An actual use case in crypto la la land
I thought it would be interesting to share Irene Energy’s use case of Stellar, as I feel it is both very applicable to the sector and specific to the Stellar features.
First, a brief explanation of what an electricity supplier does in deregulated markets (EU, some US states): The electric system consists in producers, transmission, distribution, suppliers, and end consumers, and they are overall managed by a national regulator and a system operator (who insures that the production matches the consumption). The producers are either large infrastructure (coal, dams or nuclear plants among others), or smaller producers (wind or solar panel farms for example). The market has to predict and monitor both production and consumption at all times (for a more thorough explanation, I recommend Electric Industry Operations and Markets from Duke University on Coursera.org). The role of a supplier is to buy electricity from producers and sell it to consumers. In doing so, the supplier has to manage the prediction cost by its portfolio of producers, pay a set of fees for grid usage (operations, licensing, tax), optimizing trading of electricity depending on supply and demand, and measure and bill the electricity consumed by the end client (who could very well be a corporation or a municipality).
Historically the core competency of the electricity system companies were the building and maintenance of infrastructure (plants, cables, transformers) and system operations (making sure the right plants are switched on at the right time), to which they added the client management services. The function of a supplier really is that of the client management service that consists in all the services at each end of the value chain (producer and consumer).
So what Irene Energy does as an electricity supplier and how is Stellar involved? As an electricity supplier, we built three assets (as described in our whitepaper): the predictability analytics tool, the engine that reads and processes data from production and consumption, and the micropayment system based on Stellar.
The micro-payment system based on Stellar : some context
There is a trend towards renewable production and consumption. Nowadays there is a sector wide transition from fossil and nuclear plants to renewable (France is good example) from various governmental initiatives in the last 5 years on to the next 10 to 30 years. Both from the supply and the demand side (the municipality of Paris has pledged to use 100% renewable energy by 2030 for example, so have some if not all of the largest companies in the world http://there100.org/companies).
No supplier gives any benefits to using or producing renewables.
It is impossible to track electricity on a grid, so when other suppliers assure you that you are buying renewable electricity, that is inaccurate. What they do is purchase green certificates which are a legal receipt from a producer at some point in time. That producer contributed a certain production of renewable electricity to the grid, and was issued a certificate. These certificates now trade openly and are used as marketing tools. Indeed you have bought the equivalent of renewable electricity, but you haven’t really voted with your wallet — the electricity could be produced in Germany or Romania, and you’re sitting in Civaux, France right next to a nuclear plant.
The micropayment system based on Stellar: the solution
So we studied this in depth and concluded the following: aside from all the things we have to do to become a supplier (which include incorporation, licensing, IoT dev, IT architecture, electricity trading, sales and admin), the one tool that we need is a micro-payment system to track and reconcile renewable energy production and consumption. Our offer is a way not to track electricity (still not possible) but for the end consumer (company, municipality or household) to assign payments to the producers of their choice, and to be able to say “from all the producers who will produce electricity and get paid for it, I want my electricity money to go to the producers that I chose”. If we couldn’t track electricity, we could track production, consumption, and payments. Think of a lake where clean and less clean water is mixed. Some people add clean water , and other people drink whatever water is the lake. It makes sense to prefer to pay only the people who add clean water.
Before Stellar was brought to our attention, we formulated a business model in which Irene Energy would build a system to track the intermittency of renewable electricity production and create a system of real time payment. Then give consumers the ability to choose their producers, that way we can feed them electricity and optimize the reconciliation of payments via an engine. We first looked at Ethereum and then considered Stellar (here’s a great read: https://medium.com/irene-energy/the-6-reasons-why-we-moved-from-ethereum-to-stellar-f641b76115f4)
With Stellar, we created an asset that fits our business requirements which we called Tellus (for the goddess of the Earth in Roman mythology). The requirements were to be able to choose, pay, trace and verify payments for electricity from consumers to producers. It turns out that this is rather exactly what Stellar was made to do. It is affordable, and its API is designed to make it accessible. So, for us it is the right business solution, as it solves an actual problem. The transaction costs and speed were also part of the requirements. In that respect, Stellar allows virtually free transactions at a fast speed. So when it comes to real time reconciliation and very large volumes of transactions, we can use it confidently.
I hope this gave a good example of how a real business can use the Stellar network and blockchain to solve real business problems.
