The Big Nudge #1: Make Capital Behave Differently
How Swytch shifts energy investments to where they’re needed most
In this series, we’ll be examining the four major ways Swytch will nudge behavior and markets in so as to reduce C02 emissions. This is part 1: Make Capital Behave Differently.
Swytch.io is a blockchain-based company that uses a unique Open Oracle to determine how much carbon is being offset from a given unit of renewable energy. The Open Oracle makes this determination in real time and then awards tokens to companies that make a measurable difference in reducing emissions. To earn Swytch tokens, companies go about their business, deciding where and how to produce energy through sustainable means. What Swytch does is provide a gentle nudge in order to move energy investments to the areas of the world that need it most.
Arizona or India?
Let’s say you’re a company that wants to produce renewable energy and will earn both revenue (from selling the energy) and Swytch tokens (as an incentive). You could create this energy in Arizona. Or you could create it in rural India.
In Arizona, there’s a ton of solar and relatively clean burning natural gas. You could create 1,000 kilowatts (1 megawatt) of energy in Arizona to get earn 1 Swytch token. But if you produce the energy in rural India, where energy production is still incredibly “dirty,” you’d only need to create 10 kilowatts of energy there to earn 1 token because you’d be offsetting so much diesel and/or coal. (A carbon offset is a way to compensate for emissions by funding an equivalent carbon dioxide saving elsewhere.)
This is how Swytch evens the playing field. In this case, you’re better off going to India. You’d need to produce 1/100th as much energy there as you would in Arizona. You save a ton of money while getting the same benefit.
Not to mention installation costs are probably cheaper in India so you’d be saving there too. Instead of putting up a massive solar farm in Arizona, you can put up just a few solar panels in the rural Indian town and achieve the same results. Plus, you’ve just given that town in India access to energy that it didn’t have before.
That’s an example of shifting investments to an area with a greater need where it will have a larger impact. Right now, the cost of capital (i.e. the minimum rate of return a business must earn before generating value) in these markets is much too high and there’s no real benefit for companies that “do the right thing.” Swytch creates that benefit. It reduces emissions, increases the payback, and therefore reduces the cost of capital.
Supply and demand as change agent
Companies are asking, “If we have to displace a ton of carbon, where can we do that with the lowest investment?” If you’re in a marketplace that’s already producing a very high percentage of renewables and/or natural gas, it’s really hard to displace carbon compared to a market that’s 99% coal or diesel. At the latter location, building a solar panel automatically displaces a huge amount of carbon.
With Swytch, companies will know the answer to that question. It will be determined via its Open Oracle, which is open source and features a wide variety of actors competing to answer this question: “How do I know how much carbon was offset by a unit of energy?” It will be on the blockchain and everything will be visible. Everybody will know how it’s calculated. There will be complete transparency.
The network will get bigger. More people will get engaged. There will be more demand for tokens. Renewables will scale up. Less carbon will be emitted. As a result, it will become more and more difficult to offset carbon over time. But that difficulty will continue to be rewarded with Swytch tokens. And renewables will take a greater share of the marketplace.
We won’t need good intentions to change the energy system, supply and demand will incentivize the behavior the world needs. And early adopters are the ones who will be rewarded most.
Nudge #1 summary
By rewarding early adoption, the Swytch model will shift investments to areas of greatest need and impact. Early adoption by producers is risk free and yields higher token amounts per unit of energy created.
As a result, Swytch…
- accelerates investment in renewables
- hedges the pricing risk of carbon
- reduces green program admin costs for token holders