We sat down with COO and Co-Founder of Energo Labs to find out how the clean energy market is doing in Southeast Asia. Kaikai was kind enough to take some time out of her busy schedule to share her thoughts on the industry, the challenges and also a little bit about blockchain and how it’s helping Energo Labs bring clean energy to everyone.
Read our interview we did with Kaikai a while ago.
Fresh off the opening of their regional hub in Singapore, Energo Labs has wasted no time in expanding their presence across the region. This Chinese blockchain energy company is making waves in the energy market.
However, don’t accuse them of jumping on the blockchain bandwagon as they have grand plans for the region.
Find out more about the industry and how Energo Labs is changing the game.
You’ve mentioned in the previous interview we did with you that a challenge facing this industry is the monopolistic nature of the energy industry. Do you see that as a major challenge in the region as well, and if so, how would you overcome that?
Yes, the challenge exists everywhere. We think education and on-the-ground projects provide the best platforms to overcome such challenges.
Could you give us some examples of these projects you think would help solve these issues? Anything ongoing right now?
A micro-grid project is a typical one. With solar panel or wind turbine and energy storage system installed in the area without grid-connected, the community will be electrified and realize energy self-sufficient without the public grid, that’s what advocated as Decentralized Autonomous Energy (DAE) concept. In the micro-grid, wind, solar and other kinds of distributed renewables are the main energy source and 100% clean，excess energy generation will be stored in ESS and power the community when needed.
A single household can also be designed as a mini micro-grid with a small amount of solar panel and battery to supply the energy. It’s a flexible solution.
We have already launched several micro-grid projects in countries like rural areas of India and one of them will be announced later.
There are millions of people without access to electricity, so how will Energo Labs help them?
By using Energo’s solution, individuals and communities without prior access to electricity could easily access renewable electricity. Our energy trading platform also empowers these communities, allowing them to earn additional income and in turn access better healthcare and education.
How does the platform work exactly? How would a young single mother in the Western Indonesian provinces be able to access electricity through your platform?
Energy consumers, producers, and prosumers are collected via P2P network in the DAE community. Everyone in the P2P network plays as a node. When one node, no matter the node is an energy producer or consumer, launches a requirement for power transaction (the transaction might be power selling or purchasing), the platform will broadcast the transaction in the system to make every possible node informed and automatically match the seller and buyer based on the trading strategy previously set by counterparties. Once the deal between the seller and buyer is confirmed by over half nodes or designated nodes, the transaction information will be packaged into the block and stored in all nodes. Simultaneously, the amount of power purchased will be accounted in the buyer’s smart meter and corresponding quantity power will be subtracted in the seller’s smart meter. And, the seller will be paid by tokens as well.
Actually, the whole process is automated based on the application of smart contract. The user only needs to set the trading strategy in the APP, like the selling price, purchasing price, quantity, etc., and the transaction will be executed once the condition is triggered.
So as for a youth mother, only thing need to do is downloading the app and registering as users, installing a smart meter in the house and top up the account with tokens. By setting the energy purchasing quantity, price and time, the platform will automatically execute according to the settings.
Southeast Asia relies heavily on fossil fuels, so consumer education, government infrastructure, as well as heavy competition awaits you in this region. Why did you choose to enter the market? Where’s the opportunity here?
Broadly speaking, the Southeast Asian market is mature for ground-up innovation and decentralized technologies. Although the region is saddled with deep-seated problems, we believe this presents unique opportunities. The level of electricity access varies significantly across countries, and many rural communities remain un-electrified; currently, 65 million people do not have access to electricity in Southeast Asia.
I would like to highlight two encouraging trends. First, the cost of renewable energy is decreasing. Second, purchasing power in Southeast Asia is increasing. What this implies is that energy will become more affordable in the long run. There has already been considerable momentum, with energy consumption in Southeast Asia projected to increase 4% annually. Given the upward trend in energy demand, companies which enter the market now would benefit from a first mover advantage.
Energo Labs is helping the region overcome technology barriers through decentralization. It is evident that the governments in Southeast Asia are recognizing the need for alternative instruments to modernize the renewable energy market. However, barriers to innovation differ across the country, ranging from financial barriers, capacity barriers to political barriers. We have recognized that Energo is suited to help the region overcome technological barriers.
