As the energy system becomes more decentralized and digitalized, power companies are seeking to realign with the electricity markets of the future and in the latest such move, Japanese industrial giant Sumitomo Corporation and oil and gas major Royal Dutch Shell have announced investments in U.S. firm LO3 to back the global development of its blockchain-based community energy networks.
LO3 Energy’s transactional energy platform enables users to set preferences on a mobile app to select how and when to use nearby energy resources available to them and allowing them to select the specific sources they purchase energy from. While the electrons flow through the existing grid transmission network, the private blockchain system manages the definition of the energy source and the contract agreement to pay for it.
The system has a wide range of business applications including peer-to-peer energy trading, energy hedging, virtual power plant operation, dynamic electric vehicle charging and demand response services.
Less carbon intensive microgrids
The investment from Shell and Sumitomo represents a landmark moment for LO3 Energy as the company seeks to launch its energy networks worldwide. The corporate giants have joined the roster of LO3 backers alongside New York-based VC investor Braemar Energy Ventures, U.K. energy giant Centrica and German conglomerate Siemens.
“Energy is going through a revolution with renewable distributed energy resources increasingly picking up market share – but to integrate them efficiently we need to reinvent our energy networks,” said LO3 Energy chief executive Lawrence Orsini. “These investments [from Shell and Sumitomo] will help us accelerate the roll-out of less carbon intensive microgrids, which help all stakeholders benefit through distributed, decentralized and decarbonized local energy transactions and demand response energy management on a building-by-building level.”
LO3 Energy’s transactional platform, which uses a modified version of the ethereum blockchain, was pioneered in the Brooklyn Microgrid, the world’s first peer-to-peer electricity trading project, delivered with Siemens.
Since then, the company has expanded business with pilot projects in the Americas, Europe, Australia and elsewhere. In one of the projects, Japanese electronics giant Kyocera is using LO3’s blockchain to test a virtual power plant (VPP) based on solar-plus-storage systems at its Yokohama Nakayama office.
Last year, oil major Shell reaffirmed its ambition to halve the net carbon footprint of its operations by 2050. It also unveiled a strategy to ensure the resilience of its portfolio while adapting to potential changes in the energy system. That announcement was followed by Shell’s double acquisition of German storage and VPP supplier sonnen and London-based VPP technology provider Limejump, as part of a shift from fossil fuels to electricity. In the electric vehicle space, Shell solidified its presence in 2017 by acquiring NewMotion, Europe’s biggest EV-charging network, and then adding U.S. charging-software provider Greenlots in January.
“As we move into a less carbonized future, Shell aims to invest in innovative companies that will help enable the energy transition. LO3 Energy fits right in that space,” said Kirk Coburn, investment director for Shell Ventures.
For Sumitomo – a Fortune 500 company – the investment in LO3 comes as a logical step amid the rapid growth of renewable energy and battery storage technologies in the global energy mix. In addition to investing in solar projects, the group took its first step into distributed generation with the acquisition of Western Australia’s leading solar retailer Infinite Energy in late January – expanding on its Australian coal-focused portfolio. Sumitomo’s latest plan is to draw on its power business expertise and tap its robust global networks to boost further growth for LO3.
“Under drastic change and innovation in the power sector, especially rapid penetration of decentralized renewable energy, we have the intention to expand our business into the new field created by LO3 Energy,” said Norihiko Nonaka, executive officer for Sumitomo Corporation.