welcome good morning good afternoon wherever you are this is the two tokens podcast and this time it's a remote podcast with uh people from all over Europe our special guest today is Tobias Weber upon energy decentralized energy solutions in Zurich and we will be discussing Solutions uh with Michelle shatila lawyer and you're surviving captain of the energy token working group yes why don't you first give a brief introduction of the energy token working group before we ask Toby asked to present the energy token and yeah sure we also explain what we did with power of the money just to refresh the people who are listening yeah so thank you Alex yeah so uh in the energy working group of two tokens we are discovering and pathfinding our way into the energy ecosystem with the ambition to have a power to the many uh in in the new energy environment uh supporting and accelerating hopefully the energy transition um so our first uh phase of our activity was focused on understanding um the application of blockchain and understanding tokens on top of that in order to see how we can find use cases and for that we have quite uh did some some Discovery and some work so let me let me share two slides for that that depicted we started off with understanding of how we should then position tokenization and the initial use cases we found and also our first hinge was to tokenize the energy as packages and then if you do some analysis you find that you need actually two so one based for the energy system which you can say you know that's the demand and supply and very quickly you understand that there are also trading going on um in in which is a need of a power uh notion as well so we started off with these two tokens is off take as we now call it but very soon we pivoted to um to the use case which is very relevant now in in Europe at least um for the new movements from corporate energy to more local energy initiatives by cooperatives collectives um uh so and and there we extended our our view and our token set into into 6 almost so the first one is I think most relevant for today's talk but it gives the context in which which our thinking is in our designs is our fractional ownership um so we we understood from uh from clients around Europe um that fractional ownership is is of interest for energy cooperatives energy collectives and other local initiatives so we designed a token that represents a solar panel um so and that inspires all kinds of new kind of use cases which I come into in a moment um and and for the off take we understood that the energy industry then talks about power which is related for instance to power purchase agreements but also other forms of of power and then energy that's the uh the energy delivered or generated or stored so that those are the three use cases for the energy year part and if you do renewable energy then we have the renewable energy certificates or guarantees of origin as we call them in Europe so there are some tokenization ideas and initiatives going on there as well most recently on top of that there is an initiative uh fueled by by Google with their 24x7 green initiative of their data centers which is then supported by the energy Tech initiative in the UK that gives you more granular certificates so that certificates are only ever shelf life of one hour and if you do a full instrumentation if you assume that there is a full iot world out there then there is a lot of data that you can collect and harvest and also monetize and it can be green signals can be temperature can be vibrations and there are all kinds of parties that have interest in data around and associated with the renewable energy now in our in our working group uh for the last year we have worked on a fractional ownership of solo farms um and that is uh for an uh a number of applications so there are some communities in in the Netherlands and also identified in in Italy and in in the nordics of Europe uh where you want to have an um a renewable setup that is owned by uh by the um the members of the energy Cooperative um so and and first uh way of implementing that that token is to represent that that ownership um and then on top of that we can build then and that's the topic that we have at hand right now um and I don't go not go into detail because there are other podcasts on that different use cases for the off take and also all kinds of um uh um yeah new new business cases and business models that we can we can ankle so that's I think in a nutshell right the Great Bridge to uh to utopios I think right because yeah the the use case that we worked on in the last um uh year and a half was fractionality we call that power of the many and Tobias we got in contact last year and you were explaining what you were doing at Siemens so maybe you can introduce yourself also for the listeners and for would people who don't know you and what your application is for your energy tool yeah thanks Alex happy to do so so um this is tenability Office of the solutions that serves business globally for Siemens one infrastructure I'm located in the crypto Valley in Suk so this is already one of the first first bridges into a blockchain and Technology um but combining energy with blockchain in here so um where do we start I mean we have left the time where there's a traditional power grid with large power plants and transmission and distribution grids to then the consumers so we are in a kind of an energy Cloud now where you have um prosumers you have distributed and cleaner two-way power flows with digital platforms so that means um all kind of tokens that you also have just described you would need it's about who is the owner of an asset you need to have the data I'm coming from those assets to really measure the performance in need to validate power and energy that is distributed or consumed or produced so all of that comes together therefore we are in a situation that um this energy transition requires also a digital transformation of the energy infrastructure and so just be sure for my understanding at Siemens you work at a decentralized Energy Solutions what does that mean are you working with firms and factories to help them set up a renewable energy sources what is what's the scope of the middle of that yeah so that's a good