1. The Changing Energy Industry

1.1 A new energy model

The nature of the energy industry is changing, not just in the fast adoption of green energy solutions, but in the design of our energy grid itself.

In the old model, the energy industry was sharply divided into centralized power providers on the one hand, and passive resource consumers on the other. We are, however, in the midst of a pending global technological revolution, that is taking power from centralized energy providers, and is handing it back to the individual users through Distributed Energy Resources (DERs), such as microgrids, solar power systems, and embedded networks. [2]

This new model has many benefits: it can make the electric supply system more fault-reliant and more energy efficient by eliminating the costs and risks associated with long-range distribution; it can empower everyday citizens by putting them in charge of the energy production of their local community and make energy consumption more democratic in general.

The movement towards a distributed model is already well under way. In Australia, between the years 2011-2016, more self-supplying energy supplies were installed on the roofs of households, than were connected to networks that transmit energy from centralized sources. [3] The bifurcation point where it becomes cheaper to self-supply, rather than to rely on a centralized network is right around the corner—the Power Ledger whitepaper estimates in 2-5 years—and will change how the energy industry operates globally. [4]

2.1 Market demand for Distributed Energy Resources

We have established that the demand for distributed energy resources is highly likely to grow in the near future, due to the cost-efficient and failsafe nature of DERs over centralized solutions. The reader may also be wondering about the current size of the market and its main use cases.

Firstly, demand for electricity is almost universal, and all healthy, growing economies of the world labour for access to the most modern sources of electricity. Currently more than 84% of the global population is connected to an electric network, and this percentage is growing fast. [5] To an ever increasing degree, the demand for affordable reliable sources of energy leads to a further demand for Distributed Energy Resources.

Meanwhile our electrical devices are becoming more and more energy efficient with energy improvements up to 80%.[6] The primary challenge in the industry is no longer in providing greater efficiency, but in providing better access to a yet untapped market represented in the 18% of global population who lack sufficient access to modern electricity. In solving this task, distributed networks have proven to be robust aids. In places that are hard to supply, because a traditional electrical grid is nonexistent, or where central supply is too far away too be cost-effective.

Distribution networks have been used to provide hundreds of millions of people with modern electricity access in China and India.[7] Especially in places that lack in traditional infrastructure. The process has been compared to the adaptation of wireless cellular phones in developing countries, which enabled them to skip the laborious and costly construction of the required infrastructure for landline telephones. DERs enable modern electricity access to individuals, straight on demand and have become a $40bn industry in developing countries alone.[8]

The second driver of demand for DERs is certain improvements in technology that require access to non-stationary electricity. Low cost smartphones selling for less than $50 are expected to reach 300 million people in Africa, and a billion people in South and Southeast Asia. [9] These phones require a charge daily, and in areas were electricity access in scarce, solar chargers and other DER technologies are required.
Additionally in 2015 the global threshold of 1 million Electric Vehicles was surpassed. This "growing fleet" has produced an estimated 1.45 million charging points around the globe, a number that is rapidly growing.[10] As electric cars become more common, and they certainly will, access to electricity needs to become more flexible and reliable; both qualities are provided by DERs.

Luxury vehicles like the Tesla Model X have changed how people think about electric cars. The Tesla Model X is an SUV that can go from zero to a hundred km/h in just 3.4 seconds. Electric cars have been transformed from shunned oddities to the vehicles of the future.

3. What is Power Ledger?

3.1 The General Concept

The adoption of distributed energy resources changes the economics of the energy industry entirely. In this "distributed economy", we have a new type of actor: an individual user that owns and produces its own energy supply, allowing for a new ecosystem to emerge, in which the ordinary person is not merely a passive consumer of energy, but a producer and peer-to-peer trader of it as well:

the distributed economy [...] allows consumers to realize the value of their investment in DER by allowing them to monetize their excess energy in much the same way as Uber and AirBnB allow people to monetize their cars and spare rooms. [11]

As this new distributed economy is dominated by micro-investments, a trading platform is necessary to monetize and exchange the excess energy individuals produce. Power Ledger aims to be that platform. By utilizing the power of smart contracts built on a blockchain, they have created a decentralized platform for P2P energy trading, that requires no third party intermediation and has no central entity that controls the user's data and prescribes fees for every transfer. Unlike with regular contractual agreements that require interference by a bank or a lawyer, smart contracts define the terms of agreement between the trading parties and self-execute the agreement once the conditions are met.

Power Ledger is not, of course the first P2P energy trading platform. For an example of an actively used energy trading application, the reader may look at PowerPeers, a company in the Netherlands that has created a platform that enables households to share their self-generated electricity. what makes Power Ledger different, is that exchanges on the Power Ledger platform are transacted through its native ERC-20 tokens: the Power Ledger Token (POWR) and Sparkz. Both of these tokens have many functions in the Power Ledger ecosystem, but to put it simply, the POWR token is the basic unit that is used to gain access to and transact within the system, and the Sparkz token is a stable token generated in a 1:1 ratio to the native currency of the platform user. By using these two tokens as the basis for DApps built on their blockchain, it is possible to transact energy without financial intermediaries. In general though, Power Ledger has defined three primary goals they hope to fulfil through their platform:

Developing methods that enable the inclusion of individuals living in high-density housing areas into the growing distributed energy economy;
Re-inventing and developing the existing electricity networks to provide incentive for further application of DERs and;
Decreasing the risks and billions of dollars in costs associated with centralized electricity distribution by moving towards a DER model. [12]

Although the power ledger platform is still in its beginning stages, the startup has been active since May 2016 and has seen some significant development. The reader is no doubt interested in knowing how far they've managed to go in terms of covering this roadmap.

3.2 Current development highlights

We will try to sketch a brief timeline of the more important achievements and goalposts mentioned in the Power Ledger whitepaper and elsewhere:

As an Australian startup, Power Ledger trialled Australia's first P2P energy trading network in 2016, the biggest attempted at the time.
Power Ledger has developed and deployed a "commercial energy management system" that is specifically focused on tenants living in multi-unit apartments, providing a tangible financial incentive for multiple-tenanted dwellers to participate in DER trading. [13]
Power ledger has developed a number of applications on their platform, including a P2P energy trading platform, that enables businesses to host their services on the Power Ledger platform. [14]
They have managed to seal a high number of promising partnerships: property developers in the sustainable settlements at Witchcliffe Ecovillage, creating the first blockchain-based P2P energy trading platform, working together with Vector Ltd. the largest energy networking business in New Zealand, partnering up with Indra, the world-leading iSPEED network control and optimisation platform and many more.

3.3 Future prospects

A "Blockchain in Energy" report carried out by Greentech media shows that Power Ledger is the leading business with the largest number of projects deployed and planned within the Q2 2016-Q4 2018 timeline
Power Ledger has a large (24 people + 5 Board of Directors members ), competent team actively working and promoting the project. We recommend reading the article "Sorry For The Normal Service, Things Will Soon Be Disrupted" by Dr. Jemma Green to get a short overview of the vision and potential behind the project.
The Power Ledger team is competing as one of the three finalists in the start up competition Extreme Tech Challenge. The finals will take place on October 19, on Sir Richard Branson's private Necker Island who is also the Official host and Judge for the competition.

Co-founder of Power Ledger Dr. Jemma Green posing with Sir Richard Branson

In summary, as blockchain enthusiasts and supporters of sustainable living we highly support this project and are keeping an eye out for what's next on the horizon for Power Ledger!

Thanks for reading!