The Rise of DePIN in the Energy Sector

Decentralized Physical Infrastructure Networks (DePIN) are emerging as a powerful force in the renewable energy sector, promising to revolutionize how we produce, distribute, and consume electricity. In a recent episode of the Unlayered podcast, host Dave spoke with Fredrik Ahlgren, founder of Sourceful, a company aiming to create the world's largest virtual power plant using DePIN technologies built on the Solana blockchain.

Fredrik's journey into the world of DePIN and cryptocurrency began, like many others, with the Helium network. Inspired by Helium's rapid growth and ability to incentivize infrastructure deployment, Fredrik saw an opportunity to apply similar principles to the energy sector. With a background in energy engineering and experience running an IoT lab at Linnaeus University, Fredrik was well-positioned to tackle the challenges of creating a decentralized energy network.

The Current State of Energy Systems

To understand the need for DePIN in the energy sector, it's crucial to first grasp the current state of energy systems. Traditionally, electricity grids have been built around centralized power plants, with consumers at the end nodes. This model has worked well for decades, but the increasing adoption of renewable energy sources, particularly rooftop solar panels, is challenging this paradigm.

Fredrik explains: "We have producers and we have consumers. Obviously the grid can transport like, I would say the wires doesn't care if the electricity goes in one way or the other other. Like it's not one way streets. But there is still like things that happen when you start to shift this production and consumer is that when you start to produce power in the end nodes of the system."

This shift creates new challenges for grid operators. For instance, a suburban area with high solar panel adoption might produce more electricity than it consumes during sunny periods, potentially overwhelming the local grid infrastructure.

The Balancing Act of Electricity Grids

One of the fundamental principles of electricity grids is the need for constant balance between supply and demand. Fredrik illustrates this concept with a simple example: "Electricity in the grid isn't stored. It's everything is instant. That means that if you if you like, if you cook your tea water in the morning, you put that if you obviously use an electroketer, I'm talking from someone from the UK. So I know that you have a lot of gas done. But anyhow, at the same time, you're actually turning on your heater. Maybe it's two kilowatts of power or something like that. Somewhere else in the grid, something else needs to produce that two kilowatts of power. At the same time."

This balancing act becomes increasingly complex as more decentralized energy resources, such as rooftop solar panels and home batteries, are added to the grid. Traditional power plants, which have historically been responsible for maintaining this balance, find it increasingly challenging to do so as their share of total production decreases.

The Need for a Coordination Layer

The core problem that Sourceful aims to solve is the lack of coordination between these distributed energy resources. Fredrik points out that while homeowners can often sell excess power back to the grid, there's no system in place to coordinate when and how much power is fed back.

"If homeowners are not just consumers, they are also producers and we still need to keep everything in balance. It's actually a smaller and smaller part for the power plants to sort of keep that balance," Fredrik explains. This lack of coordination can lead to grid instability and, in extreme cases, blackouts.

Virtual Power Plants: The Solution to Grid Instability

The concept of a Virtual Power Plant (VPP) emerges as a potential solution to these challenges. A VPP aggregates and coordinates distributed energy resources, allowing them to act as a single, flexible power source. Sourceful's goal is to create the world's largest VPP using DePIN principles.

Fredrik elaborates on the importance of VPPs: "We want to connect as many distributed energy resources as possible. That's that's what we want. So we are not saying that only solar only batteries, it could be loads of things. It could be EV chargers, charging boxes. I have gotten this question before, but yes, it could be a Bitcoin miner."

The DePIN Approach to Building a VPP

Sourceful's approach to building a VPP leverages the DePIN model, which has proven successful in other sectors like telecommunications with projects like Helium. The key innovation is in how they incentivize participation and reduce deployment costs.

Fredrik explains the traditional approach and its limitations: "How do a utility company or a company in the traditional electricity, electricity sector do when they want to install something in people's homes? They have a distributor network. They have a often like a rugged Linux computer that may be cost $1,000. And they send home an installer. They don't have a good UX experience with an app. You need to call some kind of distributor. Often the companies are only operating B2B."

In contrast, Sourceful's DePIN model allows homeowners to purchase and install the necessary hardware themselves, dramatically reducing deployment costs. "The homeowner will buy the gateway themselves. It's about 10 for the price of equivalent hardware," Fredrik states.

Tokenomics and Incentives

The Sourceful model uses a token system to incentivize participation. Homeowners who connect their energy resources to the network receive tokens as a reward. These tokens serve multiple purposes within the ecosystem.

Fredrik outlines the token utility: "From the high level perspective, we are going to use a burn and mint equilibrium model, much as I would say, I would say helium and we're very much inspired by that model. So the demand side, which would be the utility companies, those are the customers. So the grid operators, the utilities, I would say these are the ones that are buying services from the network. That will be fiat money that is being spent that will burn the token."

This model creates a circular economy where token demand is driven by real utility, ensuring long-term sustainability of the network.

Data Monetization and Privacy

An interesting aspect of Sourceful's model is the monetization of energy production and consumption data. Utility companies are willing to pay for access to granular data about energy usage patterns, which can help them optimize their operations and improve customer service.

