An innovative company has been launched that could disrupt conventional financing, development and operation of wind projects globally and — its founders claim — bring renewable energy to the masses.
Datawatt Energy will use blockchain to finance the building of wind and other renewables projects, said co-founder David Halligan, former CEO of Goldwind Americas. Datawatt will also track a project’s construction milestones, operating performance and social and sustainability benefits by using blockchain technology. Projects will not even need power purchase agreements (PPAs), as the power will be sold directly to the grid.
"Wind will be a major portion of our business," said Halligan. "We plan to undertake wind projects globally and hope we are able to unlock wind projects in markets that otherwise would not get done due to financing or offtake limitations." Initially, Datawatt would own the projects.
The company was launched at the American Wind Energy Association’s Windpower 2018 event in Chicago in May by Halligan and co-founder Evelyn Lim, a former managing director at TerraForm Power and former project finance partner at law firm Chadbourne & Parke.
Halligan said ordinary members of the public with a Datawatt app on their mobile phones could choose to invest in certain wind or other renewables projects anywhere in the world by buying a token representing a certain number of kilowatt-hours. A person in Hong Kong could buy a share of a project in Texas or Colombia, for example. "Individuals could help climate change," noted Lim. Investors might also include major corporates such as Amazon or Google or institutional investors.
Datawatt said using blockchain for utility-scale renewable-energy projects should lead to more clean-energy projects being built. Because it would lower costs, it could also lead to more medium-sized wind projects because the overheads would be lower, suggested Evan Caron, managing director of Swytch, which offers a blockchain-based platform to track, verify and reward consumers and businesses that produce renewable energy.
Blockchain underlies crypto-currencies such as Bitcoin. Blockchain financing of assets projects is accurate, encrypted and fast, say its proponents, cutting out the middle people and much of the financial and legal fees. They claim blockchain will democratise the market, circumventing centralised utilities as well. A wind project would no longer be an illiquid asset because crypto-currencies are so tradeable, according to Caron.
A Datawatt token might cost as little as $1,000, based on a discount to the expected future power price for the specific merchant grid. Once the project is built, Datawatt would sell the power to the wholesale market, returning some of the money to the token holder probably via crypto-currency.
Cutting costs
Halligan said conventional financing and PPA fees for a 100MW wind project can be as high as $10 million, not including interest and other fees incurred during project operation. Swytch’s Caron estimated that blockchain "tokenisation" of an electricity asset could save 20% of the financing and development cost.
However, Michael Wilshire, head of strategy at Bloomberg New Energy Finance, cautioned that blockchain is barely regulated. "The regulators are still trying to catch up," he said. According to Datawatt’s model, the risk of merchant pricing of electricity would also be borne by the original investor, he said.
Halligan agreed and added: "Some token holders, such as traders, may want that volatility. We are still evaluating how tokens will be priced and settled, meaning we may average price volatility across all tokens, so no single token is absorbing market pricing anomalies, such as negative pricing."
Datawatt’s model appears to be unique. Dozens of small firms are using blockchain globally for distributed green power, such as for local grids whereby an individual can buy solar power from a neighbour’s rooftop solar panels. Blockchain has also taken off for financing community wind projects in countries such as Germany.
