A new business model
A new business model using blockchain to allow consumers to buy electricity directly from generators at wholesale prices is taking hold in several countries.
Grid+ in the United States sold $40 million in GRID tokens in September ahead of a planned “initial coin offering” at the end of October. The pre-sales of tokens were to investors willing to spend at least $50,000 on the venture. Each token entitles the holder to buy up to 500 kilowatt hours of electricity on the company’s platform at the wholesale prices that Grid+ will pay upstream generators. Each token is like a software license allowing access to the platform. Once on the platform, customers can buy electricity using cryptocurrencies like Ethereum, BOLT and possibly eventually Bitcoin.
The GRID tokens are expected to sell for $1.15 each in the eventual initial coin offering. Pre-sale participants were given the tokens at discounts of 25¢ to 40¢ from the expected offering price, depending on the dollar amount of tokens purchased. The maximum discount was for investors spending at least $4 million.
The company hopes to have lined up 20,000 customers by the end of 2018 and to have reached 100,000 by the end of 2019 and, by then, to be handling 120,000 MWhs of electricity a month.
Traditional electricity suppliers allow their customers to buy on a credit basis. The customers pay at the end of the month for the electricity they use. Electricity purchased through Grid+ would be paid for as the electricity is delivered.
Customers with rooftop solar panels could sell excess electricity back to the market via Grid+.
An Australian start up, Power Ledger, raised A$17 million (US$13.5 million) in September in token pre-sales using a similar business model. The company’s POWR tokens act the same way as the GRID tokens offered by Grid+, and are convertible into Sparkz tokens that will be used actually to purchase electricity or into cash. Power Ledger will pay electricity generators in Sparkz tokens.
Jason Lewis, a Norton Rose Fulbright lawyer who specializes in power trading, said the Power Ledger platform is flexible enough to permit trading by individual users or groups of users. “For example, a building, a club, a community solar farm, or a micro-grid could transact as a group,” Lewis said. The company hopes to be operational in 2018.
Power Ledger is partnering with several electricity distribution companies in Australia and New Zealand in the meantime to run trials of the platform.
Lewis said a wide range of other organizations worldwide are testing similar business models. “SunContract, a Slovenian company, made a similar token offering recently for a blockchain-based energy trading platform,” he said. The Australian government investigated the use of peer-to-peer networks for the trading of renewable energy, and partially funded a trial of such technology by AGL Energy, a large energy company in Australia. A demonstration project has been underway in Brooklyn, New York since 2016 to run a community micro-grid that will allow excess electricity from rooftop solar systems in the neighborhood to be sold to local residents via a distributed ledger.
In an interesting variation on the same theme, MyBit held a token offering for a platform that pools small investors who want to invest in large projects as a form of crowdfunding for renewable energy projects. (For earlier coverage about crowdfunding in the energy sector in the United States, see “Crowdfunding: A Good Way to Raise Capital?” in the February 2015 NewsWire.)