question to to to make it crisp for for the uh audit uh for the audience um so the Siemens smart infrastructure business uh was a merge of two former businesses and Siemens so the one is Building Technology so everything um around the building how to get buildings modernize how to make buildings green how to make buildings carbon neutral yeah so when we talk buildings we nowadays talk Fleet of buildings so that means um it could be a compass it could be a district it could be a full let's say portfolio of real estate from a large corporate and in order to make that carbon neutral for sure distributed Energy Systems um in particular with renewable energy is uh within the scope so having said that there's a new component coming in that's even charging infrastructure as a tied to the info to the building and built environment but now you still cannot isolate buildings even if they become presumer you cannot isolate buildings from grid infrastructure and that was the second part of the merge that was the business of energy management so where it's about grid software about the electrical products you need for an energy transmission and distribution this is let's say the backbone of let's say what we want to tokenize so can you elaborate on how on your statement to um having trouble to separate the buildings from the infrastructure is that behind the meter and in front of the meter kind of solutions that you're talking about okay yeah and I mean I would not call it a struggle but um you still would need to have the backup from a a utility company from a grid infrastructure you need to if you have more demand than you produce you need to get the supply if you have more produced then your demand is about you need to um to feed it into the grid so I think you need to have that connectivity and therefore you're acting a larger ecosystem including the utility companies so and where did that security you know that energy token as a security then come in because I don't see that connection yet that bridge yeah and this comes back to let's say a dilemma that we experience in the market so um typically customers of ours is a large corporate no matter which kind of vertical Market or industry the the corporate is in so Enterprises from Automotive from uh food and beverage from chemicals from Pharma life science could be everyone so um they were used to get electricity from the plug literally speaking Yeah and they get an invoice from the utility company now when we talk distributed energy systems or buildings infrastructure building infrastructure becoming a prosumer um this would need investments into such assets and those assets are non-core to all of the industries because they should produce cars or produce drinks or whatsoever so therefore they always seek for someone to finance that and get those Balance those assets of the balance sheet yeah yeah no more capacity yeah and and now to close the loop so on the other side um I get the the calls from institutional investors in particular the the market of impact investing where it's not trusted about the risk return ratio where it is about risk return and impact ideally the impact is guaranteed Richard Esco company an energy Service Company typically do and now because the opposite of the fractionalization you were talking about because those institutional investors they seek for large tickets they they don't look for a single PV field of one megawatt they look for something bigger so they look ideally for single Investments above 100 150 million so in a lot of those distributed Energy Systems a lot of let's say sustainable assets are below by tokenization you can fractionalize on the other hand by tokenization you can bundle and make the ticket size larger and more attractive for institutional investors yeah that's interesting Michelle because this is the opposite of what we did with power of the money which was making big parks you know fractionalized available to the public and but you could use the same technology the same principle and turn it around what does that look like in this particular Regulatory and you know the same principle yeah yeah before I get into that I would just like to uh to come on to ask for a device to set that uh um in in his few at a building owner would not be interested to have an energy asset uh Finance is part of the building or to be financed separately if I understood it correctly that what your comment was because what I what I see actually is that building owners uh I fully agree that traditionally they're not familiar with being an energy producer or installing an energy asset and and manage each other as such um but at the same time there is a increasing requirement by the let's say the tenants to have sustainable buildings and there's a pressure to make those buildings more sustainable so you then typically will think of adding in renewable energy asset to it in order to fulfill the energy demand and that um raises the question about a building as such uh has a energy producing potential so an energy potential or value uh potential in energy terms and um if you also think about the fact that uh buildings need to show their energy performance whether it's be commercial real estate or also housing um the energy labels particularly now with the energy crisis we have had or still having with such high prices these these these energy labels of the buildings have become uh valuable so um from an in a building investor or in real estate investor point of view it it now makes sense to to also invest in renewable energy assets which is part of the building because it at the end will increase the value of your building and it will tap into the energy uh producing potential of of a building um so but so that was just just to comment on what you said they're saying it should always be separated I think there's also a movement from Real Estate owners to say okay we have to have those energy assets on the building because it increases the value of the building [Music] um now if you get into specific specifics of an energy asset and a tokenization and Regulation and in particular energy Market regulation um uh we're basically facing uh what I call a dual regulatory challenge because on the one hand the the electricity in particular electricity