Will blockchain technology help us get there?
Extreme weather, air pollution, rising sea levels, global warming, the ever-growing impact of hurricanes… or climate change for short. Unless you’re a particular head of state or have too much financial incentive to think otherwise, I’m pretty sure we agree that the planet is in absolute need of decarbonization of the global energy sector.
How to achieve that is a very complex question and we will need continuous development in several different technologies along the way but today we’re going to have a look at some of the leading projects that are pioneering one of these technologies in particular; Blockchain.
We here at The Energy Bit have been following the blockchain space in the energy sector since our very first article and felt like now is a good time to have an update on how the market is faring in 2019, what new has happened, and what to expect from the future.
Cryptocurrency Climate in 2019
After the initial hype of 2017 and a tumultuous 2018, the cryptocurrency market is back on track for 2019. Bitcoin is still leading the way, seen as a slow but robust store of value and as many would argue a non-correlated asset with the stock market movements… only time will tell.
Blockchain technology in itself is maturing. Scalability and consensus issues are worked on, and more and more creative minds are putting their heads together to come up with new and innovative ways of applying blockchain in different industries and business cases. Regulators are having in-depth discussions with blockchain experts and government grants are being allocated.
Utility Tokens in Enterprise Use
In the energy sector, like in many other industries, the blockchain and especially the utility tokens are still a somewhat contentious subject. What is the use case for the token itself? Was it there mostly to facilitate an alternative financing of sorts in the beginning? I would argue in many cases, yes, but that’s not to say the tokens can’t play an important role in the whole ecosystem of a blockchain project.
Often we are just focused on talking about the supply side of energy, but the digitalization of energy brings the demand side and the software needed to run smart grids, homes, and meters to a whole new level. That’s where the token itself can show its strength, for example in deploying and interacting with smart contracts that are used to automate and make the complex transactions real-time, transparent and traceable between multiple, sometimes competing, participants. Projects could also introduce different kinds of revenue sharing programs (equity) for token holders, or tokens could be used as rewards for community building or act as a discount on the platform’s marketplace.
And as long as the intentions and regulations are right isn’t alternative financing precisely what we need in this sector to build and develop? For that, blockchain and cryptocurrencies offer an excellent borderless platform without extra costs imposed by intermediaries. Suffice to say there’s still lots of room for improvement in many aspects, and with that said, let’s have a look at some of the innovations blockchain and related projects are bringing to the energy sector.
The Platforms and Tokens
PowerLedger (POWR) Australian company has been one of the leading projects since its inception in 2017, and they’re probably the most advanced when it comes to partnerships and getting from proof of concepts into piloting and actual real-life deployment phase. Active in eight countries and four continents, they are really pushing forward on the P2P trading part. Interesting projects include T77 in Bangkok (where we visited) and Chiangmai in Thailand, Fremantle in their home soil Australia, in Austria, and the US.
They recently finished a 2 phased pilot with a significant Japanese utility KEPCO in Osaka, where the trial on top of the usual P2P trading included a simulated shared renewable asset where participants get an allocation of the energy produced and can onsell the energy that they don’t consume themselves with dynamic pricing depending on the current supply and demand.
So there’s definitely some excitement in the field, but it remains to be seen when and what still needs to happen for these projects to scale up from several megawatt neighborhoods to reaching entire villages and even cities…
PowerLedger has also been planning on offering AGEs (Asset Germination Events) for quite some time now, where a retail investor like the most of us could fractionally own large scale renewable energy plant construction, where the token itself would be backed by the value of the asset and the energy produced and revenue shared accordingly. Although it seems these plans have been postponed for now, most likely due to some regulatory reasons to do with security offerings.
Robotina (Rox) This Slovenian startup with an experienced team is mostly concentrated in optimizing energy consumption levels and making savings through identifying patterns and connecting data collected by their own HEMS (Home Energy Management System) with AI.
HEMS and the software used is an excellent example of how digitizing energy brings the need to develop the demand side of energy; how to procure, manage, and control the different aspects of a smart grid and smart homes while enjoying the benefits to speed and efficiency in the process.
HEMS are definitely the future for what comes to smart homes and being in control of your energy consumption. As an example, Japan has a national plan to make every household have a HEMS by the year 2030.
Restart Energy (MWAT) An already established Romanian electricity and gas supplier company that boasts 20 million USD revenue in the EU in 2017. They were also the first energy supplier in Europe to accept invoice payments with Bitcoin in late 2017. They have integrated the MWAT, an ERC-20 token, that gives access to their RED (Restart Energy Democracy) ecosystem.
