How to (micro)finance decentral infrastructure

When we think of infrastructures, we think of wires and pipes, of roads and rail tracks. If we find ourselves particularly digitally native, we may think of the ones and zeros which drive our information age. We definitively THINK BIG. Infrastructures are huge, right? Networks, webs, grids: vast and global. Expansive – and expensive. The founder’s footprint of our infrastructure and the way we pay for it was set in the 19th century, when the world started to think global, the great men of industry were still admired, and monopoly wasn’t a dirty word yet.

 

But the world has been changing. Blockchain algorithms are radically decentral by design, slow food is regional, and knowledge is created by the globally dispersed crowd. Energy is no different: home solar panels are a growing market for everyone who wants to turn their roof into a power production unit. At dynamis, we believe that this decentralization is necessary for the energy system because harvesting sun and wind will require many small(ish) energy collection units as parts of smart local and regional grids in order to deal with volatility.

 

This is a substantial challenge. Turning a sluggish existing centralized infrastructure into a smart decentralized one requires money. Building a new decentralized infrastructure in less developed regions does as well. At the same time, the development of subsidies is uncertain. Some places do not have subsidies at all and the reliance on aid organizations only a temporary fix. Could the financing of infrastructure, not just the financing of individual units, be accomplished in a similarly decentralized manner as the energy production and distribution itself? If being your own energy producer empowers the individual, how much more might owning the grid empower us all?

 

Here are some ideas how we might go about that:

 

Looking South: raising credit rating through blockchain
Microcredits are a well-established tool to finance education, small businesses, and healthier living in the Global South. However, they are unattractive for many lenders as the small sums create only small profits and credit worthiness in the Global South is often not assured, which leads to an unappealing legal overhead. Lately, companies such as Everex use blockchain technology to increase the credit rating of individuals who reliably pay back microloans even in areas where there is no established banking infrastructure. Thus, larger credits become possible so that infrastructure investments can be made as well.

 

Scaling down: ppas for private individuals
Global corporations already employ power purchase agreements (ppas) to ensure stable prices for energy costs. They agree to long-term contracts for fixed prices. dynamis is in the process of testing whether ppas for groups of private individuals – with tradeable agreements in case life circumstances change for their owners – result in more advantageous credits which might help to finance smart infrastructures beyond the world of subsidies.

 

Teaming up: communities and power production agreements
Flipping ppas on their head, a local group – say, a village or the tenants of an apartment building in the inner city – might have their solar panel on the roof or their waterpower plant, as well as the smart infrastructure which connects them, financed by agreeing to deliver surplus energy at a fixed price for a certain amount of time to their crowd investors. By agreeing to maintain the grid over a longer period of time, thus insuring stable energy production over this time, the risk of investment could be decreased, leading to more favorable terms for credit.

 

Whatever the future of grid financing holds, one thing is certain: rethinking the energy system means more than rethinking wires and turbines. In the next few years, we should not only decentralize the grid, we should decentralize its financing – and thereby its ownership.

 

A comment of Patricia Godel (dynamis)

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