Networks they are heavily regulated um because it's good to be an infrastructure most of them that's our Monopoly so we have to make sure that access to those infrastructures is is open and fair and transparent non-discriminatory Etc um and on the other hand if you um tokenize assets so create let's say security rights or whatever type of tokens we we create the financial regulatory control comes into play so there's a big thick uncertainty or or or struggle or challenge to uh make sure you you make things happen without being limited too much about those two regulatory regimes we have no absolutely ABS oh no sorry go ahead no yeah I just pause for a minute so you can't really comments no no it was about his head is really close to my heart because this is exactly what happened so um at the end uh the technology uh namely with blockchain is available today so and it it's their ways and uh service providers that know how to do it and but you are creating a security usually so that means uh you are fully under the regulation of banking and exchange authorities like sec in the US or Barfield in Germany or often in Switzerland so and this is a hard thing on the other hand if you look from the investor side at the moment uh Institutional Investor has no access to private markets because those are not regulated so uh I would envisage that in the next few years together with the the Bank Authorities and uh stock exchanges um we we will develop a let's say yeah framework that at the end this uncertainty that we all have in the market right now um definitely this is harmful it will be eliminated and give access to institutional investors to those kind of assets [Music] I really like the concept because of course [Music] um this challenge to bridge the gap between the institutional investors and the smaller renewable energy projects has been there from the very very start because when the renewable energy markets start to develop everybody will say oh we need the money of the Pension funds because they are or institutional investors because they're they're satisfied with a lower return on their Investments than a typical project developer would be but you just said at the beginning the ticket size they're looking for is way too big for an individual project so you have to come through a a package of project projects that can then be be sold so and that's also something you see of course in a real in in the non-uh building sector of renewable energy assets where where very large utility scale Parks or portfolio of parks are being sold onto to um institution invested investors but then they will sort of pack a package from pile of packets structures as a package and then sold out so I was wondering if you have thoughts about how would that work with tokens yeah you could do a similar thing in particular for instance if you create a special purpose vehicle in SPV a legal entity that is the asset owner of multiple assets and then at the end you could also tokenize the SPV and therefore you get independent from their real world assets and this geographical location and yeah bundle it and yeah but for sure again you're then in a regulated market because at the end it's more or less like a like a fun product that you're creating which is managed to a certain extent so this is I would say the the big hurdle and the challenge um with the actual regulation not from the energy Market but coming from the financial Market um but there's one more thing I'd like to bring in so the one thing is get the ticket size larger that it's interesting for institutional investors or get the transactions cost lower um that smaller Investments make sense or are commercially viable and this again brings us back to blockchain as an enabling technology just imagine that you manage an asset during its entire life cycle um with the all the relevant data um validated on blockchain so that means you have an asset and whenever you're in a acquisition a situation or a selling situation um or that the information is already there so you have a kind of a proven data rule yeah data room um relevant information on blockchain so that means the typical due diligence course with I'm looking at you we should help with legal services as well as let's say the the technical diligence and the commercial mutiligence aspects you would uh reduce the effort so you would make it faster validated it and therefore reduce the transaction cost that will not pay off in the beginning with the first transaction or when you're talking as it did legal paperwork has to be done and the initial mutations has to be done but then over time the more and more um you you trade such an asset I I strongly believe that that reduces the cost so the application we have been focusing on is to make it possible for consumers to get passive income in by participating in a solar field right and even at small tickets is that what you're just describing here I'm not sure if I understood you right Alex so we are definitely we target the Institutional Investor not the consumer we have estimated those models within energy communities where you have peer-to-peer tradings based on blockchain so these these things we we have done already um not sure if there's enough value from from us as events um but where we really see see the potentials that we do we create sustainable assets and there's a market that seeks for investments in those yeah and how to how to match make these kind of projects first get the transparency disclose them make them available get them into the dynamic Market Place situation and then yeah in particular address impact investing I mean today an impact investor he how did he calculate the ESG impact of this investment it's based on a forecast based on simulation based on um yeah whatever um best guess but the Energy service companies market so the Esco Market coming from performance Contracting and Siemens is astonesco company yeah we are in this field we are accredited we do power purchase agreements and we do um yeah manage service agreements uh with energy and decarbonization and we do for sure performance Contracting so we guarantee the energy cost reduction the energy consumption reduction and the CO2 effect of our projects so therefore there's a lot more planning security