Recent months have seen a rash of energy-related token generation events as blockchain startups rush to disrupt electricity markets. For the uninitiated, it is important to understand the business models involved before delving in: not all energy blockchain companies are equal.
By Jason Deign
One that seems particularly ripe for disruption, to judge from the increasing amount of blockchain activity it is seeing, is the energy sector. Since the beginning of 2018, energy-related blockchain startup announcements have become an almost daily occurrence, and as of February this year there were dozens of ventures worldwide in various stages of development.
It’s no wonder, according to François Sonnet, a blockchain advisor with the SolarCoin Foundation, a global rewards program for solar electricity generation. He said, “there’s about 200 business models which have been identified in the energy sector” as having blockchain application potential.
In practice, though, most of the energy blockchain startup models fall into five categories.
Trading distributed energy
Ever since people started installing solar panels on their roofs, they have been wondering how to make money from the energy they don’t use themselves. And blockchain seems to offer the perfect answer: free to anyone, available to all and, increasingly, being used by a friendly neighborhood peer-to-peer energy trading startup.
In fact, when you hear the phrase ‘energy blockchain’ it most likely refers to distributed market hopefuls such as Greeneum, LO3 or Enledger. Companies focusing on this area have made big headlines and plenty of money: witness the $13 million achieved by Power Ledger’s ICO in Australia, or the news that Electron in the U.K. has gained support from energy heavyweights such as EDF Energy.
Trading utility energy
The blockchain seems perfect for helping prosumers to trade small-scale renewable energy. But some startups, including Drift, Electrify Asia and Platinum Energy, are equally focused on competing with or complementing the services offered by electricity firms. As in the distributed energy sector, the case for using blockchains for mainstream power trading is clear. USA-based Grid+, for example, claims electricity retailers sell energy with more than a 100 percent markup (see video below), giving it plenty of room to cut costs yet make a margin.
One point to note, though, is that these companies only really differ from distributed energy trading platforms in terms of their market focus. This means that utility-scale providers will probably end up competing with distributed energy trading platforms.
Trading carbon credits
While tying energy trading to the blockchain is an obvious move, companies such as CarbonX, ClimateCoin and MITO have opted to set up platforms to trade carbon credits instead. Calling these ‘energy blockchains’ might be a stretch in some cases. Green-tinged CarbonX, for example, could easily lumped alongside renewable energy trading platforms such as Jouliette or Prosume, but in fact its business model is quite different: it provides a mobile rewards program for people who make carbon-friendly choices.
Financing renewable energy projects
Beyond helping prosumers to trade energy-related products over peer-to-peer platforms, a select group of blockchain startups have focused on the issue of financing renewable generation projects in the first place. Assetron Energy, Solar Dao and Sun Fund are all examples of companies that use the blockchain to help crowdfund new renewable energy plants, for example by giving investors a stake in the ensuing plant profits.
Players such as ImpactPPA and The Sun Exchange are focused on trying to get projects built in emerging markets, potentially offering a valuable alternative to traditional, hard-to-find sources of funding.
Offering incentives for renewable energy generation
A variation on the renewable energy project financing model is to offer incentives for energy that is produced once a plant has been built. WattCoin, for instance, offers a digital currency that people can use in place of cash to pay for off-grid electricity. Similarly, Renu Coin provides an incentive for people to turn waste into energy. It remains unclear whether tokens will be a better incentive than hard cash for renewable energy production. Nevertheless, in the case of ACWA Power, a utility-scale renewable plant developer, there are indications that a decision to adopt SolarCoin may have helped improve project profitability.
As well as the major categories above, energy-related blockchain ventures include a grab-bag of alternative concepts ranging from FuelDApp’s electric vehicle charging system to 4NEW’s low-carbon cyptocurrency mining scheme. Just like the blockchain, the energy industry is filled with potential money-making opportunities. And as with other crypto concepts, it’s important to remember that a great white paper is no guarantee of real-life business success. Learn before you leap.
Jason is the publisher of the Energy Storage Report and a regular contributor to a range of energy industry publications, including Greentech Media, New Energy Update and Solarplaza.
Featured Image from Pixabay