Interview with Nick Gogerty, Solarcoin.
Nick Gogerty is the founder of SolarCoin. He has worked with one of the world’s largest hedge funds and, among other things, advised the UN as part of the SOLVE team. He is also the author of the book “The Nature of Value.” His interests include sustainable economic development, poverty reduction, renewable energy and solving large complex problems.
Under what premise was Solarcoin formed – can you explain your business model?
Well, our mission is to incentivize global solar energy production for 40 years and we are roughly five years in. The operating currency theory of value is the following: Whether we assume currency as a positive economic externality: ie, more people engaged in behavior accepting a currency or accepting a currency protocol, the more value it has. What we do is apply that thesis with SolarCoin to energy producers, so the larger the network of participants in the SolarCoin economy, the more market cap outstanding or supporters by those decisions and the greater value. We grow our network effectively by giving SolarCoin to the producers of solar energy at a rate of 1 megawatt hour for one SolarCoin, on the assumption that those participants in our network will be with us for the remaining 20 to 30 years of the functional life of their facility.
It took us awhile to figure out our model. Early in the project we have been very grassroots up direct and community-oriented. We saw many people start up new projects or new companies and they seemed to know what they were doing, so we started giving Solarcoins to individuals and that was kind of the business model. We have have pivoted from that to operate at scale. What we are now doing is selling a rewards program to solar energy monitoring platforms and utilities. Today we are partnered with the world’s largest solar energy monitoring platform, SMA Solar Energy Ag.
We have also joined the International Renewable Energy Agency IRENA coalition for action. We can work more closely in promoting the solar economy and to address the various economic issues related to solar energy and renewables development. We expect to grow our community significantly in 2019. If our network theory of value holds up then we grow the value of the coin and the SolarCoin economy significantly. The other partner that we have on board is one of the world’s largest solar energy producers, a company called Acwa Power a $30bn USD electricity generator.
Technically speaking, SolarCoin is estimated to be 10,000 times more energy and carbon efficient than Bitcoin at a similar scale.
How are new sensor technologies like the proof of production sensors from wirepas changing the way solarcoin works?
We haven’t really changed our approach. I think we find ourselves on a trajectory, so when I say a trajectory it’s kind of like a sort of agile software approach, where you start with something and then you iterate quickly and get better.
We started with manual processes and a certain amount of documentation etc, and we’re working on it going for scale and in higher quality, so our data quality has gone from what we call estimated granting. We are starting to use actual high quality data from SMA right where it’s directly from an inverter.
Our goal is that as our data improves and as we put higher quality data on the chain or others do because it’s an open blockchain that other use cases will emerge. In the long run it’s good for everybody to have higher quality open data. We only need a few data points a year from a monitoring system or platform to verify energy production.
Who would you feel are your main competitors at the moment and what do you see as your advantage?
I don’t know if we have anything I call direct competitors. Our main competitors right now if we have a low price point right, primarily it’s just our customer’s interest in us because of the economic value for the average first-time user.
Right now, for the first time users are going to get somewhere from 60 cents to three dollars for signing up for SolarCoin. That being said, we estimate the first time users signing up could be looking at thirty to sixty dollars if the scale and economic theory hold and that’s a more interesting threshold and so you can literally think of it like an adoption curve right, and when you look at the early adopters they’re primarily not motivated by what we call a rational economic cost benefit they’re into because it’s a cool feature or whatever it’s fun, I’ll give them a try.
Our sales challenge is our “don’t care. don’t get it.” So we roll up to utilities and say okay well the price point isn’t interesting and we have been at this for four years and we have seen prices at everything from zero when the program started to overvaluation relative to network theory at $2.
The target price when the program was originally designed in 2013 was roughly ten to twenty dollars long term. The thinking is, if a currency could be sustained with that value as a reward currency it would be a marginally useful incentive for solar installation. That being said, the price would have to be stable over a long time, etc..
We’re a long way from that price point and from proving stability, so that’s the long-term goal. If you look at the academic paper, our theoretical paper says that if we were to grant at scale to the world’s solar energy producers we’d be somewhere between $7 and $30 dollars based on the economic model per SolarCoin, which is far away from today’s two or three cents.
In which geographical areas are you currently active? And how much does this reflect on the current restrictions at the moment?
