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What is Power Ledger? The Consumer Energy Trading Network Explained

Power Ledger’s network allows communities to sell excess energy privately from renewable sources, incentivising sustainable practises while earning decent income.

Posted December 24, 2021

What is Power Ledger (POWR)
What is Power Ledger (POWR)

Energy used to travel one way from large power stations all the way to homes and businesses. As time goes by, retail battery and renewable private energy generators, such as solar panels and wind turbines, became increasingly cheaper to install.

Power Ledger, an energy trading company based in Perth, saw an opportunity to enable energy producers to directly and conveniently sell excess energy to consumers.

Using blockchain technology, energy can be distributed in a fair and transparent way — within and between communities.

Start from the basics. What is Blockchain Technology? A Simple Guide.

What is the Power Ledger Token (POWR)?

Power Ledger’s network requires two ERC-20 tokens to operate. One is called Sparkz, which tokenises units of energy (in kWh). The other is called POWR, the Power Ledger Token, which is used to exchange monetary value around the network.

POWR is used by clients to gain access to the network. Through exchanges, fiat currency can be swapped with POWR, which then enables clients to swap for Sparkz at any time, or at a favourable rate when demand for energy is low. 

The two tokens serve to separate the price of the POWR token from the price of energy supply in a specific market or community.

While the price of POWR fluctuates due to market trading activities, the price of Sparkz fluctuates due to the changing supply of energy from renewable sources.

This also gives clients the assurance that they have access to the same amount of energy, even if the price of POWR were to crash in the financial market. 

More about ERC-20 tokens. What are ERC20 tokens?

What problem is Power Ledger trying to solve?

The advancement of battery technology and small energy generators makes it cheaper for retail consumers to install them. This is an incredible progress towards sustainability and consumers taking part of the responsibility to supply their own energy.

However, there is one issue. Renewable energy sources do not have consistent outputs.

Excess energy can be stored in batteries, but there even batteries have limited capacity. Some communities allow homeowners to sell excess energy back to the national power grid, but at an undermining rate.

Dave Martin, the managing director of Power Ledger, addressed this issue in an interview with A Greener Life.

“Since the system was modeled for only central players to feed the energy supply, consumers producing energy don’t get fair value for their investment.”

As a result, a couple of other problems emerged. Firstly, this disinsentivises homeowners to invest in rooftop solar panels and batteries, as they are unable to monetise excess energy.

Secondly, retail energy distributors can’t find other ways to gain additional power during peak hours, raising the energy bill as energy gets expensive on average.

The problem solved by Power Ledger
The grid becomes an inefficient intermediary in this system. Source: Power Ledger explainer video

To bypass the conventional system of power distribution, retailers and homeowners can collaborate by installing an infrastructure that allows for direct peer-to-peer power distribution. Homeowners can switch roles between becoming power consumers and power prosumers.

During peak hours, prosumers that install batteries can support retailers, and earn a better deal per kilowatt hours. Retailers can also tap into an abundant supply of energy, which was stored by prosumers during hours of low demand.

The solution offered by Power Ledger
Bypassing the grid and trading directly with a retailer. Source: Power Ledger explainer video

This model incentivises communities toward a more sustainable practice, such as installing rooftop solar panels and storing excess energy. Not only that, excess energy can be distributed to people without access to sufficient amounts of power.  

“As well as giving consumers a better deal on their investment and keeping value in the grid, Power Ledger has the potential to help with the vast amount of humanity who still don’t have any access to electricity or energy,” said David Martin.

This is especially true in places that were struck by a natural disaster, which cut access to power from central power stations.

What is a virtual power plant?

Virtual power plants are a new concept that is already proven in real life, especially through Power Ledger’s many projects. It’s the idea that instead of only relying on power companies to be the sole producer of energy, homeowners can proactively produce and share their supply of energy.

With solar panels and batteries, power consumers can collectively become a power plant themselves. This is akin to having a community-oriented vegetable supply chain, where food is homegrown and sold within and between communities.

solar power panels
Solar power ushers us into a new era of decentralised power distribution. Photo by Anders J on Unsplash. 

Of course, we don’t refer to this model as “virtual farm”, since that is what traditional food production looks like, before industrial farms take over.

Therefore, the virtual power plant movement is the reverse — moving from industrial energy production to community-oriented energy sharing.

Related: How crypto mining has changed since China’s ban in 2021

Why blockchain technology is needed in Power Ledger

Critics argue that the same system and infrastructure can be set up without using blockchain technology. However, for Power Ledger, blockchain isn’t used simply to boost the company’s valuation.

Blockchain technology allows for 1) true ownership of energy, 2) decentralised and private trading agreements, 3) a  verifiable source of truth, and 4) avoids counterparty settlement risk.

We can use an example to highlight the advantages of using blockchain technology. In this consumer energy trading network, there are players with certain goals:

  • Prosumers who have installed solar panels and batteries, looking to earn some return on their investment.
  • Retailers who buy and sell energy from prosumers to consumers, as well as from the grid to consumers.
  • Consumer-only homeowners, looking to diversify their energy sources.
  • National power grid, which backs up retailers in case of a spike in energy demand.

Sparkz is actually a bond that represents a unit of energy, and it can be redeemed into fiat currency, POWR, or energy. Blockchain technology can enforce the ownership and transactions so that token owners don’t have to rely on financial intermediaries.

Energy trading can get complicated under the hood. Ethereum smart contracts, for example, can rapidly execute trades between fiat currency, POWR, and Sparkz between the different parties, but in a privacy-respecting way.

All of this can be done without worrying about counterparty risk. This is because smart contracts follow the law of code, and make no exception. Transactions can be made frictionless and fluid.

Learn more: What are Smart Contracts? – A Complete Beginner’s Guide

The future and takeaways

Now that you’ve had an overview of what Power Ledger (POWR) is, what does the future look like for it?

Power Ledger now exists around the world, partnering up with clients like Tata Power DDL (India), EkWateur (France), American PowerNet (US), Clearway Energy Group (US), KEPCO (Japan), SEDA (Malaysia), TDED (Thailand) and more. You can see a complete list of clients on their official website.

In July 2021, Power Ledger’s network began to switch from using Ethereum, and using Solana instead. Solana is a blockchain network that utilises the Proof of History consensus protocol, which uses significantly less energy compared with Ethereum’s Proof of Work protocol.

Although Ethereum is moving to a more sustainable Proof of Stake protocol (which reduces its power consumption by more than 95%), this transition will take some time. Meanwhile, Solana has been built for sustainability and scalability from the ground up.

Climate change has been regarded by many developed nations as an emergency. Even in emerging economies, governments are taking steps to become more eco-friendly each year. 

This will increase demand in battery and renewable power generators. This will also likely increase the demand for POWR tokens if Power Ledger successfully dominates the decentralised energy niche in the future.

Learn more about Solana. What is Solana (SOL)?

Are you confident about POWR tokens?

Check out today’s live POWR rates with the fiat currency of your choosing at Easy Crypto.

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Last updated January 17, 2022

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