It’s been almost a decade since Satoshi Nakamoto developed the idea for blockchain infrastructure. Blockchain was developed in the year 2017, and at that time, the awareness of the technology was building because of the cryptocurrency hype. It was also about this time that the concepts of blockchain and cryptocurrency merged, and they became mainstream in the public’s eye.
Blockchain has become popular because many components of everyday life can be recorded in a decentralized database. Up until blockchain was developed, important data points like names, citizenship, and bank accounts were owned by a centralized authority. As a society, we collectively decided to trust that authority with our data.
Our team at Flexidao liked the idea of blockchain, and it’s ability to decentralize ownership and management. We liked the idea of being in control of our data, and we thought the concept was revolutionary.
And others thought it was revolutionary also. Blockchain was popular and there was a hype over bitcoins and other cryptocurrencies. Because of this, the value of bitcoin and other cryptocurrencies skyrocketed. In 2017, the bitcoin value grew almost 2,000%, which is almost $20,000 per bitcoin. We think this was a clear sign that people believed in the technology. Consequently, also that year, several types of Initial Coin Offerings (ICOs) started to emerge, and a new tech ecosystem started developing its network. Blockchain technology was becoming mainstream.
Building an Energy Blockchain Technology
We started conceptualizing the establishment of a speculative ICO. The ICO would allow you to get money from consumers in exchange for a company’s “tokens”. We spent long nights discussing this concept, and after some time, we started developing solutions for a distributed flexibility from EV in a lab environment.
We were motivated to begin our project. The technology was there and ground-breaking. It had to be developed, and we knew that it would be hard to break ground on the project.
Our first challenge was regulation. Regulators didn’t understand the technology, its potential, and they had to adapt the legislation accordingly.
Our second challenge, we dealt with a turbulent market. In the market, conversation was developing around technological distribution and this changing paradigm. Big intermediary companies, like retailers and banks, started feeling this disruption as a threat. Incumbent companies have two choices in these situations. For one, they either change all the infrastructure they’ve built to adapt to the new paradigm, or they try to do everything they can to slow down the paradigm change.
The first option requires comparatively more effort. Therefore, blockchain technology wasn't perceived as an enabler, but only as a disrupter. Because of these challenges, we decided that it was not the right time for an ICO. We had realized to be successful, we would need to involve energy retailers in the transition instead of trying to disrupt their role. We wanted to understand the barriers of adoption and implementation of the technology before starting to push it into new directions.
Developing the Technology
To understand these barriers, we talked to everyone we could. We talked to not only the energy retailers but also their end customers to gain insights into the challenges of developing and adapting a blockchain technology.
Our primary focus was first on microgrid management enabled by blockchain, but the more we spoke to customers, the more we understood that there was much more to do before implementing this innovation. The challenge was due to both the infrastructure and also the integration of small producers into the grid that could monitor and control energy flows through the last generation of smart meters. We still predict that this will soon be a new challenge for the energy sector. They’ll have to transition towards renewable energy and establish a new balance. At that moment, they’ll need to establish microgrid management. However, the market wasn’t ready for this innovation.
If microgrid management wasn’t an immediate market need, we searched for an additional need that would fill the market gap within a shorter term. After research, we discovered that the main challenge was upstream, meaning energy consumers needed more transparency and control over where, when, and how renewable energy is produced. The need developed because the advent of renewables implied a decentralization of the production of energy. Renewable energy resources needed to be more democratic and owned by everyone.
Also, the Guarantees of Origin certification scheme is decoupled from time and space of the production of energy units. This decoupling creates market inefficiencies because renewable energy sources aren’t present everywhere and at every time in the same amount. It’s important to keep track of the location of energy production to help determine the impact of transportation and storage while keeping track of the time of production. This is fundamental to the determination of the cost of energy since 1kwh of solar energy in November won’t have the same value of 1kwh of solar on a sunny day in August.
To have a balanced grid, you have to take all these factors into consideration.
Blockchain is an effective technological enabler to solve these challenges. It provides a real-time matching of the time, place, and source of energy in addition to the certification. It doesn't only increase the transparency and traceability of the actual reporting scheme, but also provides efficiency in terms of automating a process that was previously done manually.
Long story short, the intuition we initially had was correct.
There is a market need for more transparency and credibility in renewable energy certification, and the technology, blockchain, allows that to happen. We didn’t need to convince energy retailers that they needed software to track renewable energy because their clients were already asking for it. Our solution fulfills a need.
At that point, we started collaborating with Acciona through a pilot project, and the project launched us into a commercial phase. Our customer base quickly extended to include companies like Iberdrola, Total, Tauron, and Orsted. We adapted our offering to customer needs, including new features ranging from the power purchase agreement, distributed generation, green energy tariffs, and e-mobility.
We learned a precious lesson while developing our solution. Time-to-market is an important factor for a founder, but balance is also important. Disruption is a good vision, but it’s not possible to disrupt something that doesn’t have the structure in place to be rebuilt better. Our adventure at Flexiado is just beginning.