should be high and vice versa. Thus, leading to the conclusion that the market

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mechanism mostly focuses on the transaction of currencies between participants while the price mechanism considers the trade of energy between participants (Mengelkamp et al., 2018).

The article of Mihaylov et al. (2014) fulfils the demands of the third, fourth and fifth component. As previously mentioned, the authors have created a cryptocurrency named NRGcoin, which is based on a smart contract protocol, thus satisfying the third component. Furthermore, bidding is done through an auction and energy is rightly allocated through smart meters. Mihaylov et al. (2014) contribute to the fourth and fifth component by adding the requirement that energy levels should be measured every 15 minutes. Meaning that the price of energy reflects the balance of supply and demand of energy in that specific quarter-hour. Furthermore, Mihaylov et al. (2014) introduce the term time fixed value to blockchain smart grids. This means that the value of a specific cryptocurrency will stay fixed obtained during that quarter-hour. For example, when a person receives 1 crypto coin for 15 kWh in time period X, then they will receive the same amount of kWh for it in time period Y. Thus, exchanging 1 crypto coin will result in 15 kWh.

The sixth component is named energy management trading system (EMTS). EMTS its main objective is to automatically acquire the amount of energy for a market participant while following a specific bidding strategy. The EMTS should have access to the (live) demand and supply information of the market participant. Through this information, the EMTS can predict when the participants want to consume and generate energy and will develop an according bidding strategy for the participant. Additionally, it will trade predicted amounts of energy and will adjust its strategy when prices are variating (Mengelkamp et al., 2018). Hahn et al. (2017) contribute to the sixth component. The authors have conducted an experiment in which a similar EMTS system had access to a public ledger in which the supply and demand data of specific market participants can be seen. Even though the blockchain technology was based on smart contract protocols, Hahn et al. (2017) add a factor the EMTS through developing a bidding

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strategy for the EMTS that follows the Vickrey auction principle. A Vickrey auction considers the fact that participants cannot see each other’s bids in order to secure fairness among bids. Furthermore, a Vickrey auction follows the principle of the second price. Meaning that the participant with the highest bid will win. However, it will only pay the price of the second highest bid. Meaning that if person A bids € 100, - and person B bids € 75, -, then person A will win the auction because it offered the highest price, however, it will only pay € 75 due to the fact that this is the second highest bid. This method will assure the fairness of the bidding process by ensuring the fact participants will pay exactly what it takes to win the bid, according to Hahn et al. (2017).

The seventh and last component is regulation. Regulation considers how the blockchain smart grid fits in the current local energy policy. A government may decide to support or halt the implementation of blockchain smart grids. A reason to support blockchain smart grids is to increase the efficient usage and distribution of local sustainable generated energy. On the other hand, the government may disapprove of it due to the blockchain smart grids interfering with traditional grids or it may interfere with the law. For example, the introduction of the General Data Protection Regulation (GDPR) in the European Union, requires implementers of the blockchain smart grid in Europe to assure the privacy and security of users of the blockchain smart grid (Tankard, 2016). Knirsch et al. (2017) contribute to the component of regulation through providing a solution that ensures the privacy of market participants, and thus following the law. As Knirsch et al. (2017) mentioned, nowadays blockchain smart grids offer a form of pseudo-privacy protection. Through the implementation of an algorithm in the EMTS system, it will ensure the following requirements: transparency, verifiability, reliability, and privacy. The proposed algorithm is given in in Appendix I, based on this algorithm, Knirsch et al. (2017) ensure that their protocol will find the best bid in 93,5% per cent of the cases and will fulfil the

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above-mentioned requirements. Meaning that it ensures the privacy of users in a blockchain grid which is required by the law (Tankard, 2016).

In order to answer the question: “What factors play a role in the integration of

blockchain into smart grids?” a literature study has been conducted. This study has shown that

there are seven components that are required in a blockchain smart grid (Mengelkamp et al., 2018). Even though the described components provide an overview of what is required, it does not consider all factors that are required in a blockchain smart grid are taken into consideration by Mengelkamp et al (2018). This is the reason why each component is further elaborated by multiple articles that provided additional factors. Yet, it does not mean that these components are undisputed. These components only function as a foundation that enables the exploration of factors. Thus, it is possible that these components can be adjusted in future research. Still, with the use of the present literature, the combination of the components written by Mengelkamp et al. (2018) which has been supported by additional articles, a conceptual model has been created. This conceptual model represents the factors that play an enabling role in the integration of blockchain into smart grids. This conceptual model is given in Figure 1.

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Methodology

Research design

In this chapter, the strategy that will be used to answer the research question will be explained. There will be an elaboration given on the beneficial aspects of this method and why it is required in the scope of this thesis. Furthermore, an explanation is given on how data will be collected. Afterwards, the method of analysing and displaying the data will be described. Finally, an elaboration will be given on the reliability and validity of the applied research method in this thesis.

