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The co-founders of Power Ledger came up with the idea of a blockchain-based renewable energy trading company when they met at an industry gathering in 2015 and realised that they were both trying to find a solution to the same problem: how to incentivise electricity users to stay connected to the grid.
David Martin had spent 20 years working for traditional utility companies and was heading a project that aimed to integrate customers with solar panels on their roofs with the local distribution network. Jemma Green, meanwhile, was writing her PhD on the viability of self-generated power and how to encourage households to invest confidently in renewable electricity.
“We could see the price of battery storage plummeting and it became clear that the question wasn’t about how to feed self-generated power back into the system but whether people stay connected to the grid at all,” Martin told FinanceAsia. “The whole idea behind Power Ledger is to give consumers access to an efficient trading platform that allows them to monetise their surplus energy.”
From these early conversations, Power Ledger was born in May 2016 with the backing of a blue-chip institutional investor in Western Australia. The identity of this investor remains under wraps but will be revealed later this year, Martin said.
Power Ledger’s peer-to-peer trading platform uses a system of tokens called Sparkz that customers use to trade excess power generated from renewable energy sources. This platform can be used by individual homeowners with photovoltaic systems on their roofs and by larger entities such as business operators, universities, community centres and schools.
Several successful trials have been completed and the software is now fully commercial, even though the company still only has 30 full- or part-time staff.
Martin and Green chose blockchain as a vehicle for their platform because the distributed ledger technology – the same that underpins Bitcoin and other cryptocurrencies – is quick and efficient. “Blockchain offers fast trading technology and real-time settlement,” Green told FinanceAsia from the company’s base in Perth.
Power Ledger also chose cryptocurrency as a funding source and, in August 2017, undertook what was the largest initial coin offering (ICO) by an Australian company at the time, raising A$34 million ($24 million). The company produced a billion POWR tokens – a form of contract for trading on blockchain-based platforms – and then sold 350 million of them via crypto channels at 8.5 cents each. The final tally went well beyond the founders’ initial expectations of a A$20 million raise.
The ICO had a dual purpose – it raised funds to build the business but also provided the company with a bond to cover payment settlement risk. “Like any other trading system, we have a prudential obligation,” explained Green. “When a customer sells or buys Sparkz on our platform, we have the money to cover the trade.”
Relying on a coin offering can also have its disadvantages; not least the extra volatility. Global crypto-currency markets are down about 85% since January. “This is the fourth or fifth time the markets have taken a big hit,” Green said. “You can go crazy tracking the volatility, so you have to stay very focused on driving the fundamentals of the business and delivering a product.”
Many of the company’s POWR token-holders – of which there are 17,000 – are actively interested in the direction of the business, Martin said. “They communicate with us and ask detailed questions via a telegram group. We have staff who monitor and respond to the chat; it is investor relations blockchain-style,” he said.
The war chest generated from the ICO has supercharged Power Ledger’s growth strategy. A new deployment of its platform is announced almost every other week, many of these in the international marketplace.
In April it signed an agreement with Japan’s Kansai Electric Power Co to trial its trading system with solar power users in Osaka, and then in May it announced its first US commercial deal with Northwestern University in Illinois using the platform to trade excess solar energy inside its own campus and between multiple sites. In Asia, Power Ledger has partnerships in Thailand and India.
Two other projects look set to expand the company’s product base still further: an Asset Germination Event in which Sparkz tokens will be used to crowdfund the construction of new solar or wind farms; and a carbon credit project with Silicon Valley Power that will allow electric vehicle owners to generate credits by charging their cars in daylight hours and to trade those credits with other parties such as fuel importers and refiners.
Proving that Power Ledger’s technology can be commercialised is an important stage for the business, said Green. He expects to see a drop in the number of companies that claim to operate in the crypto sector in the next 12 months.
“We’ve watched a lot of companies retrofit this technology onto businesses that don’t really solve a problem. The crypto space is full of vapourware and thought bubbles,” Green said.
Power Ledger is one of six Australian startups profiled in the Fall 2018 issue of FinanceAsia's magazine. We selected young companies that already have an established customer base and are generating revenue. Each has raised capital in the past 12 months – ranging between $15 million and $80 million – and they have a number of large-name venture capital firms behind them.
