A renewable energy project developer’s decision to adopt a cryptocoin last month may have been driven more by business sense than simple blockchain mania.
Figures show ACWA Power could have increased the profitability of its Bokpoort concentrating solar power plant by at least an extra percent the day after it announced it was adopting SolarCoin, a blockchain-based rewards program for renewable energy production.
Based on a published bid price of R 2.51 per kilowatt-hour, the Bokpoort project, in South Africa, was earning the equivalent of around USD $209 per megawatt-hour of production on Jan. 14.
The same day, SolarCoin, a cryptocurrency issued for every megawatt-hour produced by participating solar plants, was trading at an all-time high against the dollar.
As SolarCoin briefly touched $2.64 early on that Sunday, ACWA Power was effectively getting more than 1.2 percent in extra revenue per megawatt-hour from its production at Bokpoort. Admittedly, the boon was short-lived.
Illustrating the jittery nature of most cryptocurrency markets, by the end of the day SolarCoin had dropped more than 15 percent in value against the dollar. It is currently hovering at around 50 cents.
The figures show how adopting SolarCoin could be an attractive move for a renewable energy plant developer -- particularly one like ACWA, which has gained a reputation for slashing costs in order to win bids.
This month, for example, ACWA claimed to have set a new world record after winning a 300-megawatt PV project in Saudi Arabia with a bid of just $23.42 per megawatt-hour.
(The record claim is open to dispute: While an all-time-low bid of $17.86 per megawatt-hour from Masdar was rejected in Saudi Arabia, Neoen last year won an auction in Mexico with a rate that was believed to be $19.18 per megawatt-hour.)
With a PPA price of around $20 per megawatt-hour, earning SolarCoin could boost plant profitability by more than 2 percent even when the cryptocurrency is worth only 50 cents per coin.
And as SolarCoin adoption grows, the cryptocurrency is expected to rise in value to somewhere within the $1.70 to $2.50 range, said François Sonnet, co-founder of ElectriCChain, a SolarCoin-affiliated blockchain technology developer.
At this level, SolarCoin revenues might edge up to around 10 percent of the value of a PPA and “could increase substantially the profitability of the solar plant,” he said.
Solar power producers shouldn't bank on this extra revenue, given the volatility of SolarCoin and other cryptocurrencies. However, adopting SolarCoin as a potential added income stream does not present much of a downside, other than some involvement from a company’s legal, financial and IT departments.
“It’s a fairly long process to explain what SolarCoin is, but ultimately [developers] don’t have a higher risk exposure,” Sonnet said.
Announcing the adoption of SolarCoin last month, ACWA said its 50-megawatt Bokpoort project and a similar-sized PV plant in Bulgaria, the biggest in the country, were already generating SolarCoins.
“Other projects...will in time also benefit from the SolarCoin incentive program,” said the company.
“As the price of solar coins appreciate, through more users agreeing to accept SolarCoin for value representation and transactions, claiming SolarCoins can become an additional and relevant revenue stream for solar power producers,” ACWA added.
With a dozen operational utility-scale renewable power plants worldwide, ACWA is by far the biggest company to have adopted SolarCoin since the cryptocurrency was launched in 2014.
Most of the 3.6 million SolarCoins that have been issued so far have gone to distributed solar plant owners. In total, SolarCoin foresees issuing 97.5 billion SolarCoins over the next 40 years, enough to reward 97,500 terawatt-hours of solar energy generation.
In contrast to blockchain’s biggest commercial success, Bitcoin, SolarCoin uses a proof-of-stake-time system for circulation, instead of Bitcoin’s highly energy intensive proof-of-work algorithm. So instead of earning money by wasting energy, SolarCoin users get rewarded for producing it.
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