Businesses too small to take on a PPA may be able to satisfy their desire for solar with a deal in a blockchain-enabled secondary market.
Business and industry are seeking direct access to renewable energy by entering into power purchase agreements that in many cases help underwrite the construction of new solar and wind projects. That might sound a tad risky with the congested state of the grid and subsequent delays in connection, but the benefit of a fixed price for energy over a long term can be worth it in the turbulent electricity market.
About 4.1GW of wind and solar capacity has been added to the NEM since 2016 thanks to the financial certainty of power purchase agreements (PPAs). It’s a direct method of procurement that requires steady nerves at company board level, as PPAs are generally only accessible to customers purchasing more than 10MW or about $2 million of energy, which leaves most of the business community in the cold.
A different approach has come to market, however, where a PPA can be split into smaller PPAs – thus creating a secondary market – accessed on a platform enabled with blockchain technology.
“[Contracted offtakers] then become these anchors who allow smaller and smaller entities around them to participate in those same contracts,” says Kaspar Kaarlep, CTO and co-founder of Estonian company WePower, the platform provider that enables this secondary PPA market.
WePower uses blockchain technology to standardise and fractionalise PPAs, so that companies previously not able to purchase power directly from generators are able to enter the market for direct energy procurement. The first offering is for renewable power from the 9.4MW Suntech solar farm in Robinvale, Victoria, contracted to Mojo Power.
“It is literally the same contract that you’re buying a piece of, because it is deployed as a blockchain smart contract,” says Kaarlep, speaking to EcoGeneration from WePower’s Australian base in Melbourne.
Jump the queue
Robinvale will generate about 20GWh a year, which on Kaarlep’s estimate should make it able to deliver about 50-60% of load for up to 30 customers, depending on their daytime and nighttime energy usage. With smaller solar and wind plants joining the NEM Kaarlep says it will be relatively easy to create contracts that cover 70-80% of a customer’s load.
“Transparency is a big part of what we do as a technology platform,” he says. “The rights and ownerships [of the Mojo contract] are tokenized and represented in a public blockchain.”
Thirty percent discounts on energy bills are possible, he says, where the main influence on energy costs becomes the price paid for the energy that doesn’t come from Robinvale. “That is really market-dependent,” he says. The beauty of renewable assets is once they’re operating, running them doesn’t cost that much as the output price doesn’t depend on fuels. “You can get really good discounts if you go in really early, before it’s been built.”
The smallest contract done so far is 1.6GWh per annum, which Kaarlep says is equivalent to the load of a typical Melbourne skyscraper. Contracts are available up to 160GWh a year and the only prerequisite is that the buyer must have a smart meter.
Straight from the source
The PPA market peaked in 2018 with about 1.9GW of capacity underwritten by contracts, but 2019 saw levels drop to around 600MW as falling wholesale electricity prices highlighted the risk of locking in costs for years into the future.
WePower’s deal with Mojo is not exclusive, Kaarlep says. “Many customers, especially when we’re talking about the firming price – the rest of the energy – might perhaps like a more competitive offering with multiple retailers bidding,” he says. “That’s all possible.”
Kaarlep has experience working with German utilities on what a high-penetration renewables grid should look like and says a lot of the inspiration for WePower’s blockchain-enabled platform comes from European developments of the energy market. Australia is a good testing ground for these ideas, he says.
As companies seek to align their energy spend with social responsibility targets they will start asking retailers difficult questions about accountability.
“Customers really can’t control where their money from their bill ends up,” he says. “In our research we’ve seen that if we can get cost parity and we can get clean energy and we can get local clean energy, then a lot of very interesting strategies in procuring clean energy come to life.”