Going “off grid”: A bad strategy for business & consumers
By Sophie Amat on ALTCOIN MAGAZINE
peer-2-peer (blockchain) energy company Power Ledger bosses say why
The right and wrong of going off the power grid is a hot topic of political and social debate in Australia right now.
The grid being the network of synchronised power providers and consumers connected by transmission and distribution lines, and operated by control centres.
With soaring electricity price increases over the last 10 years, who would blame house owners set on doing precisely this? Exiting the grid by whatever means possible! After all, haven’t they been sold the idea that it’s in their interests to save costs, save the environment, and therefore embrace solar or wind renewables? Doesn’t such an invitation tacitly imply exiting the grid as the ultimate accomplishment of liberation from an “unwielding system”?.
Clearly someone’s ingenious market messaging is influencing house owners desire to invest in photovoltaic (PV) / solar power devices — such as solar panels and battery storage units (demand). This demand is being squarely met by a vast array of affordable, small scale renewables hardware, attractive finance terms and installers (supply) on hand to satisfy the broadest spectrum of consumer fancies.
Combine increased investment demand with increasingly affordable and efficient renewable energy equipment and you observe a compelling behavioural trend for those who can afford to; kitting up to the max on PV devices and exiting the grid for good!
the Australia money stats for renewables
The popularity of renewable energy devices on Australian homes is shown by the money stats —
“$2 billion [Australian dollars (AUD)] is likely to have been spent on small scale rooftop solar in 2018” — estimate by Clean Energy Council (Australia)
Clearly a not insignificant investment by homeowners, and a lucrative supply market to boot!
And to place this statistic within the overall national context, the estimated value of wind and solar projects already completed, and underway in Australia (as at December 2018) is more than $26 billion AUD.
So clearly there’s a massive investment in largescale renewables projects which represent some 80 wind and solar farms having 14.6 gigawatts of capacity …
“…far beyond that which is required under the mandated renewable energy target …” according to the Clean Energy Council, Australia.
So according to my simple calculation on the stats, small scale houseowners comprise a minor 7.7% of total demand.
To me, this evokes three simple questions:
- What degree of impact does householder “off the grid” defection behaviour actually have on the price of energy? Meaning is their 7.7% stake overall, materially influential on the retail energy price in any case?;
- How do largescale renewables projects impact energy prices? (kinda obvious given question 1); and
- What incentives, infrastructure, and support is out there to help renewables producers, small or largescale, “do the right thing” and stay on the grid to influence a desirable social and economic outcome beneficial for all consumers?
I don’t have the complete answer to these questions, nonetheless the exploration of who actually influences retail energy prices ultimately and to what extent, is a very real conversation that requires careful and transparent “unpacking” if we are to accept any counter strategies.
Does going renewable and staying grid locked sound like some quizzical logical paradox? Well at first it did to me.
However, when Blockchain Perth founder Johnny Swanepoel and I recently interviewed PowerLedger bosses Dave Martin and Jemma Green in their no frills, downtown CBD Perth (WA) offices, they presented interesting views to explain why any level of grid exodus is ultimately not beneficial for consumers. Their reasons are worthy of consideration to more fully comprehend how to deliver cheaper energy to all consumers, most of all those who can least afford it!
the Power Ledger backdrop
If you’re not familiar with Power Ledger, it’s a Western Australian registered, peer-to-peer energy trading company that raised $34 million AUD in their global ICO (initial coin offering) / TGE (token generation event) in September 2017. Its’ core enabling technology for its’ proprietary energy trading system is blockchain.
Power Ledger’s capital raise issued an ERC20 Token that is listed on various global cryptocurrency exchanges, and trades under the crypto tickr POWR.
Power Ledger’s ICO capital raise via an ERC-20 token issuance plus it’s innovative use case for blockchain tech and clear delivery on its’ ICO roadmap, situates Power Ledger as bona fide business within the global crypto ecosystem.
See https://coinmarketcap.com/currencies/power-ledger/ for the latest speculative price per token, or go trade it via cryptocurrency exchange BTC markets in Melbourne.
Anyone— irrespective of one’s crypto knowledge — can follow Power Ledger’s progress by joining their public community Telegram channel by clicking here. It’s an extraordinary phenomenon as you will see Power Ledger’s team directly participate in conversations; even the Managing Director and Chair of the Board!
To top it off active community members can even win POWR tokens ($100 AUD), or have $100 AUD donated to a registered charity of the winner’s choosing. A little cheesy you say? Maybe so! An encouragement for positive community engagement to sensibly discuss real, detailed progress with PL’s projects — most definitely! Besides, who doesn’t like good cheese …
Notably, the co-founders decision to register their business in Australia, as opposed to some unreachable offshore crypto haven (this topic is in and of itself a whole article of contentious debate / unpacking for another time), is a clear message to the public that they value transparency in their business dealings; being subject to Australian government business regulations that promote fair trading.
See company website here: https://www.powerledger.io .
Note for Telegram first timers in a public group: The Power Ledger team communicate direct with the public in their Telegram channel. Whilst it is moderated, you will also find negativity trolls and uncensored criticisms in the group, so keep an open mind.
the PowerLedger bosses : go green, go solar but STAY on the grid!
Both Chairman of the Power Ledger Board Jemma Green, and Managing Director Dave Martin are in strong agreement with the view :
“Go green, go solar but STAY on the grid”
Note: This is the author’s simplified interpretation of Dave and Jemma’s views.
Their underlying rationale for this concern is “the utility death spiral”. Consumers ultimately pay higher per kilowatt per hour (kWH) price rates when there is reduced consumer usage of the grid. Fixed grid costs don’t magically disappear when demand reduces, therefore the fewer remaining consumers ultimately pay much higher rates (see diagram below). Compelling logic based upon microeconomics scale reasoning and price elasticity inputs.
