[00:00:07] I literally sat down cross-legged on the floor in the teepee with Dr Gemma Green from Power Ledger. If you’re in and around the block chain world in Australia or worldwide for that matter, you definitely would have heard of Power Ledger. Power Ledger is a really innovative and interesting use case for the technology.
[00:01:48] So tell me a bit more about Power Ledger.
[00:02:05] Sure. Well, we’re a young company. We’re a tech company. We’re three and a half years old and we’re based in Perth, got 25 staff. And we use the block chain to do three things: to facilitate the trading of electricity peer-to-peer, transacting of environmental commodities, so things like renewable energy certificates, carbon credits, and asset ownership. Energy trading is the area we’re most well-known for with peer-to-peer trading of electricity.
[00:02:45] So what’s the REC trading?
[00:02:47] So like renewable energy certificates, one certificate measures one megawatt hour of energy. You might have a company in Singapore that wants to buy renewable energy, but there’s hardly any there because there are a lot of high rises, it’s an island. And so they buy a REC from a Malaysian country, Malaysia, from a Malaysian energy producer. And then they’re able to claim that they have purchased 100 per cent renewable energy.
[00:03:12] And then what it does for the Malaysians is that it gives them an economic incentive to install renewables because someone will buy the REC.
[00:03:19] So before Power Ledger, what’s your background?
[00:03:30] My background is in investment banking. I lived and worked in London for 11 years and I moved back to Australia seven years ago this month.
[00:03:53] I’ve been really blessed with enormous opportunities and we’re just really trying to make the most of them and see what we can do in leading that democratisation of energy movement and driving efficiencies in electricity markets and making electricity more affordable and cleaner.
[00:04:20] So block chains obviously a big part of what you guys do.
[00:04:40] There seems to be this scepticism or need to understand at a deeper level what the technology is. Why do you think that is?
[00:04:56] Well, I think it gained so much notoriety probably in the past two years. And there were lots of scams that people were just putting the word block chain in front of their name to raise money. And lots of really experimental ideas and some of which have just turned to dust already. And this as a result of that being a scepticism about why do you actually need a block chain? And I actually think that healthy scepticism is quite helpful. Why do you need a block chain? You need a block chain in the three product areas. And for energy trading, if you’re just doing peer to peer with one retailer, you don’t need a block chain. But what you can have is if you’ve got many retailers, the block chain can facilitate cross retailer trading in settlement real time, whereas in the current electricity market it’s like three months to settle transactions. And using the block chain, you can have customers with batteries selling to another retailer, a real time agile trading and settlement market. So that’s the energy trading opportunity with the block chain, And then with REC trading, typically REC trades happen via brokers and legal documents and then payments via traditional means and then transfer of RECs from one owner to the other and that whole process is very costly and time consuming, whereas using the block chain, again, you can agree to trade, settle the payment and transfer the REC as one and the same entry on the ledger. And then the final one around asset ownership. You can fractionalize, very small assets at low cost and tokenize the asset and make assets liquid that would otherwise be illiquid, like an electric vehicle charging station. You could own 50 dollars of one and that can become tradable and it makes the asset more attractive investment and brings more capital to fund these kinds of projects and provides an alternative ownership syndication model to investment banking products for smaller assets. And so we should have to explain why would you want to use block chain and when do you not need one? Because I wouldn’t call myself like a block chain acolyte. I don’t think it’s like the solvent for everything. But there are certain places it can add value. But I think that it should never be seen that you want to democratize everything.
[00:07:42] Yeah. And so I’ve been relatively sceptical. So in Australia, a lot of us have solar power and more of us probably should, but there’s government incentives to get these panels in our roofs in the late 90s and the 2000s, all of which seems fairly inefficient. And we have to tariff or feedback scheme, if you want to talk about maybe some of the inefficiencies within those schemes.
[00:08:46] Yeah. So you’ve got the inefficiencies in the physical market and then the physical system and then you’ve got inefficiencies in the way the markets operate. And feed in tariffs for a good mechanism to stimulate the deployment of renewables. But they’re not that sophisticated like it’s a fixed price. And as batteries come online, the value of electricity is different at different times of the day. And so people despatching into the peak could attract enhanced return. And we’ve just launched in South Australia our virtual power plant, which does that. South Australia is the most volatile market because of the variable generation from wind and solar. But it provides the market opportunity for batteries to exist, to be deployed if the market mechanism is there to underpin them. And what I mean by that is it used to be we’d build the physical energy system like big power stations and transmission lines and bring electricity to people’s homes. And that was the physical system and then they put the market on top. But what the block chain provides is a market mechanism that puts a price signal that will change the physical system. So, for example, if you can get $14.50 a kilowatt hour, you’ll put in a battery and you might put in a 15 kilowatt hour battery rather than just a small battery to self-supply. And so the market mechanism encourages you to stay connected to the grid and monetize the investment and maximise the investment.