for an investor because risk return he can do this is where he's expert but we contribute by giving him confidence that the impact will come and again here if you look around all those carbon offsetting mechanisms that are in place there will be more and more Under Pressure if you ask me whether they are audit proof or not yes is the tree the planted is the tree still there and so on to make it very simple yes so and then to to chime in on your statement that you want to have then an proven data so is that proven data room only for the assets the setup and the contracts that that are being associated with it and down to what you just said the performance contract that have some uh commitment and guarantees of CO2 reductions is that sufficient or are you looking then for more live data room where all the off-take and the and the measurements are also being shared in a data room for investors so if you then trade at a later point in time that you have a track record of your performance of the asset itself um I think it there's no need for having it in real time um therefore we have cloud-based platforms and Management Systems so this is and they they still will be there you will have your energy management system running that is gathering all the data and so on and other Automation and management systems but where for me blockchain comes to play is that whenever there's a reporting period there's an incident there's an alarm any kind of event so whenever there's something you really want to report or maybe when it's about a relevant data you want to verify this data and have it validated then for me this is where I take the value and put it on blockchain not the exponential growing iot devices that create in highest resolutions real-time data I think that that's that's not the purpose where blockchain is no yeah yeah I think I expressed myself not clearly enough so what with life I mean regular updates you know so current data rooms are you created by the initiation of your project and only minimum data is added over time yeah so usually any annual statements and that's it as an as a new investor when you evaluate your your your participation but if you have that data feed from your iot system from your scada system from your as more as indisputable yeah uh entered into the data room rather than official statements as annual financial statements then I think it will be um more valuable but that's what I want want to understand yeah yeah and you know and then at the end I mean you with your background in IBM I mean you have a Maximo and try Riga so you also collect data and we have a building suite where we do the building Automation and where we do energy management so all those existing cloud-based platforms they will be relevant and then it's up to let's say the needs of an investor to see what kind of data would you need and then which uh resolution or how actually that needs to be yeah the tokens we are particularly interested in the application right so the technology underneath that is blockchain tokenization just a means to end and in this whole energy transition we see two sides of the coin on the one hand you have the energy communities where prosumers accessing local for local those types of things and the other side is of course the institutionals but both have a need for tokenization and hence my question right if we were to create if we were to have a perfect world you know the the the systems that Siemens is putting in place would in the end enable any consumer to buy a part of a of an energy asset and have have that be part of his pension or what have you as a return but that's not the approach that Siemens is going for right now right you go for the institutions for the big tickets so my question is do you have any understanding of how big that market our potential is you know yeah I mean you can take those uh data from like uh the June the global impact investors Network and the next Pro extrapolate what's the market for that is energy related what is the market that this decarbonization related and so on so definitely this is a skyrocketing Market skyrocketing Market because investors are more conscious and shift their Investments towards impact investing so even the money that is already invested there that it's it's there there's a shift so some of the um I mean to make it obvious like investments in oil and gas and coal and by coal mining and coal power plants those Investments are typically have hard times nowadays and Investments are shifted towards more um either um sustainable technology or let's say Forward Thinking and Technology I mean we were talking about this typical examples of wind and PV or arabics but as a green hydrogen there's so much more coming up that needs upfront Investments and where you may may benefit from subsidies governmental subsidies or tax reliefs tax credits um so uh yes I believe this is a very much growing market and if we even make this step further from the when we look on ESG metrics from the environmental the the obvious um kpi of carbon emissions avoided or reduced it's as about the others with social so where it's about safety for people Health aspects for people um there's so much more water and so on so we could spend an hour just on on the ESG metrics that it's uh what what um I I I'm realizing now with what how you explain it that um this is not about tokenizing the um let's say the ownership right so the the let's say the shares of the SPV that holds all the assets and and to tokenize debt those rights uh to be transferred to the to the investors but it's about tokenizing putting blockchain all the data uh that's generated with renewable energy energy asset or any kind of other energy saving measures or whatever you or whatever you have which is relevant for easy purposes within that asset that building or that energy asset if I understand correctly so that then you have data available either makes you it makes it easier to see what the risk is of an asset once you purchase it but also to show the performance of those assets for eec purposes is this is Right poses right um I would not say any one or the other so therefore I I depends on what is your underlying Financial vehicle if it's a power purchase agreement you want to tokenize then