Steve Huang & Julia Yang
Current energy system, the electric grid, relied almost exclusively on a massive centralized infrastructure, with large power plants and long-distance transmission lines distribute energy to your house. Nowadays, with more and more renewable energy installations, distributed energy has become an unstoppable trend. More and more customers can easily install PV on their rooftop, and to buy and sell excess energy resources, communities can sell their excess power to each other. And now they need a new tool to make those transactions. New possibilities for green and finance are meant to change the economic landscape of the power sector.
In 2016, G20 heads of state for the first time recognized the need to scale up green finance, they set out a series of steps to make this happen. Key countries like China issued strategies for greening their financial systems. Policy moves were closely connected with the rapid growth of green finance in the marketplace. Insurance regulators decided to work together on how to respond to sustainability challenges. UN estimates that the number of policy measures to green the financial system has more than doubled to over 200 measures across 60 countries.
Among all, green bond market is taking the lead on the wave of green finance. With over US$81 billion in issuance, almost double the 2015 totally. Financial centers from London to Hong Kong, set out their plans to seize the green finance opportunity, no one wants to lag behind for the next big thing.
Green bond is just one of the tools in green finance. The transformational potential of Green Fintech for sustainable development gets everyone excited, from crowd-funding platform, new energy sharing economy marketplace, and mobile payments to artificial intelligence or even leveraging the latest blockchain technology for solar token ETH, Ethereum ICO offering. Investors are hungry to learn more. But, is it feasible in the near future?
Green Energy + FinTech + Blockchain + Sharing Economy + AI = ?
Where there is regulation, there is opportunity. No one knows exactly how FinTech plus green finance would work, it is still too early to say - but if you look at digitization now are changing the way that financial services are delivered, it perhaps has even greater potential than you could imagine. ANT Financial Services Group partners with UN Environment to launch a new international partnership during World Economic Forum’s Annual Meeting in Davos. The Green Digital Finance Alliance will bring together financial institutions committed to using digital technology to advance green finance in lending, investment and insurance. These new financial services can change consumers’ behavior in ways that positively impact the environment. ANT’s first case is to develop an app, link financial transaction and carbon footprint data, and then to provide carbon offset incentives to encourage eco life via social media. It provides users with a carbon account alongside their credit and saving accounts. ANT's 450 million users in China are now able to benchmark their carbon footprint, generated through algorithms of their financial transaction history, and to earn “green energy” credits for reducing their footprint. ANT’s app makes it fun to use, by integrating this into a social media experience as well as committing to a complementary, tree-planting carbon offset program, it generates strong feedback. As of today, 72 million users are participating in the app.
The Next Very Big Thing: Local Peer-to-Peer Energy Sharing Marketplace
You might wonder, how does this impact the energy sector?
It starts from renewable energy. More than 200,000 solar households in Australia lost their premium feed-in-tariffs at the end of 2016, feed-in-tariffs was considered a critical factor to support solar, and so what happened now? The same problem is being posed by big utilities, who are facing a scale and pace of disruption that could never have been anticipated - the impact of the plunging cost of solar systems and the arrival of battery storage. The disruption offered by these technologies will be accelerated strongly by the introduction of new software, such as blockchain technology, which was first used in bitcoin transactions.
The new technologies will allow for participants to buy and sell energy in the retail or wholesale markets, through peer-to-peer rating and community-focused energy systems, such as microgrids. Microgrid users can choose where they want to get their energy from.
A new platform in the Netherlands, Vandebron Energy connects those with excess renewable energy with those who want to purchase renewable energy directly from the site. On the Vandebron website, producers and consumers meet in the marketplace, consumers get to choose the length of their contract and who they want to receive their power from. Without the utility company stepping on, producers make more money and consumers pay less. Today, there are 12 producers on Vandebron who collectively generate enough excess energy to power an estimated 20,000 households.
Let’s look at another example in the U.S. There are numerous states, including New York, Texas, Maine and Pennsylvania that have deregulated electric and/or gas markets. This suggests great business opportunities. In Brooklyn, New York, a microgrid peer-to-peer energy transactions market was launched. The utility grid connects people who have solar panels on their rooftops in the Boerum Hill, Gowanus, and Park Slope neighborhoods in Brooklyn with neighbors who want to buy locally generated green energy. Like other microgrids, it operates alongside, but separate from, the traditional energy grid.
The project is sponsored by LO3 Energy, which funds the Brooklyn Microgrid project. LO3 Energy created a system that uses blockchain technology, and let people buy and sell locally generated solar energy within their communities. The blockchain, a digital ledger technology that underpins the digital currency bitcoin, to count up every unit of energy generated by the distributed energy systems. Then those energy units are available to trade on the open market, where they are bought and sold in the local community. Participants will also install smart meters equipped with the technology, which track the energy they generate and consume.
Around the world, similar market experiments are popping up. The UK’s first peer-to-peer renewable energy trading platform just launched. It is called Piclo, a collaboration between a cleantech company Open Utility and a renewable supplier Good Energy. Piclo is designed to create a marketplace for energy generators and buyers. And many solar, hydro, and wind generation sites from across England, Scotland, and Wales come to join them. Good Energy says it will also buy up any surplus power generated by its customers, and provide energy from its own network when supply is low.
This peer-to-peer service is possible because those countries share one thing in common - a deregulated energy market. In a deregulated market, companies can compete for customers, energy prices are not regulated and consumers aren’t forced to purchase electricity from their local utility. In a regulated market like Taiwan, a regulatory or government body governs all energy providing processes and consumers can only purchase energy through the local utility. In our case, it is Taipower.
It is very clear that we have a long way to develop Fintech applications in renewable energy sector, given the market is not mature. There is a lot to be done, especially in regulation. It is challenging to change human behaviors and pairing the old with the new. It is challenging to integrate the collaborative economy into the existing economy. But one thing is clear - the shift to green and, ultimately, more sustainable way of business is now unstoppable, whether we join it or not.
(Steve HUANG is the founder of KiWi Energy, he is devoted to developing a peer-to-peer renewable energy trading platform in Taiwan.Julia YANG is the Founder of Green Impact Academy. Green Impact Academy acts as a Meet Market aggregator in green industries, providing talent development, marketing, and financial plumbing services to accelerate the growth of the green economy.)