Blockchain Can Build the Smart Cities of the Future: Interview with David Martin

Power Ledger’s David Martin tells In The Future that peer-to-peer renewables trading can improve communities by cutting down on both costs and carbon.


Conversation has been edited and condensed for clarity and brevity.

In the smart city of the future, resources—especially energy—will have to be managed with profound more efficiency than today. Some cities have already begun significant pivots towards smarter energy use, and are cutting down on carbon emissions. Some are making a switch to renewable energy sources, like solar panels. Others are also looking at cleaner vehicles that run on electricity. Smart city initiatives worldwide are expected to rack up about $34 billion in spending by 2020.

David Martin - tech mahindra - power ledgerDavid Martin, the co-founder and managing director of Australia-based Power Ledger, spoke to in the In The Future about why we don’t need to rely on traditional source of power generated through coal, natural gas and nuclear.

Power Ledger is a peer-to-peer marketplace for trading renewable energy and it is one of the World’s most successful block chain startups. The platform aims to provide a transparent and automated market trading and clearing mechanism for both residential and commercial businesses to decide whom they sell their extra energy to—and at what price.

Martin believes that trading renewable energy is not only cheaper, but it cuts down on carbon emissions and make communities energy productive by sharing the energy resources. Because people tend to have excess energy from their own solar panels that isn’t consumed, Martin suggests that Power Ledger can help them trade that extra energy between one another on a blockchain-supported exchange. That energy isn’t a currency, Martin says, but instead a utility token—and it can support smarter, cleaner and more efficient communities.

ITF (In The Future): What is the basic idea of peer-to-peer energy trading?

David: We need to shift to a renewable future. In many places, particularly where we are in Perth, Australia, where a fourth of the population installs solar panels, we’re seeing consumers get off the grid. Our argument is don’t get off the grid—stay connected. We’re using some very sophisticated allocation algorithms. In virtually real time, we allow consumers to buy and sell energy from their peers and get rewarded for being energy efficient.

ITF: Why trade energy instead of sticking with the traditional model—which is just buying it?

David: It’s very simple: it’s cheaper. Using distributed renewables is 100% carbon free. Instead of buying your electricity from a power station that’s 400 or 500 kilometers [250 or 300 miles] away and having to cover all that transport, you’re co-located with the energy and share the output of renewable resources within your community. You’re using less of the distribution network. Your costs are lower. It’s not just low carbon, but also low cost.

ITF: Why do people have energy to trade with each other in the first place?

David: They’re usually getting the energy from solar rooftop panels. If you have solar panels on your roof, and you’re not home during the day, most of that energy is being spilled over into the grid. You’re typically consuming less than 50% of the energy absorbed from the panels. And that electricity is going somewhere. If you have demand in the immediate vicinity, then it’s being produced and consumed locally. Under that model, you should be able to buy and sell your energy directly to and from your neighbor. We’re not trying to change the laws of physics. What we’re saying is there’s no reason other than antiquated technology that every kilowatt-hour should come from a power station that’s 400 kilometers away.

ITF: Then how does your business model work—namely, make money?

David: This is where it becomes interesting and innovative. We partner with companies including start-ups like Hygge Energy, an internally incubated within Tech Mahindra. Companies like Hygge are offering a platform based approach to their customers where not only they help in electrical design of distributed generation but also, use artificial intelligence to optimize the local generation with the demand. When artificial intelligence integrates with Powerledger platform, peer to peer become a powerful tool for modern energy productive communities and smart cities. Powerledger have a very small transaction fee, but ultimately, it’s not about making billions of dollars but empowering customers with tools and incentives to become energy productive and contribute to a lower carbon emission economy. Powerledger along with it’s ecosystem of partner companies want to change the face of the energy system. The power token, for trading energy, isn’t a currency—instead it’s a utility token. Other than Hygge Energy, we’ve done a series of trials in New Zealand., we’re working with BCPG in Thailand on a micro grid in Bangkok. We also have agency arrangements in Europe and North America. Our next big step is entering into multiple other jurisdictions and the broadening of our strata products, which are community-scale developments.

ITF: And what’s the goal—how are these developments meant to work?

David: What it allows us to do is to create dynamically connected microgrids and autonomously settling power systems in different locations. Using the blockchain and the power of smart contracts, we can encourage the development of autonomous energy markets through the installation of renewable energy storage, that allows consumers and communities to own their own 100% renewable and low-cost power systems.

ITF: Why does this make a city smarter and bring us into the future?

David: Consumers and generators need incentive. Unless you have a transaction-based platform like Power Ledger to allow a real-time incentive for human behavior, then human behavior is very difficult to control. It’s the element that’s been missing in smart grids for the last decade. Now, with a transaction-based platform like Power Ledger, you can encourage behaviors that the creation of truly smart networks. It’s interesting to see how startups like Hygge are making it interesting by gamification of energy transaction that not only incentivize customers but also empower them with the information that make these incentives significant to these customers.

ITF: What is your advice for executives who want to better use and understand technology?

David: My advice is not to be limited in your thinking by the realities of today’s technological capabilities, and to look at the future and see what consumers are going to be doing in five to 10 years time. Look at what’s going to become mainstream. Understand the implications of change on your future business model, instead of your current business model. It’s easy to sit back and say something is not impacting my business model. You need to get ahead of the curve.

ITF: And what advice would you give other companies that value innovation?

David: My advice for other innovative companies—those looking to create change—is to be persistent. Change isn’t easy, particularly for large companies with investment in legacy assets. Change can be a painful process. But if the change has value, be persistent in the application of your efforts. You see companies try to adopt change and expect to see results almost instantly. They don’t realize that change is a process that occurs over time. So instead of expecting instantaneous results from a change, especially in a slow moving regulatory environment, you’ve got to persist with these things. Thinking that technology isn’t going to touch you because you’re too big to fail is a really big mistake. Change should be embraced almost as an operating protocol because you’ve got more at risk. Consumers have more choice than they’ve ever had.