Power Ledger: Playing By The Rules When You’re Not Invited To The Game
As 2018 hurtles towards a conclusion and 2019 crouches ready to explode from the blocks, we look back at the year that was for Power Ledger.
2018 was always going to be a watershed year for Power Ledger.
With Australia’s first and at the time, most successful Token Generation Event(TGE) under our belt, funding assured for years to come and the crypto market surging and diving, 2018 presented the opportunity and the challenge to start driving the change we outlined in our whitepaper.
We believe empowering individuals and communities to co-create their energy future will underpin the development of a power system that is resilient, low-cost, zero-carbon and owned by the people of the world… (Power Ledger White Paper 2017.)
The philosophy that drives Power Ledger hasn’t changed since we first conceived the business in 2016.
We could see the energy system was undergoing an enormous technological transformation.
Distributed renewables, owned by consumers, were challenging the rules of the game; the old, centralized view of the power system and the governance structures that had steered system development and operation for decades just didn’t make sense anymore but, for all the talk, we couldn’t see anyone taking any steps to change the rules.
The Power Ledger platform was a proposition for a new rule set — we didn’t want to change the laws of physics, but we did want to change the rules of the market.
The thing is, changing the rules of the game when you weren’t invited to play is a tough thing to do.
Power Ledger’s distributed energy trading platform had already been demonstrated in Australia at the Busselton Lifestyle Village and in New Zealand with Vector Energy prior to our TGE, so we knew it had the technology capability to deliver the reforms we thought were necessary. But getting traction in a slow-moving market was never going to be easy.
In late 2017 we announced we would undertake a trial of our peer-to-peer trading platform with Australian Energy giant, Origin Energy.
The Origin trial involved using a year’s worth of energy consumption and production data from 200 of Origin’s customers, conducting P2P trades for distributed renewables on the Power Ledger platform and demonstrating the impact on consumers’ energy bills and Origin’s revenues.
From our perspective and for several reasons, the project was a success.
As a result of this trial, we could accurately demonstrate the application of agreed trading rules, we show the buying and selling of energy at varying rates and tariffs between different types of customers and we showed we can record this information to the blockchain.
But the project didn’t proceed further at the time.
A range of factors contributed to what myself and the Power Ledger team felt at the time was a set-back. Following the trial, Origin decided to focus on further developing their Home Energy Management and distributed energy solutions before considering customer trials of P2P trading alone.
As with all new technologies, regulatory factors play an important role too.
The concept of peer-to-peer trading isn’t forbidden by existing regulations. The fact is, peer-to-peer trading isn’t even considered by the regulations, meaning the “how to” rules are yet to be written.
In an industry as heavily regulated as the energy industry, rules are king.
We were proposing a change to the rules when we weren’t even invited to the game.
Of course, by this stage we were no stranger to challenging the rules.
Leading By Example
The Power Ledger TGE, while probably the most transparent TGE conducted in Australia, was conducted at a time when the rules around this new funding model were still being considered.
While the rules around TGEs were unclear, the rules around other forms of fundraising are well understood. We made a corporate decision to reflect the principles of these traditional funding arrangements in our TGE.
We conducted the TGE through the agency of our corporate, Pty Ltd, structure.
We published very clear disclosure documents, we produced clear terms and conditions for participation and we did not allow retail investors in jurisdictions where TGEs were not permitted.
Everyone who participated in our TGE was very clearly informed about the risks and opportunities of the process they were participating in.
When you’re in a bull market, everyone is your friend. But when the market falls, fingers start to point.
We’ve always said we can’t control the market, all we can do is work hard to grow a really successful business.
Criticism is a fact of life for organizations like ours.
It’s not a unique problem that we face; the best gold producer in the world can be made unprofitable from commodity prices which are completely out of their control. Shareholders may well be upset, and they have every right to ask informed questions at shareholder meetings.
Power Ledger gets these questions all day, every day. In fact we created the forums for these conversations which provides a far greater level of transparency than most companies in the non blockchain space.
We maintain chat groups in English, Japanese, Thai, Korean, Filipino and Mandarin to keep people informed about the business, to answer queries and provide ongoing disclosure, but these platforms also provide refuge for trolls.
It’s not just lone actors. We’ve had administrators of major online communities threaten us with spreading negative comments if we don’t pay them to create positive content — FUD (fear, uncertainty and doubt) has its own currency.
As far as we’re concerned that’s extortion and we won’t and don’t play that game but it’s indicative of some of the challenges that companies like Power Ledger face and how people with a vested interest can manipulate public opinion to suit their own agenda.
All we can do is work our hardest at building a good business and that’s our focus.
Power Ledger has also been working with the Australian Taxation Office to explore the taxation implications of TGEs and how to apply GST on the online sale of cryptocurrency assets.
The outcomes of those conversations will have a material impact on our financial position but we planned for the worst in our treasury management and we always said we’d be as open and transparent as possible regarding meeting our corporate obligations.
