Blockchain and Sunshine: Generating prosperity and slowing urbanisation
Interview with Sebastian Groh (Solshare)
Sunshine + Blockchain Technology = De-urbanization and Financial inclusion
That's the equation that soldier working to in Bangladesh, a country where $3 million worth of electricity is wasted every day from people generating it in their own homes, but not being able to share it.
Outside of those very homes, there are people who have to pay massively over the odds to do simple things like charge their mobile phones – and for whom electricity is still a cost and not an income source.
By linking together these homes and creating communities or micro-grids of electricity, Solshare aims to be able to share that electricity and to turn anyone who wants to into a Solar Entrepreneur: generating an income, creating financial inclusion and giving people more reasons to stay in their villages and towns, without being one of the 10,000 people that arrives into Dhaka every day.
It's a pleasure to have Sebastian here from Solshare to explain how and to be able to talk through the journey with him.
Sebastian, it’s a pleasure to have you on the #Goodstart podcast and thank you very much for making the time today.
Thanks a lot for having me.
Can we start off with the problem is that Solshare is here to fix?
Why Solshare? Yes.
The problem that we’re here to solve is where people are paying for the same kind of services that better off people enjoy every day: but where they have to pay a much higher price and often get less value or good service.
I think that the roots and DNA of Solshare will hopefully always stay the same: which is to try to figure out how to lift people out of energy-poverty or to free them from the ‘energy-poverty penalty’ so to speak. What I mean by that is that there are millions of systems, these systems produce a lot of excess power, and the value of this excess power is enormous.
To put some numbers around this, in Bangladesh there are about 600,000 kilowatt-hours of excess power which are dumped or lost every day on average. And the value of those is about $5 per kilowatt-hour. If you multiply those two, you have around $3 million-worth of electricity which is lying in the street and which nobody picks up.
Couple this with staggering numbers of people suffering from energy poverty.
Those are the two fundamental premises of Solshare.
People already throw cables over the wall if one neighbour has access to power and the other one doesn’t (be it through a solar system or from a diesel generator). What you do is throw a cable over, you note down how long the person has their light on in the evening and then the next day you say “Hey, from 8 to 10 your lights were on, so give me 10 cents”. That's a very rudimentary way of sharing, but it's effective and it works.
You can of course design this in a more seamless way: and that's what Solshare is all about.
So how to tap into these $3 million and make it available to those who need it.
The solution we came up with is a trading platform where people can exchange electricity seamlessly, peer to peer. As time goes on, it’s becoming clear that this kind of an approach, this energy arbitration exchange is likely to become the predominant energy utility model: not only in Bangladesh but globally.
So we're talking about both using the $3 million-worth of excess electricity and, on the other hand, am I right that there are around 17 million households who are off the grid at the moment and who have to pay a premium for access to electricity (costing them much more than the people who are on the grid)?
The latest data is 40% are off-grid according to the government as of last month. That means 93% have access to electricity – and I think that's very much at the higher end of what is real.
Where we are operating most now is in the river-island areas, where it is extremely unlikely that the national grid is reaching people at all: so the 40% off grid is likely to rise significantly above that.
If you don't have access to electricity, but you have a phone - which is quite often the case in many countries and also in Bangladesh - what do you do? You probably bring it to a neighbor and that neighbor will charge you, depending where you are in the country, between 4 to 5 taka (5 US cents). Now if you calculate how much it costs to fully charge a simple phone (and we're not talking a smartphone) you come to about US$10 a kilowatt-hour, which is obviously an insane amount of money.
So you've got the people who are off-grid and having to pay astronomical rates to be able to even charge their phones. At the same time you've got $3 million worth of electricity being kind of thrown into the streets every day.
And this is all worse in the river island areas and the rural areas.
Presumably this is one of the reasons why there is so much urbanization going on as a secondary consequence of life? People are being pushed or forced to move into electrified areas to be able to actually run a more normal or cost-effective life.
Yes. Dhaka (the capital of Bangladesh) has an influx of people of 10,000 every day. The city is already bursting. I mean you have some of the highest levels of pollution in the world. You have an average speed in a car off 5-6 km/h. The city cannot take more people.