So it’s a case of tough bikkies for households and businesses who have no choice but to accept mounting market energy prices. Probably the less well-off who don’t have a choice and are left holding the proverbial hefty kWH “price can”, that they can ill afford.
Hence, the encouragement by Dave and Jemma is simply this. By all means kit out your home with PV devices. But stay put in the pool of energy grid consumers.
Critics of the death spiral view could rightly counter thus. Why should small householders pay for ineffciencies of a high maintenance, unsustainable legacy generation, transmission and distribution system? Where are the sector capital reserves from mega-profits set aside for ongoing maintenance as per published annual reports to soften the price blow to end consumers?
In any case, the behavioural reality remains to be seen whether small scale PV investors perceive that a “STAY strategy” benefits them and the community sufficiently to stay connected. Furthemore, one wonders how transparent and readily accessible electricity price data will be, to show PV home owners that they can be rewarded for altruistic motivation.
an important social asset
Dave and Jemma unanimously support a “go green, go solar but STAY on the grid” strategy because …
The energy grid is a vitally important social asset!
It’s an important means by which households and businesses stay socially connected. Electricity plays an essential role in homes, shops, businesses, factories, office buildings, street lighting and transport. We need electricity to charge mobile phones, send emails, light our houses, charge our computers, fridges, operate in home dialysis systems +++.
The very fundament of our social life as modern human beings is linked to having access to affordable and sufficient energy supply.
Dave cautions that a valuable social asset must be accessibly priced if we are to avoid financially and socially marginalising those who can’t afford to put solar panels on their roofs. Are we ready to treat electricity as a luxury good? I think not!
It’s simply not fair to householders to have this necessary comfort become unaffordable! says Jemma.
the off grid investment
I recently read an ABC news article about affluent Australians who readily paid the $30,000+ AUD price tag to take their properties fully off grid; generating all their electricity needs. What a fabulous dream to be out of the system. But at what real, total cost to the rest of us? Do they know the price implications of their exit or do they even care?
How many of us have the spare cash to scrape together a not insignificant investment of $30K? And what of those who don’t even own their own home upon which to place PV devices? We / they are the price takers that bear the brunt of affluent householder defection. Admittedly we can’t force anyone, but isn’t it high time to present clear reasoning to stay connected for the benefit of all? Does this sound a touch socialist and offensive to the default capitalist mindset so many of us have invested in for so long?
All Australians should have access to affordable electricity. It enables dignified participation in modern social life. What’s your stance?
grid defection impacts small and medium businesses
Australia small and medium enterprises (SMEs) i.e. those with fewer than 200 employees, are major energy consumers. They represented 37% of the total $27 billion spend by all Austalian businesses on electricity and gas in 2014/15.
Furthermore, small businesses are under significant pressure from rising electricity prices.
Many SME’s face a doubling or even tripling in electricity prices in … as [they] come off 3‐5 year contracts. Often electricity is at least 5% of total costs, and firms that are in the traded goods sector cannot pass on these cost increases.
One retail grocer with multiple sites saw in increase of over 50% in their monthly bill, even after taking many energy efficiency measures.
Dave Martin is rightfully adamant that grid defection is bad for business! If you’re running a small engineering workshop and contributing to the local economy, paying staff, and power is a major component of your cost of doing business, then your business may be limited in ability to fully contribute to the local economy.
Power Ledger solution : financial incentivisation using blockchain
So the penultimate question is, how can we financially incentivise people to commit to the grid and stick around? The answer is elegantly simple.
By using the existing energy grid as a trading platform; which is thankfully the core business model of Power Ledger.
“There’s no need to build a more efficient network”, says Jemma. “It’s much easier than that! We simply encourage consumer PV generators to sell their surplus energy directly into the grid, to their neighbours”.
And here’s how.
Through micro grid trading (μGrid and )regulated grid trading (xGrid).
Micro grid (μGrid), peer-to-peer trading works in a specific location specific embedded network environment, including, residential strata complexes, shopping centres, industrial parks and the like.
Electricity generators or prosumers, sell their electricity excess to consumers within the micro grid. All transactions are recordable on a public ledger blockchain. Instead of paying with fiat $AUD cash, consumers pay with “Sparkz tokens”.
Imagine as a consumer having the choice to access electricity supply directly from your neighbour’s excess power overflow. The Power Ledger technology provided to all consumers within the grid enables them to choose from real-time data, purchasing supply from either your neighbour or from the external regulated grid (as per usual).
The dual token model (DTM) is the crux of how Power Ledger proposes democratisation of power. Here’s a simple, fictitious example showing how the DTM works.
- A power utility provider such as Horizon Power (WA) purchases a large quantum of crypto POWR tokens.
- These crypto POWR tokens are held in escrow as a POWR Smart Bond.
- This purchase — escrow transaction generates the issuance of Sparkz tokens.
- Consumers purchase Sparkz tokens to pay for microgrid electricity.
Kudos to Power Ledger who have successfully trialled their first micro grid trading pilots in residential apartments in Busselton and Fremantle, Western Australia. So the peer-to-peer (P2P) trading model technology definitely works. This is great news for the prosumer (small PV house owners / PV apartment blocks) and consumer market!
wait and see
So now it’s a wait and see game to gauge how enthusiastically utility players adopt the technology, become application hosts on the PL platform, and embrace direct price competition that will offer their current power consumers dualistic supply choice. Perhaps a tall order, yet not impossible!
As an idealist and eternal optimist, I believe in human goodness, practical democracy and choice, disruptive technologies and miracles. My money is on P2P POWR trading!
In kindness,
Sophie Amat