We are currently active in 73 countries and we are constantly updating countries where we can operate and where we can’t. Some of our biggest restrictions are U.S. economic sanctions. We are currently restricted across I believe thirteen or fourteen countries, the list was recently published in our news item.
Regionally we anticipate that our next big move with SMA will get a lot of Europeans solar installations, but the SMA timing portal has a global footprint. Other monitoring companies we are talking with will also be of European and North American regions. We are trying to expand into Australia since there’s a lot of solar installations and more in the United States, so it’s a global effort.
The nice thing is that our target monitoring platforms and utilities are fairly concentrated, with an initial target list of less than 100. As opposed to trying to sign up 20 million direct consumers spread all over the world, which is what we estimate the current solar installation base at. It is growing 20 to 30 percent a year.
What do you think your biggest challenges will be?
I think the biggest challenge is user experience, right now blockchain and crypto in general is a terrible user experience. This stuff isn’t easy, so if you try to explain these things to your grandma for example you will end up getting a blank stare very quickly. The market cap for all those smart contract projects is over 20 billion dollars and the average user count on any given day is about 50,000 users. One of those numbers has to give. Those market caps that come down significantly reflect values created for those users, or a lot more users show up and we are all waiting for that.
The reality is that the killer app hasn’t shown up and evaluations got way ahead of themselves and we’re feeling that in the community right now. The real other challenges for blockchains and energy are twofold; one is the existing regulation, which makes many environments very challenging and the second is an incumbent push back. The real other challenges are twofold; one is the existing regulation, which makes many environments very challenging and the second is an incumbent push back.
As renewable costs will drop, which according to IRENA is already cheaper than any other fossil fuel source in probably 50 or 60 countries. While those costs drop, the incumbents are fighting back with regulation, and that’s really the last thing we want. Many blockchain-based solutions that are awesome and may make economic sense are going to be running into political and regulatory buzzsaws while these entities try to maintain their legacy business models of centralized energy with fairly static pricing.
Where do you see Solarcoin in 5 years? What are your growth plans?
We would be in front of potentially millions of people and have a meaningful price point, and I see meaningful as north of five dollars that would be the goal of the project. There’s a lot of things that haven’t gone according to plan from the start until today and we have had a pretty extreme roller coaster.
Our economic thesis is still a very interesting asymmetric bet in terms of how many users will eventually say “why not give it (SolarCoin) a try?” Every one of those coins comes into an existing community that’s supporting you. Our thesis is, could we distribute solar coins to 20 million people for the verified production of solar energy and basically put the equivalent amount of money into those people’s hands as Bitcoin’s estimated 20 million users and $50 bn USD as an incentive for solar production.
Are Solarcoin focusing only on solar technologies or will there be more renewable energy sources added at some point?
We try to keep it very simple. I have a role as an analyst for an investment group in renewables, and our macro thesis is that the value of currencies is a function of the size of the network, that’s the participants, the users, and so when we look at all the renewables solar is one that really makes sense. We focus on solar and try to keep it as simple and basic as possible. One of the keys to a scalable business is simplicity and also keeps it very easy for the end users to understand.
What needs to change before the widespread adoption of blockchains and cryptocurrencies into the energy sector happens? Will we reach a tipping point where everybody needs to adopt or be left behind? When do you see it happening?
I think when blockchain technology disappears and what I mean by that. Let’s say a really good technology just disappears and you don’t think about it, for example: when you’re browsing on your phone, under the hood there’s HTML, a bunch of servers and databases. We are not there yet, the interface for the stuff is still terrible and in the energy sector you really need large incumbents on side. This will be interesting to adopt into their business practices.
Right now the whole sector operates at a slower scale because of regulation and incumbency. With this I don’t mean that the business is still thinking in terms of 20-year capex expenditure cycle but I wish I could be more positive about it. My only advice for others in the space is: finance yourself well, run super lean and be very patient. It took us two years to sign the world’s largest energy monitoring platform via our partner Solarlux and to get meaningful numbers. Basically end-users don’t want blockchains, what they want is cheaper energy and the blockchain community is still selling technology and solutions as opposed to selling benefits. To answer your last question, I would say it will take maybe four years in energy to get it to that point and for a multi trillion-dollar industry this isn’t full steam ahead yet.
Thanks for your time Nick, I really appreciate it.