Power Ledger, an Australian startup that recently won Richard Branson’s Extreme Tech Challenge, plans to soon start selling tiny fractions of renewable energy plants to anyone who’s interested. “Presently, it’s quite hard for everyday people to invest in and co-own energy assets,” says Jemma Green, cofounder and chairman of the company. “It’s pretty much exclusively the domain of institutional investors.”
Early next year, the company plans to make its first offerings–portions of a commercial-scale solar farm and a grid-connected battery project in Australia–via cryptocurrency tokens on the blockchain. (If you have only a hazy understanding of what the blockchain is, here’s a detailed explainer.) “That will be the world’s first regulated crypto energy offering,” Green says. At a later point, customers will also be able to buy portions with dollars.
The company, like a handful of others, is already using blockchain to enable a peer-to-peer grid, a system that lets someone with solar panels sell excess power to their neighbors. In Japan, the company is using blockchain to help set up a virtual power plant. In California, it’s working with a utility to use blockchain to give electric car drivers carbon credits for charging their cars during the day, when there’s more renewable energy, instead of at night. But the new project uses blockchain to find a new source of funding for large-scale projects.
The product, called Asset Germination, will work with existing solar farms and other assets, rather than building new ones, because that’s less risky for Power Ledger’s retail investors. Sophisticated investors can separately take on new projects, where there’s the risk that a developer might not be able to complete construction or might not find customers to buy the electricity. Retail investors will only buy assets that are already up and running. The process helps spur the growth of renewables because developers can use the cash from the sale to build new projects more quickly than would otherwise be possible.
Typically, selling a solar or wind farm to institutional investors is a slow process. “It’s very time consuming, and there aren’t that many buyers, because it’s a large asset in terms of how it’s packaged,” Green says. “But in fractionalizing it into some portions and putting that token on an exchange, that makes the asset more liquid.” The power plant (or battery, or other renewable energy asset) will operate like a trust, with a custodian managing the plant for investors. Investors will get returns as the electricity is sold, and the blockchain–which creates an immutable ledger of transactions–will make the process transparent and secure.
Using the blockchain is also a way to tap into the huge amount of money flowing into crypto markets–often for questionable ideas like Bananacoin, a digital token pegged to the price of bananas, or occasionally outright scams, like OneCoin, a Ponzi scheme that raised hundreds of millions of dollars. “A lot of the investment propositions in crypto are very high risk and will potentially turn out to very little, in a similar way to what occurred with the tech stock boom in the early 2000s,” Green says. “I think that crypto holders are interested in real assets.”
It’s one of a small but growing number of approaches to crowdfund cleantech. One new site is attempting to build a version of Kickstarter for large renewable energy projects. Some researchers are exploring the idea of using the blockchain to bypass the middleman in funding new infrastructure in the developing world. “The public financing of infrastructure because it is an absolutely broken, and I would argue, in many, many parts of the world, completely corrupt process,” says Michael Casey, a senior advisor for the Digital Currency Initiative at MIT Media Lab, who helped launch a research project to look at using blockchain to build solar microgrids in Puerto Rico. Neighborly, a Bay Area startup that is trying to democratize municipal bonds, has worked with small investors to fund projects like a massive wind farm in Utah and hydropower in Ohio.
For Power Ledger, the new project is a way to accelerate the shift to a zero-carbon economy in the tiny window of time that’s left to avoid catastrophic climate change. “I hope that it can play a decisive factor in helping to meet the Paris climate goals,” says Green.