Over the past decade, I have attended many conferences discussing utilities’ use of technology. Event Horizon is a tech event like no other. It had dry ice, loud techno music, light shows, and was located in an old Berlin power station. Most striking of all was (my approximation of) attendees’ average age, which was well below 40. More traditional energy events rarely go beyond a passing reference to climate change; at Event Horizon, the issue dominated the first morning’s key notes. Distributed energy resources (DER) integration was cited heavily as a way to avert environmental disaster; blockchain—in many guises—will help integrate DER.
Event Horizon was organized by the Energy Web Foundation (EWF), whose founding partners the Rocky Mountain Institute and Grid Singularity were highly visible on the show floor and in the keynotes. However, there was a good mix of other organizations not affiliated to EWF. The event served as a bellwether for blockchain’s maturity, which I sum up in five observations:
Rampant Investment in Blockchain Overshadows Utilities’ Reticence
Blockchain hype is at its peak. One presenter believes over $1 billion of investment capital has been raised by energy-focused blockchain startups, the majority of which was raised through initial coin offerings (ICOs). However, utility spend on blockchain is far lower. I believe this is limited to a handful of larger utilities, which have created small blockchain teams within innovation centers to test a handful of use cases.
The North American Market Is Flailing
US-based ICOs led the world in 2016, but stalled in 2017-2018. CleanTech Group estimates $723 million of ICO capital was raised in Europe, $251 million in Asia Pacific, and $140 million in North America, which recorded the lowest growth of the three regions. This is not surprising, given the US’s lack of market reforms or competition, and its anti-renewables administration: the consensus on the exhibition floor was that North America is about 5 to 10 years behind the rest of the world. The money appears to be following activity; DER trailblazers New York and California may well catalyze the rest of North America into action.
ICOs to Be Replaced by Venture Capital
In a recent blog I discussed why ICOs worry me: they strike me as a way for naïve investors to part with their money. The volume of investment raised by startups is staggering, but it is important not to get too carried away. ICO funding is showing signs of drying up, with few new investors emerging and a lack of originality in startups’ proposed business models. As the industry matures, an increasing proportion of funding will come from venture capital.
Few Business Models Focus on Utilities’ Current Needs
Most blockchain startups are focused on peer-to-peer energy trading. Unfortunately, while I am enthusiastic for transactive energy’s future, it won’t really exist as a mass-market offering for many years. In contrast, a handful of companies—notably Electron and Spherity—presented uses for blockchain that resolve current issues that existing IT fails to address. The rest of the blockchain community should take note: pragmatic solutions tend to make the most money.
Nothing Dispelled My Antipathy toward Token-Based Business Models
Finally, I was disappointed to see so many startups with business models that “tokenize” energy markets. Essentially, this strategy attempts to merge cryptocurrencies with energy markets. Tokens may be useful when used in a system’s backend, but remain invisible to end-users. However, I believe regulators will put the kibosh on any business model that has the merest whiff of cryptocurrency. The world of Bitcoin is far too risky to translate into a workable model for energy customers.