ICO Analysis: Grid+

Let’s get one thing straight, Grid+ and Power Ledger are NOT offering the exact same product. The reason why I started with this disclaimer is that this is most prominent question being asked wherever Grid+ is being discussed. For our readers not familiar with Power Ledger, you can check out our review here.

While both Grid+ and Power Ledger are designed to shake up the energy market, the difference lies in their approach towards solving the problem. Power Ledger’s core product revolves around creating marketplaces where people will be able to sell their excess energy to those who need it. Power Ledger focuses on peer-to-peer energy trading as their main value proposition. On the other hand, the long-term vision of Grid+ involves creating a marketplace for energy trading, they are more focused on reducing the costs of retail electricity.

So, what does Grid+ plan to do?

Grid+ focuses on disrupting the existing utilities, where they aim to remove the intermediaries and sell electricity at wholesale rates to the end users.
The 4 major elements of electricity supply chain are energy generators, transmitters, distributors and the utilities. Utilities are responsible for administering and billing customers, and their associated costs are a significant overhead to the end user’s electricity bill as discussed in the whitepaper:

An energy utility buys electricity in the wholesale markets, pays the distribution system operator a fee for getting the electricity to the customer, and then bills the customer for the service at a large markup over their cost of goods sold. Typically only about 50% of the cost of retail electricity is used to pay for the electrical energy itself. The other half is tied up in administrative burden, marketing, and risk management associated with bad debts.

By operating as a utility itself or licensing its technology to electricity generators, Grid+ will be able to bring down the cost of retail electricity significantly. Grid+ will automate the processes of billing and settlement which are largely manual and a significant portion of the overhead costs. By using the Ethereum-based smart contracts, payments will get recorded automatically without any payment processors. For the Texas market, Grid+ will bring the cost of $0.115/kWh down to $0.068/kWh, which translates to a customer saving ~38% on electricity.

Smart Agent

At the core of Grid+ technology is the Smart Agent. The Smart Agent is an internet enabled proprietary hardware, which users will have to buy to participate in the Grid+ ecosystem. The Smart Agent will read from the household smart meter and pay for the electricity usage in real-time. The users do not need to have any understanding of the blockchain technology, the Smart Agent takes care of that.

Longer Term Vision

As the costs of storage/batteries drop it will be in the economic interest of the consumer to buy batteries to store excess electricity. Once this occurs there will be situations where customers will not want to interact with wholesale markets directly, but rather trade energy locally. The Smart Agents will calculate the user’s energy requirements and sell excess energy in a peer-to-peer manner. Also since the middlemen aka the utilities are removed, users can directly view prices shown by the wholesale distributors, which vary according to the supply and demand. This will enable users to perform price arbitrage of electricity i.e. buy low and sell high!

The Token and Crowraise

Grid+ will operate with a two-token model, with each token being ERC-20 compliant. The BOLT token will be treated by Grid+ as a stable-coin, redeemable by Grid+ customers for $1 worth of energy from Grid+ and backed by USD deposits. The GRID token will allow Grid+ customers to purchase electricity from Grid+ at wholesale price. In particular, each GRID token may be redeemed by a Grid+ customer for 500 kWh of electricity from Grid+ at the wholesale price available to Grid+ in the jurisdiction in which the customer is located at the time such electricity is actually purchased.

The GRID token will be distributed during the ICO, with a fixed number of 300 million tokens scheduled to be minted. As mentioned above, the GRID token will be a credit on the GRID+ platform, redeemable for the right to purchase 500 kWh of electricity at wholesale price available to GRID+. Once redeemed, the tokens will be burned thus increasing value for the existing token holders. The price pegged BOLT tokens will be used to carry out transactions on the platform.

The crowdsale begins on October 30th. Of the total 300 million tokens, 90 million are available for sale. Each GRID token is priced at $1.15 for the ICO with a hardcap of $75 million USD.

The Team

Grid+ is a part of Consensys, which is a “hub” for similar blockchain based projects. Along with Grid+, Consensys is behind many other well known projects like BTC Relay and BlockApps.

ConsenSys has spent two years working with some of the brightest minds in the energy space, which has culminated in the formation of Grid+. The Grid+ team leverages experience from other ConsenSys teams, Ethereum startups, and massive Fortune Global 50 energy companies to design a system that will fundamentally change the way consumers interact with their energy providers.

The cofounders and the team have been selected to lead the Grid+ project after proper vetting by ConsenSys. There are 8 team members and 9 advisors listed. Ethereum cofounder Joseph Lubin is one of the advisors.

Verdict

Grid+ does not necessarily focus on clean energy or for that matter any “type” of energy. The core product is focused on disrupting the energy grid and providing cheap electricity to the end users, no matter where the electricity comes from. Grid+ might turn out to be a big boon for hydrocarbon power companies, as they would be able to sell electricity at rates cheaper than renewables. But then Grid+ is just a utility which is simply billing the customers and doing the administrative works. The benefits coming in for customers are also great. The project is actually improving an inefficient system and claims to lower electricity bills by almost 35-40%. Around $40 million USD have already been raised in the presale, which shows there is a considerable interest for the project.

The only point of concern is some ambiguity around the GRID token. The token has no other value apart from being a sort of coupon for getting 500 kWh electricity at wholesale prices. But since the same condition applies for GRID tokens all over the world, and electricity prices show a wide variation based on geographies; how would the token be valued by the markets? There would always be an upper cap to the value of the tokens, from a “trader” view, this coin will never be actually worth more than 20-30% of 500kWh of electricity at retail value. Currently the token is valued at $1.15 for the ICO, and it will immediately start trading at a price which is equal to the delta of the wholesale and retail price of 500 kWh electricity, which according to many estimates could vary from $4-7 making the ICO price a bargain.

Risks

  • The GRID tokens are nothing more than coupons for cheap electricity and will always have an upper cap. -1.5
  • The project can only operate in deregulated markets. At present there are only 2 states with deregulated electricity markets in the US. -2
  • There is some initial investment for users in the form of buying Smart Agents, which might prove to be a barrier. -0.5
  • There is no working product like Power Ledger has. They have not even applied for the creation of utility yet. -3

Growth Potential

  • From a business perspective, there is a good potential for Grid+ to grow considering the potential benefits for power generation companies and the end users. +3
  • Being a part of Consensys lends a huge credibility to the project. +2
  • $40 million USD have already been raised in the presale, $13 million raise by Power Ledger pales in comparison. +2
  • As the GRID tokens can immediately be redeemed for 500 kWh of wholesale priced electricity, the current token price of $1.15 is at a discount to the expected future price. +4

Disposition

We arrive at a score of +4 for Grid+. This is lower than the +6.35 we gave to Power Ledger. The absence of a working product and ambiguity surrounding GRID token’s valuation reduces the rating for Grid6.

Investment Details

The ICO begins on Oct 30th at 12pm EST. You can participate in the ICO here.

Author:
Aakash Kawale is a financial analyst based out of Mumbai, India. He is the lead analyst at a Singapore based organization and has extensive experience of analyzing US and Indian equities. Aakash is a strong advocate of the Blockchain technology and has been analyzing cryptocurrencies since 2015.