Given the need to close the market gap, ground-up innovation in the Southeast Asian energy market is timely. According to IEA, more than 65% of the projected increase in Southeast Asia’s electricity demand will be from residential and services sectors due to a booming middle class. Given this trend, we foresee that electrification efforts will intensify in the coming years, and this region-wide push will require concrete efforts from both the public and private sector, which is why ground-up innovation in the energy market is so critical.
Energo is entering the market because our software is not only compatible with intelligent energy networks for urban centres and smart cities, but our solutions also empower local, rural communities in a decentralized way. Our blockchain solutions encourage sustainable, peer-to-peer (P2P) energy trading, leveraging locally operated and maintained infrastructure. I would say that we’re unique because our solutions have proven to be rapidly customizable to meet energy demands in both rural and urban markets of Southeast Asia.
In a recent article on eco-business, it was estimated that over half of the renewable energy projects in the region were unbankable. Do you believe most companies and organisations in this industry are going about it the wrong way in Southeast Asia?
I would first comment that globally, there are significant barriers when it comes to renewable energy financing. What’s alarming in Southeast Asia is the “chicken and egg” problem that this may create. An increasing number of projects are grabbing international headlines because of their unbankability, which in turn leads to other ripple effects, which shake investors’ confidence and negatively affect market sentiments in the region. This is the perpetual vicious cycle that the region is entrapped in.
Secondly, miscalculations of the risk factors, inadequate checks and balances, and weak regulatory structures are the main contributing factors to the unbankability problem. Investors would prioritize companies who have conducted thorough due diligence, prepared the right documentation and deal structure when they consider extending financing to renewable energy projects. Given the Southeast Asian landscape, what’s most important is the inclusion of detailed timelines, checkpoints, and specific project milestones — these should be explicitly outlined and would help boost investors’ confidence in a market where project delays and regulatory changes are rather common. Ultimately, it is about laying a strong groundwork where project milestones can be tangibly measured, so that progress can be made accountable. Companies and organizations that are transparent and meticulous about such reporting standards would fare better in Southeast Asia.
Beyond project financing, it’s also important to shift away from a one-size-fits-all framework when developing renewable energy projects in Southeast Asia. It’s not about replicating use cases from global best practices and trying to force fit that to the Southeast Asian context. When entering Southeast Asia, a flexible yet pragmatic go-to-market entry is necessary. When doing business in Southeast Asia, one would notice that certain taken-for-granted norms from the Western world have been re-written. I believe that this is where Chinese companies may have a slight advantage – we understand what it is like to navigate regulatory complexities and to do business in a highly dynamic environment where clearly defined business relationships, or guanxi is a defining principle in any project.
So regulation hasn’t really caught up to blockchain in the energy market as yet. What regulations do you think will be introduced in the next few years and will it impact the growth of the industry?
Editor’s note: Kaikai shared these in point form, so we decided to keep it in that form.
- Making it easier to allow prosumers to trade excess energy locally. Either by loosening the regulation for small systems (e.g. households) or making the licensing or permitting and billing process easier and more open.
- Flexibility with (smart) metering. Allowing us to connect to smart meter to read the data and use it. Make it easier to understand how this affects the role of the meter company and our obligations for data reporting to different market entities.
- Setting up sandboxes to implement cryptocurrencies and tokenization of energy.
- Clarity on requirements for consumer/data protection and who is responsible for this in a decentralized system.
What do you predict will be a major milestone or pivotal moment in the renewable energy market in Southeast in 2018?
A major trend that’s emerging and is poised to be a major milestone is the decentralization of energy markets. With decentralized energy solutions, electricity access in rural communities of Southeast Asia can be significantly improved. With decentralization, we no longer have to wait for governments to be the first movers; businesses can start to stimulate sustainable and ground-up change.
Southeast Asia is home to vast renewable energy resources, but they are not fully utilized yet. With decentralized solutions, we can move closer to a more optimal supply-demand match to bring electricity to all corners of Southeast Asia. The decentralized technology solution would have to be scalable to connect a large number of households to stable electricity supply, and cost-effective such that adoption by both energy producers and consumers takes off. We foresee that in 2018, this could materialize to be a pivotal moment that would redefine the renewable energy market.
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