Every MWAT that registers on the platform comes with an initial and one-time charge of 0.11 KWT. In addition, every month the RED Loyalty System transfers 1-5% of the monthly energy traded by producers on the platform to registered MWAT token holder accounts, directly proportional to the amount of MWAT tokens held compared to the total registered amount. There is also a staking program for the tokens on the cusp of coming to fruition, but more on that later when it’s up and running.
So as we can see, the ecosystem is pretty complex with their exchange for MWAT tokens and plans of sending and receiving energy worldwide with local rates through their franchises they offer in different countries. The plans are undoubtedly big, but they do have the real energy supplying business and the experience supporting them on their quest.
WePower (WPR) This Lithuanian startup is currently focused more on the B2B side of things and serving the needs of larger PPA (power purchasing agreement) buyers in the market.
They’re already very close to launching extensive PPA auctions in Australia and also in the last stages of Free Electrons -global energy startup accelerator program that should be beneficial for them getting in contact with even more leading utility companies.
The WPR token itself is designed to allow holders to benefit directly from the renewable energy PPA auctions. WPR token holders can register their tokens to a PPA, then 0.9% of the PPA auction value will be shared among the token holders and the value paid out in WPR tokens. They also allow holders to purchase energy at a priority auction – they are able to purchase the energy at a set price up to the value of WPR tokens they hold.
They have also just secured a strategic investment from big Japanese trading company Marubeni, to further develop their corporate energy procurement platform and expanding the sales team so it looks like there’s a lot to look forward for WePower.
(our previous piece about WePower)
SunContract (SNC) Another Slovenian startup, but with strong ties to Italy. Already a simple, yet fully working platform and an app with sales north of 1 million USD for the year 2018. They are joining their energy-producing partners and energy consumers together in a pool, enabling them to trade electricity efficiently.
The app has a Fiat gateway with numerous other upgrades and a plan for the SNC token to be recognized as a currency in investments for solar power plants in the future. They seem to be on the right track.
Energy Web Foundation (EWT) Here, I have to recommend reading the interview we did with Jesse Morris from the EWF. Very thorough and up to date, as it was made just a couple weeks ago. With a very professional and experienced team in the energy sector, the EWF has a bit of a different approach than others, as they’ve set their target on becoming more of a base layer for everything blockchain and energy. A BaaS (Blockchain as a Service) kind of model where their own blockchain acts as a layer between the applications and the physical world, or like their CEO, Hervé Touati, put it beautifully:
The Energy Web Chain was launched just two months ago. The native token, EWT, is yet to be publicly traded but by providing robust frameworks and governance for others to build on, here the “others” being more than a 100 affiliate companies ranging from RMI (Rocky Mountain Institute) to German utility giant EnBW the EWF and the token certainly seem like something to keep a close eye on.
(update: Walter Kok has replaced Hervé Touati as the CEO. Hervé continues as an advisor to EWF)
Investing in Token Economies?
We here at The Energy Bit are not and don’t pretend to be financial advisors, but we can always have a brief look at what might be worth considering if one would be interested in investing in some of these aforementioned or other energy tokens.
First of all, it’s good to keep in mind that the success of the company behind a utility token doesn’t automatically result in a rising value of the token. Therefore, not even high transaction volumes or network effect of the platform necessarily equate to gains in token value unless there are token mechanisms to capture the value. These could include ways to decrease the total number of tokens through company buyback or an inherent burning mechanism where a small amount would get burned with every token used on the platform.
Other mechanisms could include ways to decrease the number of available tokens in circulation (slowing down token velocity). This could happen, for example, by incentivizing token holders to stake (lock-up) the tokens to gain governance functions(voting power) or other benefits on the platform. On top of these, the token value could, of course, be tied to physical assets or to a revenue stream, where the token acts more like traditional equity.
These are just a few possible parts of a well-constructed token economy, and it’s good to remember that incentive structures, token use cases, and economics can evolve over time especially when the project itself has good fundamentals and is led by a professional and a level headed team. For short: Great team with good token economics and an original idea executed extremely well. Good luck!
The energy industry is rapidly transitioning from the traditional vertically integrated utilities towards a renewable and more distributed, customer-based infrastructure. The possible benefits are indisputable, but like always, with change comes new challenges. Managing smart grids between different distributed energy resources and smart meters demands a lot more robustness and flexibility from the digital infrastructure and that’s where blockchain can play a crucial role to efficiently interconnect all the different market participants and their IoT devices bringing an automated, transparent and real-time settlement between them in this transition to a new, more distributed energy reality.