Cape Town-based Sun Exchange has pioneered the use of blockchain to build solar projects in a developing country, South Africa.
Now, under the aegis of the United Nations Development Programme (UNDP) the company is expanding its field of activity to the tiny landlocked Eastern European country of Moldova in an initiative that could have implications for other developing countries and the development goal of sustainable energy for all by 2030.
The Sun Exchange’s model is conceptually simple – to use the blockchain to crowdfund the purchase of solar panels for commercial and industrial scale projects, which are then leased to the recipients (normally over 20 years) and from which a return is provided to the original investors.
To date, the Sun Exchange has completed five projects at a school and for wildlife parks among other locations. Its sixth and most ambitious, a 473kW installation at a Cape Town plastics manufacturer, is currently undergoing the funding phase. Projects are comprehensively reviewed prior to acceptance and only proceed if the solar cells are fully sold.
Alongside this project activity, which is bitcoin-based, the Sun Exchange is also launching its own token, named SUNEX, in a parallel initiative to create a solar project insurance fund. The intent of the fund is to cover the risk of payment default by the lessee and to enable the installation to be relocated. In addition, the other main intent of the token sale is to enable pre-building of sets of PV rooftop projects which are then crowd re-financed.
Blockchain funded solar for Moldova
Moldova is a country ripe for solar and other renewable power, dependent as it is on imports for three-quarters of its energy needs – the balance primarily from local hydropower – and with energy prices having increased by more than 50% in the last five years.
The initiative initiated by the UNDP is aimed to instal a 1MWp solar array on approximately 15,000m2 of rooftop at the Technical University of Moldova, one of the country’s largest. With the installation, which will be crowdfunded through the Sun Exchange blockchain platform, the university expects to be able to meet almost all its energy needs while also making considerable savings on its bills.
In partnership with Andorra-based ElectriCChain, which monitors solar production and usage on the blockchain, the project ‘currency’ will be SolarCoins at the rate of 1SLR per MWh of solar produced. SolarCoin is claimed as the world’s largest community-based solar reward programme with more than 6m having been awarded globally so far.
From the UNDP’s perspective, the project is very much about developing and promoting alternative financing to support the uptake of clean energy.
“This alternative finance mechanism will help cities, businesses and potentially private homes to meet their basic needs, knocking off several global goals targets at once,” says Dumitru Vasilescu, UNDP programme manager in Moldova. “Ultimately, this could revolutionise the renewable energy market for Eastern Europe and Central Asia.”
To take the project further, UNDP intends to establish a pilot fund to raise national awareness on how to access and promote solar energy as well as to replicate the model elsewhere.
Blockchain for electrification
Such alternative financing will be crucial if the energy development goals (SDG 7) are to be reached. The latest progress report indicates that delivering on the goals would require an additional $8trn relative to current ambitions through 2040.
According to the report, in 2016 electrification stood at 87% globally compared with the baseline 83% in 2010, with around 118m people now receiving access to power each year. However, projected progress up to 2030 under the current trajectory reaches 92%, leaving an 8% deficit towards the 100% target.
The energy efficiency improvement goal also is currently not on track. Besides the additional funding, the report also indicates the need for “immediate and dramatic changes to the global energy system, including a peak in coal demand by 2020, a near-complete decarbonisation of the power sector and rapid electrification of many end uses”.
The UNDP is also starting to investigate the use of blockchain not only in energy but in other development verticals with another project to create a land registry in India.
In a March white paper produced with digital asset software platform Blockchain, they claim blockchains can be a valuable tool for governments, regulators, private companies and civil society to establish trust, tackle corruption and distribute resources.
“We believe that blockchain technology can accelerate and amplify our efforts [to meet the sustainable development goals] because it is relatively quick to develop and relatively easy to adapt to such a wide range of tasks,” they write.
The energy chapter states that a range of technological advances and innovations - from smart meters to ever more efficient renewable energy sources – suggests the preferred approach to electrification is local mini grids and markets.
Underpinned by blockchain technology, these can back up existing suppliers, and also ensure independent, consistent, and affordable energy in underserved areas, the paper says.
“They have the potential to implement smart contracts, incentivise reduced overall consumption and promote clean energy. As such, these decentralised grids can play an important role in creating a scalable, resilient, and efficient solutions worldwide.”
The Sun Exchange is of course not the only blockchain operator focussed on energy delivery in developing countries. Another is North America-based ImpactPPA, which is launching with an initial pipeline of over 200MW of projects. And another is Energy Bazaar, which is focussed on project development, particularly in India.
Large energy companies also are getting involved in supporting achievement of the sustainable development goals. Enel is partnering with the innovation company InnoCentive to identify and crowdsource solutions to 50 technology related challenges that can help the Group deliver operational efficiency and industrial growth while helping to achieve the goals. Blockchain is likely to feature among such solutions.
For SDG 7, Enel has targetted 3m beneficiaries mainly in Africa, Asia and Latin America by 2020.