[00:10:21] So this creates essentially more of a peer to peer network where you’re maximising what you have as essentially becoming a micro supplier of energy, correct?
[00:10:31] Yes, I call it citizen utilities.
[00:10:35] Yeah, nice. Right now on the ground, like, can I do this? Can I get in and start?
[00:10:42] Yeah. In South Australia anyone could sign up with Powerclub and if they’ve got solar panels they’re able to trade and then if they want to install a battery then they’re able to use that battery to sell electricity to Powerclub in the peak and Powerclub will buy electricity from its customers in the peak instead of buying it in the wholesale market.
[00:11:05] Okay. And so what’s the process look like as a consumer? Like how do I go about facilitating that? And then I suppose in terms of that return, is that in credits or as in dollars, how does that work?
[00:11:16] Yeah. So longer term, the way the system will work is that as your battery dispatches electricity, you will receive a credit in your account that you can use to offset your electricity bill or otherwise credit it into your bank account. And so that’s basically the concept. The block chain got hype, so people were asking questions about it and obviously that’s good that they’re interested, but ultimately the user experience is with electricity. People want to set and forget. And so we have what we call a dual token system. We have Sparks and Power and Sparks are like phone minutes for electricity. So one spark is one cent. So you buy a dollar’s worth of sparks, you get 100 sparks. It doesn’t change. It’s a stable coin or what we call a cryptographic token. And so you just have the web, you log in, you’ve got your balance in your account and you can turn that back into dollars, into your bank account. So the user experience is you can set the platform up to trade how you want to, and then it does the rest automatically.
[00:12:31] And how does that integrate with, like, your existing energy provider?
[00:12:35] Well, you would need to sign up with one of the retailers that is offering this. So far, we’ve announced one, Powerclub and they’re a small retailer, but they actually won retailer of the year because they’re really around empowering their citizens.
[00:13:33] What about other markets? Where has been the best uptake globally?
[00:13:37] So just a snapshot of where we’ve got other projects. We’ve got a one megawatt project in Bangkok trading commercial buildings. And we’ve got another project in Thailand that’s under construction now, which is 12 megawatts in Chiang Mai. In Japan, we’ve got a partnership with Pepco, the largest privately owned utility, and we supported the creation of a virtual power plant in Osaka. And then we’re just about to start doing direct trading with them. Got another partnership in Japan with a smaller entity called Sharing Energy. And they want to be an aggregator and retailer. In Malaysia, we’ve got a partnership with the government to do peer to peer trading between residential and commercial customers because there’s a price difference. So there’s an arbitrage opportunity there. In America, we have a partnership with a Nasdaq listed company. We’ve got six gigawatts of renewables. They’re called Clearway and they are big trader in REC’s. And then we’ve got with American Powernet an energy trading project there and then in Perth, peer to peer trading across the grid trial and some apartments with solar and batteries. And then we’ve announced the project in South Australia. That’s a snapshot.
[00:15:36] What’s your sort of vision of the next five years and not just with Power Ledger, but I suppose renewables in general and sort of what the trajectory is like at the moment?
[00:15:44] Yeah. So like so much money being spent in renewables every year globally, 350 billion dollars every year, and the price of solar’s coming down, the price of batteries are coming down. It’s reaching parity with good prices, but there’s no energy revolution. We’ve got broken systems and it’s manifesting in places like South Australia first. So we really need, like you said, you have feed in tariffs, which are pretty basic. The market’s about as geared up to empower citizens, as Coles is to buy your home grown tomatoes.
[00:16:16] And it’s a good analogy.
[00:16:17] Yeah. And so we’re really looking at how do we manage that transition that’s happening without as much destruction of value for incumbent players and to really underpin an energy system that is stable and low cost and clean.
[00:16:30] Because you keep hearing that when people start talking about the batteries, whatever that they had to deal with here in South Australia. You look at the polarised opinions and some of those things and stability keeps coming back into those conversations and I don’t know that much about it. It seems to keep coming up, especially somewhere like South Australia.
[00:16:51] And in a way, because of the instability that’s occurred in South Australia, that’s why the government’s got the battery subsidy program to put 40000 batteries into the scheme. And so actually that instability is triggering innovation, that’s solving it. So I think you’re going to see ground zero here around what the energy system of tomorrow will look like. So it’s very exciting. I think South Australia is leading the way in so many respects around AI and robotics and energy as well and block chain. So there’s a lot happening.
[00:17:27] I think a lot of people, and not just in South Australia, just in general, are unaware of some of the incredible things that are happening right on their doorstep. And for whatever reason, in Australia, we’re not very good at picking ourselves up. So you don’t hear about it that often unless you’re in the particular niche, you know?
[00:17:45] Yeah. I mean, I think Stephen, your premier has done an amazing job of really representing South Australia and the vision that he has for the state. I think the confidence in the South Australian market is the highest out of all the states and territories in Australia. So I think that it’s starting to do its work.
