Power Ledger’s Jemma Green Speaks to the GBBC on Global Energy Policies
On Tuesday, Power Ledger’s Dr Jemma Green sat down with Global Blockchain Business Council’s Dr Sandra Ro, for a conversation on global energy policies, consumer change and how Power Ledger fits into the equation.
The Global Leaders Series, in partnership with Global Digital Finance, is the Global Blockchain Business Council’s weekly global town hall hosting policy makers and business leaders to hear their insights into their work, the state of blockchain, digital assets and current global affairs. The session included live questions from the international audience.
Dr Sandra Ro: If you think about some of the challenges you’ve seen or some of the evolution you’ve seen over the last few years, what’s struck you the most as a friction or challenge, that you guys have had to overcome at Power Ledger?
Dr Jemma Green: I think when you’re doing anything new, there’s a lot of people that either don’t think that anything else could happen, other than what is already in existence. Then also comprehension. Electricity is quite a complex topic. It’s not like cocoa beans. You can’t just store it in a warehouse.
The blockchain is a complex topic as well. You’ve got two quite complex subjects that people have to wrap their heads around. On top of that, you’ve got the mania that happened around blockchain and subsequent scepticism, which was justified in many cases. So we are contending with a lot of things to get people to understand.
If people didn’t understand something, they generally don’t trust it. There is work to be done establishing an understanding of the technology in the market and getting people to look at their problems through the lens of this technology — to see how it could solve problems and add value.
But also how to create new markets and do things that haven’t been done before. That’s really where we’ve seen an inflection point in electricity markets in the past 12 months, I would say because of the much higher penetration of renewables.
When you get a lot of a renewable energy being generated at a particular time and there’s not enough demand at that time in that place, the grid breaks.
You get problems with voltage and reactive power and we’re starting to see these issues really manifest. Renewables are being blamed correctly, but really it’s the way the renewables have been grown until now, which is largely driven by subsidies and centralised planning. Our thesis is that if you actually put correct localised price signals in, supported by a marketplace like ours, then you can grow renewables in a scalable way.
If renewables are put in the grid when and where they are not needed it creates a phenomena, that some people would call the duck curve, which is basically too much electricity when there’s not demand. In places like California, Germany, Australia and in Japan, where there’s high penetration of renewables, this has become a very prevalent issue.
At the same time, the regulatory landscape has changed globally. It was foreshadowed that this would happen, but the rollout of that is really starting to take effect. In the US there’s a FERC ruling called 2222, which got announced in September, 2020. FERC2222 means that everyday people and businesses will be able to trade directly in the wholesale electricity market soon, beginning in the next year.
They will need software to do that.
There are similar rules being rolled out in Europe, called the Clean Energy Package, which is requiring all the EU member states to implement local energy sharing laws by the end of 2021 This is a cornerstone piece of reform similar to what happened in 1996 with Bill Clinton’s Telecommunication Deregulation Act. This set the stage for packets of data being traded in ways that hadn’t been contemplated before and lots of new market participants getting involved in the telecommunication sector and setting up as internet service providers. There was a lot of small companies that grew a customer base, consolidation and M&A that happened.
We’re in that formation stage in electricity, similarly to what happened there. So I think to answer your question in short, there’s a lot of things that have to be contended with to develop anything new and when they’re particularly complex, even more so as electricity markets in different countries and even within them are all different.
So it’s not a one size fits all solution either. So as a follow-up to that, you mentioned a couple of regulations that have come out, that should be favorable for both the consumer and anyone innovating. What regions are you particularly bullish about?
There are a number of places where regulatory reform has been signalled for some time and the details are being worked out. Then there’s some surprises, I would say. In India, in the state of Uttar Pradesh, which has 90million people living in it and is the largest, most populous region in India, just changed their rules to say “we’d like to allow peer to peer energy trading facilitated by blockchain”, and they did that pretty much with the stroke of a pen because the government has big ambitions around renewables. They’re hitting a lot of the targets for large scale renewables, but not for small scale distributed energy, and they see peer-to-peer as a way to encourage the growth of renewables, in Uttar Pradesh.
Another state in India, similarly changed its rules, Karnataka and they have 64 million people living there. You can see the size of these markets is enormous. In some ways, I think some of the developing countries may leap frog ahead in a surprising and unexpected fashion, compared to places like Europe, where the Clean Energy directive came out in 2018, with a requirement for the member states to implement by 2021. There was a long lead up to the 2018 directive, so you saw it coming. Whereas India just sort of looked at it and very soon months later changed the rules.
It’s a bit hard to predict precisely, but you can see broadly the countries that have set targets around renewables, some of those milestones and now want to get to the next frontier, but don’t necessarily want to fund it with subsidy. They are prime candidates and also the ones that are struggling because they’ve got high penetration of renewables.
Texas, for example, has a really interesting location because it has run itself very leanly and separate to the rules, nationally in the US. But because of the blackouts, many of the utilities have lost vast sums of money. So now they’re looking at new ways to, to have flexible loads that they can pay their customers for and create these two sided markets.
Where it was like, this is something that we might explore for the future. Now it’s like, we must do this immediately because we cannot lose a hundred million dollars again. So these situations are almost catalysing things that were right to change. I guess in a similar way to what COVID has done in, you know, fast forwarding remote learning.
The concerns around the electricity grid, stability, high costs and carbon emissions are kind of propelling certain places forward faster than others, in sometimes expected and sometimes surprising ways.
