Applied to the energy market

The problem of the global energy market

Energy market overview

Energy is a core element in all life activities, especially in the modern industrial era. According to data from Statistaglobal energy consumption continues to increase. Environmentally harmful traditional energy sources such as nuclear power, coal and oil are gradually losing market share, while renewable energy such as wind and solar are increasingly popular.

Problems of the current energy market

Although renewable energies are widely used, they still have stability problems due to their dependence on time and natural conditions. For example, solar energy works at its maximum during the day but is useless at night; Wind energy is also unstable. This requires complex infrastructure and high costs to stabilize supply, which comes with many risks.

Below is an example of California’s grid stability problem. This city must quickly provide 20 GW of energy every day when it gets dark.

In fact, the world produces more energy than it consumes, and even this gap is increasing. This can be seen when we consider real-life examples of Vietnam and many countries around the world. From having no electricity and severe electricity shortages, most people are now able to use electricity stably, and power outages are becoming less and less frequent.

However, this is not true everywhere. Some countries still have to import energy and bear the risk when events occur. A typical example is the conflict between Europe and Russia in the past, causing some European countries to suffer from supply shortages and high energy prices.

In addition, some countries, for many different reasons such as: focusing on development in other fields, not being able to access high costs and technical difficulties…, so the growth in the amount of energy generated gradually cannot meet consumer demand. For example, US energy generation has increased very little in 12 years even though many new energy sources are being developed.

Therefore, the problem of energy and how to exploit it is still an existing problem and causes many headaches.

Solution to the energy problem

There are two main directions to solve the energy problem:

• Expand energy infrastructure: Build more power grids, hydroelectric plants, wind farms…
• Use energy efficiently: Encourage energy saving such as turning off unnecessary devices and avoiding peak hours.

Depending on the decisions of each country and city, method 1 is being implemented with different progress. As for method 2, in addition to communication activities such as earth hour or environmental protection messages, there are places that encourage efficient energy use behavior with financial rewards.

For example, the city of California rewards people who apply Virtual Power Plants (VPPs) technology from companies such as OhmConnect, SunRun, and Tesla. Basically, users will plug additional devices into the power source to adjust energy consumption. When the power source is overloaded, VPPs will temporarily stop using energy or take a portion of the energy from the installation household to put back into the grid. Rewards will be paid based on the level of contribution.

Currently, the market focusing on energy efficiency is still very new. The largest VPP operator in the US, OhmConnect is just gaining traction 300,000 households Register to use the service. The above number is only 0.25% of 120 million households in the US. This shows the potential of the market but also shows the difficulty of attracting users to apply the above solution.

Crypto for energy markets

The energy market requires a broad level of adoption to be effective. For example, a city that can regulate 100KW of electricity will not bring much impact, but if this number is 10,000KW, the efficiency will increase significantly. This will help attract the attention of regulators so they can pay rewards and encourage more people to participate. The stronger the network effect, the greater the efficiency.

To promote the development of the energy market, companies and projects can apply blockchain and crypto. Blockchain helps manage and reward automatically, publicly and transparently, while crypto encourages users to participate thanks to incentives from tokens.

Looking at projects like Helium or Render, the use of token rewards has shown the ability to quickly attract users, promote network effects and help the market reach the necessary threshold in a short time.

Read more: Does incorporating crypto help Helium’s network service reach success?

Applying a token incentive mechanism, the Decentralized Energy group of projects targets the energy market, where traditional companies have not yet thrived.

Users who apply the Decentralized Energy solution theoretically not only receive tokens but also reduce their electricity bills, creating real demand in everyday life.

Overview of Decentralized Energy branch

Maybe it Decentralized Energy is a small branch of DePIN with many deployable product models. Although the number of current projects is still small, this field is developing with many new directions.

Find out: What is DePIN? Overview of the DePIN ecosystem.

Examples include Daylight, Scrful, StarPower, Glow and dClimate. The general way they work is to integrate devices with energy sources such as solar panels, batteries, electrical outlets… thereby helping users have data of connected devices.

However, projects like StarPower, Daylight and Scrful allow users to control devices remotely or tweak parameters to optimize energy consumption. DClimate focuses on collecting weather data from the surrounding environment, creating a data warehouse for tasks such as weather forecasting and geographical surveys. Glow helps users grow carbon credits and receive Impact Points.

Most of these projects have only been active for a short time and have had modest results. However, there are two outstanding projects: Scrful funded by the Swedish Energy Agency and StarPower with more than 13,000 devices connected after two months of mainnet.

Analysis of Star Power project

With Star Power, users who install and use project equipment will receive token rewards. Star Power has a total token supply of 1 billion STAR. Current users will receive tSTAR representative tokens when using them and they will be exchanged with STAR at a 1:1 ratio when the token launches.

Data shows that when the number of active devices reaches more than 6,600, users can receive an average of more than 169 tSTAR if using the device at full capacity. As the number of devices increases, the rewards will gradually decrease. Currently, with more than 13,500 active devices, users can receive about 70 tSTAR each week.

Star Plug device price is 109 USD and assuming STAR’s FDV at launch is 500 million USD, early installed users can break even in a little more than a week, while existing users need about 3 weeks to break even.

Note: The above estimate does not include shipping fees or accompanying equipment for Star Plug to operate at full capacity and FDV may change depending on market conditions.

The application of token rewards has been helping Decentralized Energy grow rapidly in the number of installed devices. However, they also have flaws in the model that are being exploited.

For example, in the case of Star Power, to receive maximum rewards requires the device to operate continuously. From there it makes users Use auxiliary equipment to maximize profits instead of using it with the need to save electricity. The maximum use of electrical equipment not only does not help reduce electricity consumption but also increases the amount of electricity used daily.

With high speculative cash flows, we will likely see hot growth continue to a certain level and quickly decline when the rewards are no longer attractive enough. However, if the device is truly effective in saving electricity and has additional token rewards, although not many, we can still expect users to continue to use the device in a more sustainable way.

It can be seen that Decetralized Energy has had initial results, but there is still a long way to go from developing the project, attracting users and creating real value in a sustainable way.

What to expect from Decentralized Energy branch?

Currently, the main incentive for the installation of devices under the Decentralized Energy branch is token rewards. Projects that have not announced rewards often do not attract cash flow.

However, unlike regular Depin projects, some devices under the Decentralized Energy branch have clear practical impacts, such as reducing electricity bills. Similar devices such as smart electric drives and smart batteries have been commonly used in the traditional market. The addition of token rewards, however small, could make Decentralized Energy devices more attractive to users.

Decentralized Energy projects have a long way to go and many challenges before being widely adopted and receiving approval from the government. But if done well, they still have the potential to be tested, especially in regions looking for optimal solutions in energy use.

In addition to reducing electricity bills, the trend of selling electricity from households to the state is also growing strongly. When installing energy equipment, households can consider using additional Decentralized Energy equipment if the economic benefits and operational efficiency are attractive enough.

Decentralized Energy is still a new field, but has the potential to bring practical benefits to users and the energy market in the future. Developing quality products at competitive costs compared to traditional equipment will be a key factor in exploiting the advantages of crypto, opening up sustainable development opportunities for Decentralized Energy.