[00:18:10] Yeah. So you came out of investment banking, was there a shift in terms of like did you have a consciousness shift in terms of sort of renewables or was that what got you interested in the first place?
[00:18:22] Yeah. So the first part of my banking career was mainstream finance, and then I did a leadership training course. And as a part of that I had to do a project and I looked around our office and thought, oh, there’s no recycling. I’m going to introduce recycling to JP Morgan’s London offices, which is about six buildings and nine thousand staff.
[00:19:33] And, you know, it’s just kind of like the definition of unsustainability, I guess. But it kind of got me really interested. And I thought this is an area I want to work in. And then I went on and did a postgraduate diploma in sustainable business and a master’s in sustainability leadership. And yeah, it was kind of like a sequence of events from mainstream finance to sort of environmental risk and financing energy and then doing my PhD and then setting up Power Ledger.
[00:20:54] Why couldn’t I have a grey water system? But then there seems to be quite a lot of difficulty to implement, it seems, based on the actual technology that’s there.
[00:22:00] There’s not an established market for grey water systems and so it’s more expensive.
[00:22:21] So what else around that space do you see is in that same sort of vein, that is uncommon now, but that should become commonplace?
[00:22:30] Well, this morning I was watching an interview between David Letterman and Bill Gates in 1995, and Gates was explaining to Letterman what the Internet was. And it’s really funny to watch because he was saying, it’s this place where you can post information and you could watch like a baseball game. And Letterman goes, yeah, buy you could like watch a baseball game on the radio or the TV. And he said, Yeah, but you could watch it any time you want to. And he was kind of unpacking the features and the benefits of this new world. And he was almost incredulous, he couldn’t believe it. And I think that there’s a bit of that with any sort of new technology innovation where people can’t quite imagine that it will be any different. Like even when we had the floppy disk and it was replaced by the hard disk. Why would you want to put a more expensive disc in there when the floppy disk does a good job? But of course, it stored more data and it was a more stable storage device. And so they ended up putting both of them in there in spite of the cost of duplicate systems.
[00:23:35] And when the motor vehicle was invented, it took 50 years for it to disrupt the horse and cart. And many people thought that it never would. And the same goes with the telephone. There was somebody very senior in the British government at the time that said, oh, telephones will work very well in America, but in the U.K., we’re very happy with our messenger boys. And also wrong technology predictions from very well esteemed technologists getting things completely wrong. And so I just think that we’ve kind of got this sort of disbelief about anything being really any very different to how it is, even if we have progressive aspirations. And I think a lot of the work we’re doing at Power Ledger is really kind of explaining that this is a thing and it could happen and actually it can solve problems depending on what the situation is. It’s not like a universal thing, but you’ve got to bring people along for the journey so they can start to imagine what it would be like. And unless you can imagine it, it’s hard to step into that world.
[00:24:38] Yeah, and I suppose there’s always going to be the forerunners that are out there adopting and jumping on early. And you’re right that some things will work, some things won’t.
[00:25:14] It’s hard to sort of wear away old sort of mindsets and ways of thinking. And it does take time and energy.
[00:25:23] Yeah. I mean, changing behaviour is a really challenging thing. And so what I think technology can do is really automate a lot of these things. So you take out the need to do things and it just happens. And that, I think, is where you have more step changes that can occur.
[00:25:44] But I think in a practical application, energy here in South Australia is extremely expensive. We all see that we have an abundance of solar energy around. So I think that you come to South Australia and it makes a lot of sense. And to think, well, one, if it’s going to be cheaper and then, two, if sustainability is an outcome of that, then great. But if economics is going to drive that sort of problem?
[00:26:06] Well, it used to be that they were almost mutually exclusive of each other. But I now think that they are intimately linked.
[00:26:14] And the battery technology. So that’s obviously come a long way in the last few years. Is that sort of on a pretty steep curve up in terms of efficiency and price?
[00:26:22] Yeah, so the levelized cost of electricity for the batteries is coming down faster than was predicted. And we’ve got like a physical problem in the market, like in South Australia and in Victoria they need the batteries in the system to keep the stability. And subsidies make sense to drive that to solve that particular problem, but within two years, the price of batteries will be competitive with grid pricing and there won’t need to be any subsidies.
[00:26:49] So, yeah, so there are subsidies in South Australia at the moment?
[00:26:52] Yeah. So up to six thousand dollars per household, for pensioners and for non-pensioners up to four and a half thousand dollars per household.
[00:27:01] Ok, you get a lot of those calls from people selling solar and you don’t know if they’re legitimate or not.
[00:27:09] Yeah, well, I mean, you can buy solar and battery systems, but if you buy a system that can work for the virtual power plant, then you can actually optimise that investment by selling electricity into the market. So if you’re interested, I would encourage you to look at that.
[00:27:24] Yes, so Powerclub is the place to look at. If people want to find out more about Power Ledger?
[00:27:34] Go to www.powerledger.io