Fredrik explains the value of this data: "We're talking about one Euro per month. And that's what the utilities today are paying for just access to the data. And this is you might wonder like, why would they ever care? Yeah, they care because these are things that happen in, I would say, their grid."

This data can help utilities provide better insights to customers, such as breaking down energy usage between electric vehicle charging and solar production on monthly bills.

Regulatory Challenges and Go-to-Market Strategy

As with any innovation in the energy sector, regulatory compliance is a significant consideration. Sourceful's approach to this challenge is to start in markets with favorable regulations and expand from there.

Fredrik outlines their strategy: "Supply side is global. Yes. And why this is the case? Why we can do this is that we will just give a baseline rewards to the users as we get smaller rewards, but you're still part of building the network. The demand side and like go to market because we do need to, we do need to have a cash flow for actually being able to have this a sustainable business. It's that simple. That will be in Europe."

Sweden and other Nordic countries are likely to be the first markets where Sourceful will fully deploy their demand-side operations, with Germany and the Netherlands following closely behind.

The Future of Energy in an AI-Driven World

The conversation then turned to the future of energy, particularly in light of the rapid advancements in artificial intelligence. There's concern that the energy demands of AI could strain existing power infrastructures, but Fredrik sees this as an opportunity rather than a threat.

"Data centers are usually the consumers that are willing to pay a premium for renewables. So they like they want to brand themselves as that. And also the price of energy compared to the price of the DPUs and the data center itself is minuscule," Fredrik explains. This willingness to pay for renewable energy could drive further investment and innovation in the sector.

Moreover, data centers represent a controllable load that can help balance the grid. Fredrik points out: "Everything that is controllable, which a data center is, at least if you let it to be controllable, is good for the grid. So you can actually eat up a little bit of that natural variability you get from renewables."

The Role of Nuclear Power

When asked about the future role of nuclear power in the energy mix, Fredrik expressed a nuanced view. While he's not against nuclear power, he believes that the economics of solar and battery storage might outpace nuclear in the coming years.

"I'm pro-nuclear, so I'm not like against nuclear per se. But I believe that we might not see the rise of nuclear as we would like or think just because this scale of economics of solar PV and batteries," Fredrik states. He points to the rapid acceleration in solar installations worldwide and the increasing investment in this technology as evidence of this trend.

Energy as a Digital Commodity

Looking even further into the future, the conversation touched on the possibility of energy becoming a digital commodity in a world of superintelligent AI. Fredrik sees this as a natural evolution given the fundamental role of energy in modern society.

"If we tokenize this, I think that would probably be a prerequisite for being able to trade this in trade and use this in a digital economy," Fredrik muses. He envisions a future where energy transactions occur in real-time on open ledgers, potentially using tokens like the one Sourceful is developing.

Sourceful's Next Steps

As for Sourceful's immediate future, the focus is on growth and scaling their network. Fredrik outlines their plans: "We are now opening up for API. And I think one of the interesting parts, which we are at the moment very, we're unique in that part is that we are using both APIs and we're going to connect utility media."

They're also working on streamlining the verification process for home energy resources without the need for physical inspections, aiming to have thousands of units connected by the end of the year.

The Potential of DePIN in Renewable Energy

The conversation with Fredrik Ahlgren highlights the immense potential of DePIN technologies in revolutionizing the renewable energy sector. By creating a decentralized coordination layer for distributed energy resources, projects like Sourceful could play a crucial role in enabling the transition to a more sustainable and resilient energy system.

The use of blockchain technology, particularly Solana's high-speed, low-cost network, enables the real-time coordination necessary for managing a complex, distributed energy grid. The tokenomics model provides the incentives needed to drive rapid adoption and network growth, much like we've seen with other successful DePIN projects.

Challenges and Opportunities Ahead

While the potential is significant, there are still challenges to overcome. Regulatory compliance, hardware distribution, and user adoption are all hurdles that Sourceful and similar projects will need to navigate. However, the urgency of addressing climate change and the increasing instability of traditional power grids provide a strong tailwind for these innovations.

As AI and other technologies continue to drive up energy demand, the need for flexible, resilient, and sustainable energy systems will only grow. DePIN projects like Sourceful are positioning themselves at the intersection of these trends, potentially playing a crucial role in shaping the future of energy production and distribution.

Implications for the Solana Ecosystem

For the Solana ecosystem, projects like Sourceful represent an exciting new frontier. The ability to handle the high-frequency, low-latency transactions required for real-time energy coordination showcases Solana's technical capabilities. Moreover, the potential for energy tokens to become a significant part of the digital economy aligns well with Solana's vision of a high-performance blockchain ecosystem.

As more real-world assets and infrastructure become tokenized and integrated into blockchain networks, Solana's speed and scalability position it as a prime candidate for hosting these next-generation applications. The success of projects like Sourceful could pave the way for a new wave of DePIN innovations across various sectors, further solidifying Solana's role as a leading blockchain for real-world applications.

