Blockchain technology enables secure energy trading between neighborhood microgrids in Chicago

The proliferation of distributed and renewable energy resources introduces significant operational challenges to the communities and houses. A research team led by Prof. Mohammad Shahidehpour and Dr. Chongyu Wang at Galvin Center for Electricity Innovation, Illinois Institute of Technology, has developed a blockchain-based energy trading system to enable the secure transactive energy management system between neighborhood microgrids.

 

They published their study on November, 2025, in iEnergy.

 

 

Blockchain-based Secure Transactive Energy Market Architecture

The proposed system features a hierarchical framework. At the top level, the Distribution System Operator (DSO) optimizes the power network configuration to ensure network security. Below that, a Transactive Aggregator (TA) manages a two-layer transactive energy market. In the upper market layer, neighborhood microgrid operators trade energy through the TA. In the lower market layer, individual houses within each neighborhood trade energy among themselves.

 

The system employs permissioned blockchain with Proof of Authority (PoA) consensus mechanism, which enables much faster transaction speeds and lower energy consumption compared to public blockchains like Bitcoin. The permissioned blockchain allows only authorized and certified participants to access the system, with the DSO managing entity providing governance.

 

“Unlike public blockchains such as Bitcoin, which require energy-intensive mining, we use a permissioned blockchain with Proof of Authority consensus. Only authorized neighborhood operators certified by the DSO can participate. In addition, privacy protection is built into the design. Individual house data remains confidential. Each neighborhood appears only as an aggregated equivalent load to the DSO, and all data is encrypted using hash functions to ensure tamper-proof operations.” says Chongyu Wang, a senior research associate at Illinois Institute of Technology.

 

Paving the way for trustworthy energy trading

The research team tested the proposed method on IllinoisTech-Bronzeville networked neighborhood microgrids in Chicago. The numerical results demonstrated clear economic benefits for all participants. The blockchain-enabled transactive market allowed the energy trading between the neighborhood microgrids at a price lower than the standard utility rate. Within the IllinoisTech microgrid, individual building clusters saw differentiated benefits based on their renewable energy contributions. Buildings with significant solar panels and batteries enjoyed the lowest electricity prices, while those without distributed energy resources still paid less than the standard utility rate through the cooperative arrangement.

 

“Blockchain-based management methods can provide trustworthy operations and pave the way for automated, secure transactions among participating communities. We hope this research lays a foundation for future energy systems where neighborhoods collaborate to achieve sustainability and resilience goals”, Prof. Mohammad Shahidehpour explains.

 

 

The above research is published in iEnergy, which is a fully open access journal published by Tsinghua University Press. iEnergy publishes peer-reviewed high-quality research representing important advances of significance to emerging power systems. At its discretion, Tsinghua University Press will pay the open access fee for all published papers from 2022 to 2026.

 

About iEnergy

iEnergy is a quarterly journal launched on March 2022. It has published 4 volumes (16 issues). Authors come from 25 countries, including China, the United States, Australia, etc., and world’s top universities and research institutes, including University of Nebraska Lincoln, Columbia University, Imperial College of Science and Technology, Tsinghua University, etc. 12 published articles are written by academicians from various countries. The published papers have also attracted an overwhelming response and have been cited by 353 journals, including top journals in the field of power and energy like Nature Materials, Advanced Materials, Joule, Energy Environmental Science, etc., from 70 countries.

iEnergy publishes original research on exploring all aspects of power and energy, including any kind of technologies and applications from power generation, transmission, distribution, to conversion, utilization, and storage. iEnergy provides a platform for delivering cutting-edge advancements of sciences and technologies for the future-generation power and energy systems. It has been indexed by ESCI (Impact factor 5.1), Ei Compendex, Scopus (CiteScoreTracker 2025 11.1), Inspec, CAS, and DOAJ.

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