So part of our goal often is also is to make life in the village areas equal to or even better than the cities from an electricity and Internet access perspective - in order to prevent this mass movement into the cities.
So by providing an energy source to people in rural and in off-grid areas, you're giving them first of all electricity; second of all, you're reducing their costs; and third of all, you're giving them an income; and fourth, you're giving them a reason not to go to Dhaka?
Yes – and we would like to go even further. The startup sector here in Bangladesh is getting stronger and stronger and one proposition which I would like to make is to say “Okay, if you're in a village, I will give you electricity access, I’ll give you internet access and I’ll give you access to doctors in the US. So then you can have a live chat or phone call over Skype with a doctor in the US who can treat you in real time. And you can only get if you are here in the village.” If you’re in Dhaka you can’t get this kind of doctor’s care. And the moment you have this kind of access, a whole new world opens up.
We’re also talking about giving people an income here: not only putting money in their pockets, but presumably also starting to bring them into the financial world in terms of giving them access to other financial services (such as credit) and setting them up to be able to run small businesses and so on. Just simply off the fact that they start with an individual income?
That's right. I mean $3 million, $6 million or whatever that number may be is of course just a starting point of how much energy is being wasted today and which can be tapped into through this social platform.
But it's more than that because the moment you have a trading platform and it makes sense financially for you to acquire solar-storage or solar-generation equipment - not only for your own consumption, but to sell – then you have entrepreneurship.
We call them Smart Solar Entrepreneurs.
That means that as the platform grows, more money is brought into the village because solar is not only being traded among the villagers. We even have schemes now where electric vehicles like rickshaws (and there are 1.5 million of them in Bangladesh) can drive through our villages to recharge and whilst they are in the village, they have a cup of tea - which means people can also make money from outside. So it is really a model where we are helping to build the local community.
So step 1 is just to give somebody a light bulb. Step two is then make them an entrepreneur: in terms of not only being able to take care of their own individual requirements, but to be able to solar energy turn it into proper income source?
When we're talking about putting electricity into people's hands in river islands, what does that look like in practical terms?
There are 5 million solar-home systems which have been installed across Bangladesh: all of which have a battery, a panel and usually a charge controller - and a couple of appliances.
The Solbox is nothing other than a meter which is bi-directional (ie it can run up and down). But what is special about a Solbox is that it doesn't show you kilowatt hours – it shows you the local currency instead. So you may start the day with a 100 taka and, over the day, as you switch things on or off; or as you buy power or sell power . you are partly a consumer and partly a producer of electricity: a kind of hybrid. That day, you may end up with 80 taka or you may end up with 120 taka depending on how energy efficient you are, what appliances you use and how much power you produce.
You don’t know who you're trading with: which is very important in villages because it may be a small Hindu Community; or a Muslim community; or you might simply not like your neighbor: and we don't want to have any issues like that.
From a revenue perspective, we apply a bid/ask spread as our Solshare charge. So if I sell you a kilowatt-hour for 50 taka, my meter will go from 50 to 100 taka. Meanwhile, you will have probably paid out 60 taka from your meter: of which 50 goes to you and 10 goes to Solshare.
What is important is all this is synced to the people’s mobile money wallets, which means they have this money available to them in real time. So if I go to the market at 3pm, it's very likely that I'm selling electricity because the sun is at its peak and my battery is likely to be full. And that means I can buy my rice in a local market with the money I make from selling the power – paying with my mobile wallet and funded by the money that my Solshare panel made me.
So essentially Solshare exists within the, the mobile money ecosystem? You're an input in terms of electricity but the mobile money is the key facilitator that takes this from an isolated idea into a real-world income source?
That's right. And it’s at that point when you're connected to the mobile wallet, that you can access other financial services, financial education and so on. As you build up a track record of having paid off the Solar home systems in the first place, you generate a financial footprint in terms your trading behavior. And this data can help you to become eligible for any other kind of financial transactions.