I wanted to talk a little bit about some of the other projects, you’ve got going on. Your projects all over the world at this time. How do you see the evolution with respect to each markets are unique. They have their own standards, they have their own regulation.
Do you think that remains, do you want to see more globalized standards and metrics, or do you feel like you can still operate and innovate in a world where every country has got its own sort of set of rules?
I think as you start to look at new energy markets with digital platforms, you know with APIs, the way that these systems talk to each other, smart meters, the metering standards and the data around that, I don’t think we need to standardize the electricity markets personally… there’s so much going on in energy that is context specific. You really do have to have something that is fit for purpose.
It does need to be bespoke that said, there are many things about electricity markets, which are inefficient that have legacy things in them. For which there’s inertia. Metaphorically speaking to change things, you can see that with any new innovation that is disrupting the legacy technologies, there is a resistance to that.
It’s most visibly seen in Australia, interestingly, with the change of so many prime ministers over energy policy here. We’ve had like five or six prime ministers, with different positions on that topic. But I think that the polarization of the conversation around energy is something that is quite unhelpful.
On the one hand you have like climate activists that are saying, the planet is burning and it really doesn’t matter what the price of electricity is. We have to get to a hundred percent renewables immediately, even if we have blackouts and the cost of energy triples that, so be it.
Then on the other end of that polarized spectrum, you have people that go, well actually I don’t believe in climate change, I really don’t want blackouts so I can’t afford 300% more electricity cause I’m a pensioner, or actually my business won’t survive if I have to pay that much because electricity is a big input cost. They are very valid concerns.
What our view at Power Ledger is that we see our technology has a bit of a missing piece of the jigsaw puzzle to help drive renewables, but without the issues that can be caused by renewables in the grid.
Typically where they’re basically grown by subsidy, which is a very blunt price signal to put energy anywhere at any time. It’s okay if it’s just 1% or 2% in the system, but once you start to get to 10 or 20%, that’s where you start to get the issues that in places like California are experiencing, in Germany as well because they have the highest penetration of renewables in the world, but the highest cost of electricity in the world.
McKinsey put a report out on Germany and said that they’re actually failing across all three metrics of stability, carbon emissions, and cost because of the way in which they’ve gone about growing renewables. Our thesis is that if you actually put price signals for where energy is needed, when it’s needed, using a technology like the blockchain that can do complex things at scale efficiently, then a lot of the value for households and businesses that will be transacting in this environment, can be preserved for those who have invested in assets.
It doesn’t really make sense to build a lot of generation in the North of a country, when the demand is in the South, only to have to build very big transmission lines, which everyone has to pay for. It’s better to build distributed generation, in the South for it to generate electricity when and where it’s needed, but for that to happen, you need clear price signals, strong pricing models, local and discreet signals.
The differences in energy makes it more interesting to work in, but the places that have got to higher penetration of renewables first, have the most issues to contend with.
There’s a few questions here on residential solar and companies offering Power Purchase Agreements (PPA) for residential solar. Is it something you see changing? How do you see the solar space? If you can comment at all?
Well, I mean looking at the incumbent players and their potential for their market share or their profit margins to be eroded, they can either fight that, resist the change and try encourage taxes on renewables or increase grid charges for renewables, or they can start to innovate and try to participate in the market.
PPA are a way that electricity retailers are starting to sell their customers renewables, but over like a 10 year period, where the output of a solar system or a battery system is supplied to the house, under like a feed-in tariff type or a micro PPA. That is a way that electricity retailers can get new customers and also keep them as well because if you’ve signed onto a 10 year contract, you’re with that retailer for that period of time.
Whereas if you weren’t, you might move retailers every couple of years, depending on the offer. So I think retailers are caught on to the fact that that that’s a market opportunity for them and we’ve actually done a project in Australia called loyalty peer-to-peer trading with a beer manufacturer called VB.
They’re one of the oldest beer manufacturers here and they made a commitment in 2018 to go 100% renewables by 2025. Part of the way that they’re looking to do that is to buy rooftop solar from households using our platform and pay them in beer, delivered to their house. It’s effectively a micro PPA.
So instead of their brewery just buying it from a solar farm’s buyer PPA, they are buying it in a distributed sense from lots of small solar systems from households and buying them in product. We’re really excited about this peer-to-peer platform feature because many companies have made public commitments around intention to procure renewable energy and particularly those consumer brands, consumer goods and services. So food and beverages, supermarkets, hotels, telecommunications, many of those can now use solar as a form of currency and pay by energy from their customers, engage with their customers, in a new way and pay them in store product or vouchers.
We started off with PPA, but in the future it could be other goods and services. We already got a lot of interest from other companies that want to do the same. So we’re moving from a centralized paradigm of large-scale PPAs to a distributed paradigm of decentralized PPAs.
There’ve been a lot of recent announcements, where in the US, New York city, New York state has made announcements about, and many companies have made announcements on how they’re going carbon neutral by X date. That also includes then massive efforts to get to that place in such a short period of time.
About Power Ledger
Power Ledger is an Australian technology company that has developed a blockchain-enabled renewable energy trading platform that is now available in more than nine countries, across four continents, enabling customers to access and trade cheaper, cleaner electricity. Power Ledger’s technology won Sir Richard Branson’s global Extreme Tech Challenge award. The company has built a series of products to enable energy trading, renewable asset financing and renewable energy credit markets.