In conclusion, the intersection of DePIN, renewable energy, and blockchain technology represents a frontier of innovation with the potential to reshape our energy systems and accelerate the transition to a more sustainable future. As projects like Sourceful continue to develop and scale, they may well play a crucial role in addressing some of the most pressing challenges of our time, from climate change to grid resilience, all while showcasing the power and potential of the Solana blockchain.

Facts + Figures

• Sourceful aims to create the world's largest virtual power plant using DePIN technologies built on the Solana blockchain.
• Traditional electricity grids are built around centralized power plants, which is being challenged by the increasing adoption of renewable energy sources.
• Electricity grids require constant balance between supply and demand, which becomes more complex with decentralized energy resources.
• Virtual Power Plants (VPPs) aggregate and coordinate distributed energy resources to act as a single, flexible power source.
• Sourceful's DePIN model allows homeowners to purchase and install necessary hardware themselves, reducing deployment costs to about 1/10th of traditional methods.
• Utility companies are willing to pay around 1 Euro per month for access to granular energy usage data from households.
• Sourceful plans to start their demand-side operations in Europe, particularly in Sweden and other Nordic countries, followed by Germany and the Netherlands.
• There is more money going into solar PV investments than all other energy production sources combined.
• Data centers are willing to pay a premium for renewable energy, which could drive further investment in the sector.
• Fredrik Ahlgren believes that the economics of solar and battery storage might outpace nuclear power in the coming years.
• Sourceful is aiming to have thousands of units connected to their network by the end of the year.
• The energy sector shows a linear correlation between GDP, living standards, and energy consumption per capita.

Questions Answered

What is a Virtual Power Plant (VPP)?

A Virtual Power Plant is a network of decentralized energy resources that are coordinated to act as a single, flexible power source. It aggregates various distributed energy assets like solar panels, batteries, and electric vehicle chargers, allowing them to be managed collectively to balance the grid and optimize energy distribution. VPPs can help integrate renewable energy sources more efficiently into existing power grids and provide greater stability and flexibility in energy management.

How does Sourceful's DePIN model differ from traditional utility approaches?

Sourceful's DePIN model drastically reduces deployment costs and improves user experience compared to traditional utility approaches. Instead of using expensive hardware and sending installers to homes, Sourceful allows homeowners to purchase and install the necessary equipment themselves. This reduces the cost to about 1/10th of traditional methods. Additionally, Sourceful uses a mobile app and token rewards to incentivize participation, creating a more engaging and user-friendly experience than traditional utility services.

Why is balancing the electricity grid becoming more challenging?

Balancing the electricity grid is becoming more challenging due to the increasing adoption of decentralized renewable energy sources like rooftop solar panels. These sources produce power intermittently and at the edge of the grid, making it harder for traditional centralized power plants to maintain the constant balance between supply and demand. The grid requires instantaneous matching of production and consumption, and with more unpredictable sources, this balancing act becomes more complex and requires new coordination mechanisms.

How does Sourceful monetize energy data?

Sourceful monetizes energy data by selling access to granular energy usage information to utility companies. This data is valuable because it provides insights into consumption patterns, helps utilities optimize their operations, and enables them to offer better services to customers. For example, utilities can use this data to provide detailed breakdowns of energy usage on bills, distinguishing between electric vehicle charging and solar production. Sourceful estimates that utilities are willing to pay around 1 Euro per month for this data from each household.

What role might AI play in future energy consumption?

AI is expected to significantly increase energy consumption due to the power demands of data centers running AI models. However, this is not necessarily a negative development for renewable energy. Data centers are often willing to pay a premium for renewable energy to maintain a green image. Moreover, their energy consumption is highly controllable, which can actually help balance the grid by absorbing excess renewable energy during peak production times. This controllable load can help manage the variability inherent in renewable energy sources like solar and wind.

How might energy become a digital commodity in the future?

Energy could become a digital commodity through the tokenization of energy production and consumption. This would involve creating digital representations of energy units that can be traded in real-time on blockchain networks. Such a system would enable more efficient energy markets, allowing for instantaneous trading and better matching of supply and demand. It could also facilitate peer-to-peer energy trading and more dynamic pricing models. The development of energy tokens and open transaction ledgers for energy could be a crucial step in this direction.

What are the main regulatory challenges for DePIN projects in the energy sector?

The main regulatory challenges for DePIN projects in the energy sector involve navigating the complex and often fragmented energy regulations across different countries and regions. These regulations can affect how energy can be sold back to the grid, how decentralized energy resources can participate in energy markets, and what kind of data can be collected and shared. To address these challenges, Sourceful is adopting a phased approach, starting in markets with favorable regulations (like Sweden and other Nordic countries) before expanding to other areas.

How does Sourceful plan to scale its network?

Sourceful plans to scale its network by opening up API access, allowing for easier integration of various energy resources. They are working on connecting both APIs and utility meters to verify energy production and consumption. A key focus is on streamlining the verification process for home energy resources without requiring physical inspections, which would enable faster onboarding of new participants. Sourceful aims to have thousands of units connected to their network by the end of the year, focusing first on growth and expanding their presence on the blockchain explorer.