Residential solar customers are already used to selling power back to the grid. When their rooftop panels produce more electricity than is needed at any time, they can send the energy to the wider network and gain a credit on their utility bill in return. That process is called net metering. In the future, however, this process may seem somewhat controlled and anachronistic. Instead, we may sell power not only to utility companies but to each other.
That’s the vision of a European startup called WePower. The operative innovation behind the project is the blockchain, the decentralized ledger technology that first came to prominence as a way to track and record bitcoin transactions. Blockchains have since been adapted to trade all kinds of digital assets from loyalty points and insurance contracts to electrons.
WePower is yet to launch, but its proposition is radical. On one side, it’s gathering together producers of renewable energy, including solar, wind and hydro plants. On the other, it’s signing up investors who pay upfront for the right to consume electricity generated by those plants. To do this, it’s created its own cryptocurrency, a token called WPR. Each token represents one kilowatt-hour of power produced and are themselves tradable on the platform.
“We’re changing how renewable energy plants are financed,” says cofounder Arturas Asakavicius in an interview. “Currently if you want to finance a set of renewable energy plants, either you have to go to a bank and take on debt, or you go to an investor and issue securities. In our solution, producers are selling energy upfront in the form of a token.”
WePower is essentially a platform for mini initial coin offerings (ICOs). ICOs are a mix between crowdfunding and conventional equity IPOs, where instead of issuing debt, equity, or perks (as on Kickstarter), companies issue coins or tokens instead. These cryptocurrencies purchase either ownership in the startup or some form of participation in the future business (like the right to buy its products).
The ICO mechanism has raised hundreds of millions of dollars for startups this year, eclipsing the value of the traditional early-stage venture capital market. The space is currently largely unregulated and could be headed for a major “correction” according to many observers. But, in the long term, it could also be an important financial innovation, one that allows companies and everyday investors to collaborate more directly, without today’s intermediaries and gatekeepers.
As well as orchestrating mini-ICOs on WePower, the company itself plans an ICO this November. The aim is to raise up to $30 million–money that will go towards building the platform and providing financial guarantees to the energy producers listing on the system. The platform stands behind collateral payments buyers put up as a promise that they will honor contracts as they come due. WePower plans to go live nine months after the ICO is completed in mid-November.
The founders say WePower will offer electricity contracts at a lower price than on the conventional market. In Spain, WePower’s launch market, they estimate that one megawatt-hour will cost $39-$40 per unit against a standard wholesale price of $47 per unit. That would be a 17% saving and the unit itself would be tradable, meaning you could sell on the token if the price was rising (say, because there was a shortage of renewable power available at any time).
By tokenizing renewable energy and putting it onto a blockchain, WePower is making that power tradable and accessible to anyone. And it’s giving people more control. In effect, people taking contracts on WePower become their own energy traders, substituting for the role utilities play in buying and selling power on our behalf. Instead of showing the price set by a utility, their bills will show the price they’ve negotiated on the platform. (Households will, however, still have to pay the cost of grid transmission and distribution.)
There’s been a lot of interest in blockchain technology in the energy industry and several early-stage projects have already emerged. LO3 Energy has launched a blockchain-based microgrid in Brooklyn. Power Ledger has several blockchain pilot projects in Australia. Drift has launched a blockchain-based utility in New York. And a host of companies are involved with the Energy Web Foundation, a nonprofit group founded by the Rocky Mountain Institute and Grid Singularity, an Austrian blockchain developer focused on energy applications.
“The increasingly decentralized nature of energy production will see the grid become more decentralized and the nature of the blockchain means the two developments will go hand in hand,” says Nick Martyniuk, another WePower cofounder. “The end goal is to produce a true peer to peer energy platform, where people would sell renewable energy and also be able to get energy back from the grid.”
In the beginning, WePower plans to work mostly with larger energy producers. It claims already to have 1 gigawatt of capacity lined up with three solar plants in Spain. In the longer term, it wants smaller scale producers to come onboard, including homeowners who just want to sell excess power from their personal solar panels that they don’t need. The vision is for a co-operative, flattened-out electricity system, where homes both consume and provide power depending on the need, with all transactions recorded in a decentralized ledger. Such a system could drive down the cost of power dramatically, though, given the highly regulated nature of the industry, it may take several years to come to full fruition.