So having a transaction-record based on your Solshare relationship can provide the basis for a credit history, which can then go on to provide the basis for all other services from banking and another financial services.
You talk about using a local currency as the underlying currency for Solshare but you could equally have chosen to use a cryptocurrency. There are obviously very good reasons why you chose not to run using elements of the blockchain, not just crypto. Can we just talk through that for a second?
Lets start with why not crypto: and there’s a very simple answer to that. I really love my freedom and there is a 7-year jail term penalty for using crypto in Bangladesh. It's not very appealing.
Wow. That would be a significant obstacle….
Yeah. So crypto is how out of the equation for the time being, even though we are now mimicking crypto in our first pilot project.
Everything that we're doing on the Solboxes could be called a distributed lecture, but I usually don't say that because then people get all carried away with the term ‘blockchain for good’ and then everything gets a little crazy.
But we do not use any of the consensus mechanisms of the blockchain for the simple reason that our Solboxes today do not have to computational power to do that. Even if I were to use the lightest nodes that are available in the market today we wouldn’t have the power to run the computations that DLT needs.
Equally, the energy consumption goes extremely against all our efforts when it comes to energy efficiency. And who pays for that? I mean, we can't make people pay for that, so we would need to pay for the power that we would need in each node. But we don't have our own generation assets in villages: as we don't want to have any assets.
You also don't have a trust issue. We have very good business partners who have a track record of over 20 years. So there wasn't really a case or a problem we had to solve using blockchain.
Which I think is fascinating that you've had a very informed look at blockchain technology and its various aspects (in terms of trust, in terms of the crypto elements and so on) and still reached the conclusion that, despite all the hype, it just doesn't fit.
But it raises a lot of attention. And we do use blockchain for something….
We were part of an accelerator called ‘Free Electrons’, which is a program consisting of 10 giant energy utilities firms from all continents. They came together and said “okay, we believe that what has happened to the telco industry will also happen to the energy utilities and when this happens we have to be prepared. So let's go on a hunt for startups and see what the energy future will look like.”
So we began to discuss the problem that no one is really aware of the cost of a kilowatt hour. It's something which we just take for granted and we normally just hope that the monthly bill is as low as possible. Because of that, when we sell energy-efficiency measures to, for example, the automotive industry, it takes about 18 months to close a sale because it's such a boring topic. If we could emotionalise that process, they felt that we could probably save maybe 6 to 9 months from their sales cycles, which would save them an enormous amount of money.
And then another company came and said “We are selling PV (solar) equipment but we don't have any key selling points because prices have come down and panel is a panel: it’s not sexy."
So if I could say that 1% of all the electricity that I am producing (and you can see this live in your phone, in an app or in your dashboard) could go automatically into a smart-grid in a remote area in Bangladesh – and I could also see that with 1% of my generated power, I could power an entire village in Bangladesh, then that would be pretty amazing.
So we thought about this a little bit and came up with the idea of what we call the Solidarity token.
The solidarity token is basically a token where you define a rule (either your energy savings or a percentage of your energy generation) which is automatically transferred onto a box of your choice. And users can choose specific purposes via a dashboard (such as sending the power to a woman, a rickshaw, a computer shop or a pharmacy – or sending it for light-only, for example) all with the promise that this is 100% transparent.
If we were allowed to use crypto here it would be 100% efficient, but we’re not and so the process is not 100% efficient. But it's definitely the most efficient way to make a donation of all of the various development aid channels.
We have had an external body come to Bangladesh and perform what is called an SROI (social return on investment) assessment: which is measuring your project against a set of the United Nations’ SDGs. In our case it was SDG’s 1, 5 and 7 (so poverty, gender and energy). They calculated that, for every dollar invested, we created about $4.85 of value.
So that was a very encouraging result for us.
We are about to launch the solidarity token and I think that's something where the blockchain makes sense. It is all in a smart contract. It is all programmed. And it's all set in stone - or rather in code.
So blockchain just doesn't fit with your core infrastructure (which you use to generate electricity) for good reasons. But from a giving perspective, you're able to use tokens and smart contracts as a way of providing donations that are extremely transparent and more cost effective than most other mechanisms?