Power Ledger had the option of conducting our TGE through a digital foundation with (purportedly) no governing jurisdiction like almost all TGE’s before us. We could have used a warren of shell companies and trust structures. But we wanted to be better. We wanted to raise the bar.
We wanted to conduct our business in a way that was transparent and built the legitimacy of the emerging cryptocurrency and TGE markets as well as confidence in Power Ledger.
Progress & Projects
Our focus has been demonstrated through what we’ve achieved in 2018. We’ve commenced projects in Thailand, Japan and the United States and begun a world-first trial of peer-to-peer energy trading across a regulated distribution network in Fremantle Western Australia, RENeW Nexus, alongside our project partners Curtin University, Western Power, Synergy and energyOS.
The T77 project in Thailand is a partnership with Thai government-owned renewables developer BCPG using the MEA network to sell excess solar energy between a number of commercial and retail buildings in Bangkok.
In Japan, we’re working with the country’s biggest privately-owned electricity retailer KEPCO to develop a Virtual Power Plant model to help address Japan’s challenges with excess solar generation.
On the east coast of the USA, American PowerNet will soon be using the Power Ledger system to sell excess solar energy to two commercial customers connected to the local distribution network. On the West coast, we’re working with Silicon Valley Power to develop a platform for the measurement, validation and reporting of Low Carbon Fuel Standard credits.
In Australia, a broad sustainable communities research project involving utilities, universities and government agencies partially funded by a grant from the Commonwealth Government as part of the Smart Cities and Suburbs program will see Power Ledger install a community-scaled battery to support the provision of low-cost and low-carbon energy supplies to the residents of a sustainable housing development in Fremantle.
Power Ledger’s platform is also in commercial deployment in three separate strata developments in White Gum Valley.
In September we announced we’re working with Vicinity to trial our platform at their Castle Plaza Shopping Centre in South Australia as part of their $75 million industry-leading solar program.
“This year was really about us deploying our products in multiple locations around the world so we could see where was the biggest opportunity for us to scale and commercialise our technology. Most of our projects to date have been around being proof of concept but we do now have contracts for more commercial projects coming online in the coming months.”
The projects in total don’t represent huge sums in revenue but that’s not the point.
The POWR economy and the Power Ledger business model isn’t predicated on huge revenues or massive trading fees.
The point of our platform is to allow other people to monetise their investment in distributed energy resources by allowing them to sell their excess energy — if we had large trading fees we’d open ourselves up to disruption.
Instead we use the POWR token as an alternative to SAAS fees or platform subscription fees. It also allows us to create a liquid trading environment which can protect platform users even if their electricity provider faces financial distress.
Basic economics teaches us that the greater the demand we create for POWR tokens, the more benefit accrues for POWR token holders.
As cryptocurrencies mature we expect that the prices of various tokens will begin to reflect the real world value and success of their products, not just speculation. We are committed to building an internally sustainable business model which can survive without crypto boom and bust, and creating demand for the POWR token through deployments is how we aim to get there.
That benefits us and our supporters, but it’s a fact that’s lost on most mainstream commentators that still think revenue rules the world.
One of the side-effects of innovation is you become something of a test case for everyone that comes after you.
We’ve never shied away from challenging questions or opinions. In a world where it’s easy to block and ban at the first sight of negativity, we engage. The critics keep us thinking differently and innovating constantly, and we’re thankful for that.
Innovators innovate, commentators commentate, haters hate and people who resist change get left behind.
Power Ledger’s staff grew from about 12 full-time and contract staff in the lead up to the TGE to more than 30 by the end of this year. But our growth hasn’t been without its challenges.
When you’re in a rapid growth phase, getting high quality staff into the business is an absolute must, unfortunately sometimes in the rush to bring in capability, you get it wrong.
While I think everyone who joined the business this year has come with the best intentions, were highly skilled and were genuinely good people, the high-pressure, rapid-change nature of a startup isn’t right for everyone.
Some people self-select out, others we’ve had to move on.
We’ve had a number of people leave the business as we’ve worked to find the right structure to take us forward. We’ve had many more join.
2019 and Beyond
We’re now looking to the future, to a new year when the hard work of demonstrating the effectiveness of our platform transforms into the hard work of delivering projects.
The focus for 2019 will be on market growth and scale and the continued development of carbon and asset financing products.
It’s been a wild ride.
I really grew up in utilities so this whole startup life is an amazing, challenging, frustrating and energising experience for me and I think the business learns and grows every day.
We haven’t been perfect but I think we’ve got more right than wrong. We’ve fixed the things we’ve broken and we’ve brought our partners and supporters along for the ride.
We’ll keep trying to change the rules to make distributed renewables an increasingly important part of our energy future. And to be frank, we don’t care if we’re invited to the game or not.
Creating change is too important for us to be dissuaded by the critics.