Blockchain technology is on the cusp of revolutionizing many industries—right from the banking to the education industry. Of these industries, the energy industry has already started witnessing a paradigm shift in the way it operates. For instance, in the energy industry, while old coal power plants are being replaced with clean power production, transmission and distribution assets, it’s also embracing a hyper-local green economy where decentralized micro-generation turns buildings/houses into mini power plants and communities take care of the power supply.
According to BNEF NEO2018, $11.5 trillion will be invested globally in new power generation capacity between 2018 and 2050, with $8.4 trillion of that going to wind and solar and a further $1.5 trillion to other zero-carbon technologies such as hydro and nuclear.By 2050, wind and solar technology provide almost 50% of total electricity globally – “50 by 50” – with hydro, nuclear and other renewables taking total zero-carbon electricity up to 71%.
So a tremendous amount of capital is required to meet the future energy demand, and the cost, complexity and delay associated with many types of existing financing options can be a significant barrier to successful financing.
The shift in investment — away from high carbon towards low carbon — needs to increase exponentially, and investors should now focus on scaling up financial flows to enable greater global ambition. At present, there is still a massive gap between the infrastructure financing needs and the offer of funding. Although, the financial industry, asset managers and investors are moving away from the stranded assets due to 2 degrees “carbon budget” but the divestment process is still quite slow, and the access to high investment grade projects is still quite limited. The equity markets are also searching for new avenues to invest in towards the future.
Blockchain with Smart Contracts has the potential to catapult the energy transition. The technology’s potential to streamline processes, lower costs, increase the speed of transactions, enhance transparency, and fortify security could impact all participants of the energy finance ecosystem. The new emerging blockchain based platforms, on the sell-side (renewable markets) with crowdfunding and on the buy-side (financial markets)with loan syndications and securitization are trying to address this but these two worlds are still not converged.
This is where SPREAD comes in. SPREAD, a blockchain based renewable energy and urbanisation financingstart-up, was founded to bridge the gap between the sell-side and buy-side by leveraging the distributed ledger technology. With the vision to be a catalyst in building a greener sustainable future, the company aims at securitizing the decentralized assets and thereby creating a new market for the investors. SPREAD aims at democratising investments by opening up the market, reducing the entry barrier for the investors and making the assets highly liquid.
By employing SPREAD platform in place, asset owners, project developers and prosumers can reduce their weighted average cost of capital and thereby increase the profitability of the projects. Also, institutional investors and accredited investors benefit from the higher yields, and asset managers can make the portfolio attractive as the risk of investment will be pledged against the securitization built-in the platform with blockchain.
“The strength of blockchain technology is its application in situations where the provenance of an asset and the data from it needs to be interrogated, updated and validated by multiple parties like in case of securitizing renewable energy assets or for monitoring and verifyingdata to confirm the savings in case of investments in the energy efficiency projects. The industry needs financial innovation and creativity to unlock investments and to grasp these employment and growth opportunities,” says Amit Sharma, Founder &CEO, SPREAD. Blockchain contributes in this regard by recording all levels of performance of energy efficiency assets, hence securing their net asset value for investors, working as a guaranty for their profitability. By letting go of intermediaries, blockchain transaction lowers cost, speeds up processes, relaxes system constraints related to inefficient administrative tasks resulting in greater flexibility throughout the value chain.
The promising applications of blockchain such as peer-to-peer trading platforms, architecture optimization for managing grids, distribution management and many more are providing a host of benefits to the organizations operating in this space. However, what hinders the industry from reaching its fullest potential are financial barriers and project risks. “These financial barriers and projects risks are giving rise tothe Cost of Capital for CAPEX funding for these projects, of which a sizeable debt consideration would be necessary,” explains Amit.
As a new entrant in the market,SPREAD’sobjective is to remove these financial barriers and reduce the project risks to accelerate the energy transition by leveraging blockchain technology. SPREAD enables title and land ownership recording, trading of financial derivatives, crowd-lending (debt syndication) and virtual power purchase agreements, equity swaps, escrow, collateralization and smart bonds.
Today project developers, asset owners, asset managers and investors alike benefit from using SPREAD platform. With its ability to create innovative financing conditions and thereby acting as an active catalyst in building a greener sustainable future, the company is carving a niche across the renewable energy and smart city industry.
SPREAD tokens
SPREAD is a dual-token platform, so there are two forms of tokens used in the SPREAD ecosystem — SPREAD tokens (SPRD) and SPARK tokens (SPRK). SPRD tokens are utility tokens and are fixed in number and are available only for the issuers (asset owners, project developers, asset managers and the prosumers) and members of the SPREAD ecosystem — Investment Banks, Rating Agencies, Technical Auditors, Financial Auditors, Tax & Accounting Advisors, Legal Advisors, Credit Enhancers, Liquidity Providers, Trustees and Regulators.
SPRD tokens do not grant any ownership to issuers or the members.To use services on the Platform issuers will require SPRD tokens for issuing SPRK tokens, in their local jurisdiction. SPRD tokens can be seen as the global token that opens access to the Platform for all Participants, to onboard the system. The SPRD token is the access token, like a software license, that grants ability for issuers to transact on the Platform. The SPRK tokens are security tokens, and they represent the rights of an investor as an equity holder and/or debtor of the funds provided to the issuers on the SPREAD platform
SPREAD as a trading platform
SPREAD platform allows the issuer to issuesecurity tokens that are unique to their project or to pool of projects. These tokens financialize value directly and allow for liquid secondary markets of exchange (such as smart bonds). This value can then be fractionalized to enable any level of participation down to the smallest of micro-transactions. “In principle, anyone, anywhere, can participate in these new digital economies before, during or after their creation; allowing all parties to have a stake in their success through a form of decentralized ownership,” says Pierre-jean Cherret, Co-Founder & CSO, SPREAD. These security tokens are then offered to all registered institutional/accredited investors globally and represent the rights of an investor as an equity holder and/or debtor of the funds. At present, SPREAD Platform provides accesses to a secondary market to facilitate the trading of SPREAD Tokens among investors. In future, SPREAD could also operate as an exchange/trading platform or funds structures seeking alternative investments.
Since the security tokens can be sold and traded internationally, they become more fairly priced and, therefore becomes attractive to investors. This regulatory complaint offering is appealing to both institutional investors for its more recognizable structure, and to crypto investors for its technological innovation. Moreover, SPREAD leverages tools and technologies that encourage transparency to enable a more efficient, more effective and reliable ecosystem for renewable energy financing. The company uses data, technology, and design to simplify the way investments are made and managed.
New Process
The existing processes for financing renewable energy and infrastructure projects are quite fragmented, opaque, complex, expensive and time taking. In a typical deal creation today various parties get involved starting from originators or the asset owners/asset managers to auditors, rating agencies, legal advisors, tax consultants — all the way to investors. There are too many brokers also involved in the deal-making impeding project’s fair valuation, and it’s time to market and as a consequence weighted average cost of capital (WACC) and yields. SPREAD makes the entire deal flow transparent, effective, efficient, and reliable by removing the intermediaries (agents/brokers) and by bringing the whole ecosystem together on a decentralized ledger.
Unlike the other platforms, SPREAD provides visibility of all transactions based upon users and members role in a deal.