Blockchain Creates Solar PV Marketplace on the Grid
Blockchain is widely hailed as a disruptive force in grid management, and an Australian company is working with utilities to enable a grid-based marketplace for solar PV microtransactions.
Power Ledger is empowering prosumers to monetize solar and storage without disintermediating the utilities, according to co-founder Dr. Jemma Green. “The platform provides competitive advantages to retailers. In competitive, unregulated retail markets such as the east coast of Australia, customers are not tolerating low feed-in-tariffs and high electricity costs with locked-in contracts,” she told Energy Central. “The companies that are putting their customers first are coming out ahead.”
The technology addresses critical pain points in markets such as Australia’s. “Dave Martin, one of the other co-founders, recognized the problem of declining utilization of the networks because of distributed solar and storage being installed,” Green recently told Bloomberg New Energy Finance. “As a result, network charges are going up for the remaining users. He saw with a blockchain that you could see the grid as a trading platform, and enable small transactions on it, and provide price signal in the distribution end of the electricity network to maintain utilization.”
The Perth-based company has created applications that enable prosumers to transact peer-to-peer (P2P) in both grid and microgrid environments. Green, a PhD in sustainable policy and former J.P. Morgan executive, explains. “The Power Ledger P2P Platform provides dwellings with solar panels and batteries with a greater return on investment as they can sell their excess energy for higher prices than the feed-in-tariffs provided by retail clients. Instead of buying electricity at $0.26/kWh and selling it for $0.07/kWh, now homes can access lower cost energy and high margins on their excess energy.
“A neat bi-product of the trading platform is the behavioral effects, whereby users have a direct incentive to reduce their electricity consumption as well as to buy solar and energy storage assets to save money and the environment.”
Escape from the Death Spiral
P2P sales is a far-fetched concept in many regulated environments, but Australia’s utilities have an appetite for new solutions to their daunting challenges. “The International Energy Agency says that in parts of southern Australia, grid upgrades have doubled network costs since 2008-09,” The Economist wrote recently. “Despite cuts to subsidies, Australian PV installations are expected to triple over the next decade.”
A recent report in The Australian says that the nation has 7,000 megawatt of oversupply in the wholesale electricity market and yet needs another 5,500 megawatt of new renewable energy generation to achieve its 2020 renewable energy target.
Energy marketers are facing fierce competition from new market entrants who “are digitally savvy and unshackled by an operating model heritage, enabling them to better deal with the new breed of consumers who are eager to do whatever it takes to gain more control, cut their energy bills, and source services from whoever has the best value proposition,” according to an Accenture report entitled Why Australian Utilities Need to Delight and Disrupt. The report notes that when battery storage technology matures, “the ‘death spiral’ will kick into overdrive.”
Peer-to-peer marketing could be seen as a negative driver, but Power Ledger is trying to keep the utilities enfranchised while also helping consumers monetize their solar investments more effectively.
“Power Ledger has not, at least so far, been a ‘tough sell,’” Green said “This can be attributed to the interest in blockchain technology that exists in the market, or the large, deep personal networks the Power Ledger founders have that have allowed us to make contact with several large utilities.”
The Grid as Marketplace
Perhaps the most interesting application to date is Power Ledger’s peer-to-peer energy trading via the grid. Whenever a solar panel is generating power beyond what the owner can use, the blockchain-based application can measure that output in a distributed ledger and enable the prosumer to sell it directly to another customer on the grid.
The company is working with multiple retailers and distribution system operators, including Origin Energy, Australia’s leading energy retailer. Origin executive Tony Lucas, said the utility is interested in leading-edge technologies. “While it’s still fairly early days for this technology, we are keen to explore the potential benefits that peer-to-peer energy trading could offer our customers,” he told Medium.com.
Power Ledger also has a solution for onsite trading of electricity. At a housing project in Freemantle, Western Australia, residents trade electricity amongst themselves at a price greater than available feed-in tariffs but lower than residential retail tariffs. Most of the buildings have rooftop solar, and battery systems enable storage.
Power Ledger is also working with an Indian technology provider, Tech Mahindra, to develop a microgrid-as-a-service platform that enables building owners, campuses, smart cities and communities to produce and manage their own electricity and to trade any excess generation.
Yet another application of Power Ledger’s technology is a system for fractionalizing the ownership of assets such as solar and storage installations. A blockchain-based ledger records the ownership and manages income and payments. A buyer could purchase 1 percent of a solar farm and get 1 percent of the income. The asset registry enables them to sell their share and can also support a secondary market where people could buy and sell shares of the asset. Green says this system enables smaller investors to participate in the renewable energy marketplace.
Power Ledger’s prowess in the utility space is reflected in the success of its recent initial coin offering (ICO). When the company put 350,000 POWR tokens up for sale, it raised $34 million (equivalent to $26 million USD) from more than 15,000 buyers. The tokens will enable holders to trade on the Power Ledger platform. As of December 7, 2017, POWR tokens have the 56th highest market capitalization among cryptocurrencies worldwide at $183 million, according to coinmarketcap.com.
“We have been blown away by the response and interest,” Green told Medium.com. “When we set out to launch Australia’s first ICO, we wanted to make sure any potential contributors knew exactly how we would use the funds to develop our blockchain-based energy trading platform. The response has shown that, even though they don’t know us, they really like what we are doing.”
POWRs are tradable on public blockchain platform Ethereum, and can also be converted to Sparkz, which are tokens that can be traded for units of electricity on Power Ledger’s private blockchain.
Green recently explained the POWR ecosystem to Bloomberg New Energy Finance: “If an application host, which could be a network operator and a retailer, wants to allow their customers to trade P2P, they will need to purchase power tokens and put them up as a bond to be able to purchase Sparkz, and sell those to their customers. It ensures when those customers go to redeem their Sparkz for cash, there are funds there in the form of power tokens.”
Bright Future for Blockchain
Power Ledger’s P2P platform is particularly compelling in a deregulated marketplace, where the utilities compete directly with other providers, but Green says that even in a monopolized environment, utilities can use the platform for real-time transaction reconciliation and settlement and offer their customers more functionality.
Non-participating utilities could face pressure from customers who want them to adopt technologies that give them access to low cost, local and low carbon electricity, while letting prosumers recover their investment in solar panels and batteries sooner, according to Green.
Power Ledger is communicating with clients and blockchain experts around the world about project development. “We are also lucky to have a Board consisting of experienced, and very well-networked Directors,” Green said.
Green sees a bright future for blockchain in the utility sector. “It is highly probable that utilities will use blockchain technology to better understand their supply chain, and to manage electric vehicles, peer-to-peer electricity trading, and demand side response events,” she said. “As our energy future becomes more distributed, the need for a distributed ledger that can track and settle the entire marketplace is greater and greater.”