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In order to answer the main research question, an exploratory study will be conducted. This method is useful to find out “what is happening; to seek new insights; to ask questions

and to assess phenomena in a new light (Robson 2002, p. 59).” Saunders et al. (2012) add to

this explanation through stating that an exploratory study is especially advantageous if a person wants to clarify the understanding of phenomena. This is again strengthened by Brown (2006) who mentions an exploratory study is a convenient method to tackle problems on which little research has been conducted. Additionally, exploratory study is not aimed to provide a final and conclusive answer. It tries to explore the research question on multiple levels. Yet, it is possible that an exploratory study can become the basis of a conclusive study. Meaning that an exploratory study provides the advantage of being used as groundwork for future studies (Sandhusen, 2000). However, the negative side of an exploratory study is that its samples are mostly based on modest numbers that do not represent a target population. Furthermore, exploratory studies mostly provide qualitative data that is prone to bias (Nargundkar, 2008). The reason why an exploratory method is utilised, is due to the cross-sectional nature of this thesis. A cross-sectional study only considers the analysis of phenomena in a specific time period (Saunders et al., 2012). The possibility exists that additional developments can take place in the field of blockchain smart grids outside of this period. Meaning that these developments are not taken into consideration in this thesis which can jeopardize the conclusiveness of the results. Additionally, as Horta et al., (2017), Mengelkamp et al. (2017) and Kounelis et al. (2015) indicate, future research is required in the field of blockchain smart grids due to the immaturity of the technology. Meaning that again the possibility of providing conclusive answers is diminished due to the immaturity of blockchain smart grids. As a result of the cross-sectional nature of this study, and the immaturity of blockchain smart grid, it opted for an exploratory method which provides exploratory insights which can be used as a foundation for future studies in order to become conclusive (Sandhusen, 2000). Accordingly, this thesis will

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conduct research on the factors that can have an enabling influence on integrating blockchain into smart grids. The exploratory method will create the opportunity for future research to analyse these factors, and increase or decrease the number of factors and create new insights on the development of blockchain smart grids. Additionally, as mentioned in the introduction, the academic literature does not provide a general overview of the factors that enable the integration of blockchain into smart grids. Leading to the conclusion that not much literature is available in this field of knowledge. Due to this lack of literature, the exploratory method is used due to the fact that it provides the possibility of analysing phenomena on which little research has been done (Brown, 2006) which again should justify the application of an exploratory method in this thesis.

Saunders et al. (2012) mention three principles methods of conducting an exploratory study. Firstly, a literature review should be conducted. This is the reason why a literature review has been conducted in order to obtain a model of factors that analyse the required factor that is needed for integrating blockchain with smart grids. Through conducting a literature review, the guideline of an exploratory research has been followed (Saunders et al., (2012). Secondly, experts should be interviewed on the specific subject or it is possible to conduct focus group interviews. It is chosen to only interview experts in the field of blockchain smart grid due to the cross-sectional nature of this thesis. This study has been conducted in a specific time period, which means that it was not possible to form focus groups due to the shortage of time. However, due to the literature review and interviewing the experts, this thesis aimed to follow the guidelines provided by an exploratory study in order to gain new insights into the field of blockchain smart grid.

Hence, an exploratory method is used due to the fact that it fits within the scope of this thesis. The reason why an exploratory study complements the scope of this thesis, is because blockchain smart grids is an underdeveloped and limited researched concept. As Horta et al.

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(2017), Mengelkamp et al. (2017), and Kounelis et al. (2015) mentioned, further research is required in the field of blockchain smart grids. This means it is too early to link conclusive answers to this thesis. Furthermore, as an exploratory study stipulates, this thesis should provide insights on what factors are considered of importance in a blockchain smart grid. Yet it does not mean that these factors are undisputed. This provides the opportunity for future researchers to further elaborate on the factors that are mentioned in this thesis (Sandhusen, 2000).

Data collection and sampling

In order to answer the question: “What factors play a role in the integration of blockchain into

smart grids?” interviews will be conducted. The literature study has shown which factors are

necessary for a blockchain smart grid. The conceptual model based on the literature review will be strengthened by data collected through expert interviews. Furthermore, interviewing experts can lead to additional insights which may lead to new factors that are required when constructing a blockchain smart grid. These interviewees are obtained through the following sampling strategy of Saunders et al. (2012). The sampling strategy is a mix of convenience, purposeful and snowball sampling. Convenience sampling considers that interviewees are based on availability. Secondly, purposeful sampling regards the fact that interviewees are chosen for their expertise in a specific field or knowledge. Cleary et al. (2014) add up to this statement by considering the fact that it is important that the expertise of the interviewees should be used in order to answer the research question. This is the reason why multiple individuals will be interviewed as each individual holds his or her own expertise. For example, some interviewees may have knowledge of only blockchain, while the other interviewee is competent in the field of smart grids, while others have knowledge in both fields. Each interviewee brings his or her own knowledge in order to answer the research question. Furthermore, the fact that multiple experts have been interviewed, is in line with the principal of an exploratory study (Saunders et al., 2012). In order to determine the expertise of each interviewee, each interview will start with the question if the experts can elaborate on their function in the company, and

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