Peer-2-Peer trading has been a dream of many early visionaries in the blockchain revolution. Today blockchain based marketplaces, where producers and retailers trade directly, gain popularity worldwide, thus cutting costs to end consumers. However, sale of excess energy produced by your solar panel to other users has been sought by some but achieved by few. Dr Jemma Green, Power Ledger Co-Founder and Chairman, talks to our Editor in Chief on her firm’s practical successful experience in blockchain based p2p energy trading:
Question: We have seen ideas and good intentions in blockchain based renewable energy trading. However few reached the implementation phase. Your projects are operational in several countries already. Please describe your business model and perhaps provide some conclusions on its application, based on your experience.
Answer: We have seen adoption across 4 continents; Europe, North America, Australia and Asia. We utilise a hybrid SaaS model, offering various methods for our users to pay for their use of our products. We have seen the most amount of interest in our flagship P2P product but are also now seeing a large interest in our REC trading product, and are expecting a warm reception of our soon-to-be-launched asset financing product, AGE. We have an integrated business model capturing multiple value streams.
(Q) What is an energy certificate in your projects? How do you turn it into a tradable asset?
(A) A Renewable Energy Certificate is a measurement of renewable energy that can be traded or sold. 1 REC is 1MwH of energy produced. They are already traded, but typically over the counter via bilateral contracts. We are creating a tokenized representation of the RECs to allow them to be traded on an exchange and where the trade and the settlement can be one thing on the blockchain ie create an efficient liquid and transparent market.
(Q) Do you believe there shall be a secondary market for the energy certificates, or they shall be traded only inside platforms?
(A) There is a secondary market already but it is largely OTC. With blockchain it can be exchange traded.
(Q) One of the challenges in p2p energy trading is how to transfer excesses of energy produced by one user to another user in the network. How does Power Ledger tackle this issue?
A: We don’t change the laws of physics. Instead, we optimize the financial settlement associated with energy flows in a network. We facilitate the creation of an ex post facto transactive environment that allows generators of surplus renewable electricity to be remunerated by others who have a coincident need for energy.
(Q) What regulation has to be in place for Power Ledger to start operations in a new market/country?
A: It depends on the product. For uGrid, there are rarely if ever any regulatory changes required for the owner of an energy network to begin offering the product to those consumers who are connected. For xGrid, in some cases there is a need for regulated network tariffs to be amended to provide the flexibility required for electricity utilities to offer the product to their customers. REC trading depends on the markets in which they are issued, so is quite context specific.
(Q) Some experts believe that blockchain based energy trading is feasible only in projects of large scale / significant number of users. Do you support this view?
(A) That has not been our experience. While we do have several larger-scale implementations now live, we also have some that are of a smaller scale. These small-scale deployments in aggregate are seeing success in driving down energy costs for those that are connected. We see these small scale deployments as integral steps towards our vision of widespread adoption of the technology – it’s not easy to boil the ocean.
(Q) How does p2p energy trading can aid to combat climate change?
(A) The International Renewable Energy Agency has said that investment in renewables needs to be scaled up 6 times faster for the world to meet the Paris Climate goals. We have pioneered AGE as an investment product to help with that. After that, the energy the asset generates can be traded on our platform as well as any associated RECs. Collectively we see significant potential for this to make a meaningful contribution to the Paris goals and impact the lives of a billion people.
Current direct action methods to encourage investment in distributed energy resources (DERs) are not sustainable in the long term as governments struggle to fund subsidies both direct and indirect. Peer to peer energy trading presents an opportunity to provide additional market based incentives to the owners of DERs.
By creating a product that offers a framework for owners of DERs to sell their energy directly to their neighbours, we can facilitate a transition away from an inefficient and unsustainable centralised transfer-payment policy to a more sustainable decentralised market mechanism, allowing everyone to participate in the energy transition.
(Q) What is your estimate as a practitioner on the market cap in p2p energy trading, in the near future, mid term, long term?
I saw this report which might help