Yeah, that is something which our Solboxes can do in terms of computation: it can answer to a smart contract logic. That is possible.
You're talking about a top-up really here, if I use mobile-phone language, but you are remotely topping up somebody's electricity balance – or rather their Solbox balance.
That's exactly right. And it could be a school, for example. We’ve had donors come to us saying “Look, we would like to support these schools but we are only allowed to do it if 50% off the money also comes from the local government. But whenever we send our funding, the local government doesn't end up paying and then our money gets stranded, and the project doesn’t happen.”
With a smart contract, you have simultaneous execution and you only have execution if it is simultaneous: so zero corruption.
Let's talk also about kind of where Solshare is today. This is very real and it’s happening across many communities in Bangladesh. Can you give us a few stats and figures in terms of where you are and where you're aiming to get to?
One of our partners is Grameen Shakti, which was founded by the Nobel laureate, Professor Muhammad Yunus. They have single-handedly installed 1.8 million solar home systems across the country in the last 20 years.
We're working with them and we have also had considerable support from the UN DESA to build a hundred grids together with them this year. For us a hundred grids means about 30 to 40 houses on average; or 3000 to 4000 connections that we are building this year with them. We’ve so far set up the first ten grids with them and so we’re on schedule for that.
Part of the exercise this year is also to see whether our hundred grids can become a thousand grids with Grameen; or 10,000 grids; or is it more likely to stop at a hundred and then choose another path to growth. That is really key for us.
One of the key issues for us is also to dive deep into our data. So this 30% of excess electricity, this 600,000 kilowatt hours: how much of this can we make available to the people?
What if we changed to a dynamic pricing model so that at 3:00 PM you have a different price from at 3:00 AM (given that it’s all solar power)? How much more efficient would energy allocation become if we did: how much more of the 30% could we tap into? Equally, how much money are people making when they sell power; how much are they investing in additional battery panel capacity. These are all KPIs that we are closely monitoring.
We have very ambitious plans, but they depend heavily on our performance right now: and we so are closely monitoring the data we receive from all our boxes.
And your ambitious plan I think is best summarized as a million people by 2030. Is that correct?
And how ambitious would you consider that now that you're several years into the journey?
If you look at the growth path of our partner of Grameen Shakti, it took them about six or seven years to get around 5% of their 1.8 million installations. Then they went through a growth stage that was a kind of hockey stick-shape.
I would want us to see clear signs that we are on a similar hockey stick path before the end of this year.
What are the reasons why you think you may struggle? What are the surprises that you've seen so far that might undermine your ability to roll out at the speed that you want?
The elections in those have just taken place in December and, as usual in the run up to the elections, the government is going all-in in terms of promises on electrification. It remains to be see how this develops but that has definitely been one.
Then there is the peer to peer trading. The technology stack to support that is very complex. It’s the heart of the system but I would also say it’s the tip of the iceberg, and there's a lot lying under the surface.
We could have installed a lot more boxes already but we have consciously refrained from doing that because we wanted to get more feedback from the field first and making sure that the boxes work. Fixing queries like “this button should not be there,” resolving firmware problems and so on – before we install an even bigger batch.
So essentially by end of 2019, you’re aiming for 130 grids: all providing income, providing the basis of financial inclusion, rural regeneration, and potentially even access to additional health care, remote education and so on. So we're changing lives in a, in a very significant way simply by connecting households and access to electricity in a way that's just never been done before?
So back to the original 3 million of wastage: if you can do the right data analysis and track it down, you're well on the way to being able to make a significant impact on that.
Really thank you very much for explaining this so clearly. I cant wait to see how you get on reducing that $3 million of wastage as fast as possible.
Thank you so much.
I'm Barney Nelson and thanks for reading this week's #Goodstart episode. Next week there'll be another amazing story about how blockchain is being used for good, and so make sure to join us. Then in the meantime, if you'd like to get involved, look us up on thevalueexchange.co/goodstart or on Linkedin or Facebook. Thanks and see you next week.