you're more into your tokenize the kilowatt hours yeah and not the asset if it's about really financing a new asset or transferring an asset from one owner to another one then I would say it's a direct um it's about the direct ownership of the asset that you want to tokenize and in many cases you you need a systematics in place to monitor a report and validate um the performance of the asset and the kpis uh you are measured on so therefore I would say it's not the one or the other it's almost all of them and then the detect as a technology will show us what what can be combined so the the recent things we were looking at and we had a hackathon um just concluded last week a global hackathon within Siemens was to look on Dynamic nfts for instance whether Dynamic nft could be the appropriate token solution where you have an asset reflected by their non-fungible token direct ownership of it but the same time that the dynamic uh nft with uh let's say Dynamic data and smart contracts and oracles allows you to have an asset represented during its life cycle with its relevant performance data interesting so the big Siemens you are working on nft projects how does that work there's some exposure in terms of people perceiving nfts so I'm really surprised by this it was within the confines of a hackathon or uh when you read the news about Siemens Corporate Finance You Know What You Did in February so Siemens are really out of the curve seems like yeah we are we are a small but uh let's say um a good community of blockchain experts in the company yeah from uh from legal in particular when it comes to financial law and tax law then our colleagues in corporate finance treasury with the news you were just referring so for the first token I spawned um that we we released to the market um and we also had an nft our first nft for the 175 years anniversary of Siemens giving to um yeah politicians and VIP guests yeah so that means we had to be 100 assure that uh this is a fully compliant with all kind of laws and yeah back to the dynamic nft this is like we are in an ideation phase this was an uh result of the hackathon that two out of three finalists that we have chosen they have decided for dynamic nft as appropriate token are you going to be publishing the results of this hackathon is there somebody with a listeners can find information about this yeah there's uh so that has been recorded so I can share the links with you the link with you so you can see the recorded session and at least listen uh to the Winner's presentation yeah sounds very interesting and I'm very surprised yourself so uh yeah indeed yeah that's very good work this uh okay uh the final thought final question who wants to have that final question yeah so so we have a question so tobia so what do you think is the biggest inhibitor to to move the needle forward in the energy domain I mean foreign let's say look on on the complexity uh within the stakeholder metrics who's your stakeholder and in many cases no matter if you're on the building side or on the grid side or the Utility side or an energy consumer Community side you have an asset owner you have someone who operates the asset you may have a tenant someone who uses electricity yeah or power in general so you need to have a value proposition for all of them you need to make it um tangible for all of them and I think this is one of the big challenges coming from the acceptance in the market and how how responsive the market will be for changed and then all under the boundaries of the laws on the energy market and the financial market so it's a it's coming top down and bottom up and you need to work and Lobby on on in both directions it's it's right it's bottom up and top down and uh here at the foundation we try to not only do the ideation and and bring out these great Concepts but actually do them and preach what you you know do what you preach and so we see that within Europe if you look at Austria Portugal Spain the Netherlands Germany they're all gone at a different Cadence and I think as a as a community you know of of we need to create correlation of the willing to actually do these projects how do you see that in you because you're all over Europe as well do you what what do you see you know is it is it is it as difficult in every country you know would it be possible to maybe select a couple of projects in different European and presenters yeah that's that's the beauty of working for Siemens is that I have access or we we have those customers we can identify customers that are open-minded that are also willing to say hey let's let's go for a proof of concept um it's it's not a rock solid product or solution that we have in place we want to try something new yeah and even um yeah it's not only about the engineering solution that needs to be Innovative it's about the financing solution or the underlying technology that needs to be Innovative so therefore um there's always a potential to do that with existing Siemens customers and then indeed you need to look on the regulatory environment where you want to do it and I mean uh with the complexity we have it's not about you you select the country you need to look in the country to the state and in the state to the city in order to really figure out whether you you are able to realize that or not um what I would see as a disadvantage if I may say so for a Western countries in Europe or so if you take North America um it's very regulated so there's not so much freedom to try something new this is why if you look on Venture capitalists they always would love to see you to go to South America to Africa where you have not such a regulated space to try something new but that would not be the set of countries we are aiming for to to give it a start um we we have the ambition to say if it would work for instance in Germany if we would have for instance a buffin agreeing to what we have in mind then we feel more more safe and secure for amount of planning process and Investments yeah especially with Micah and what Baffin is ahead of the curve at the crypto gazettes and evpf you know this seems to be more possible in Germany than in the rest of Europe which is really interesting what final question for Michelle you know what do you see in Europe in terms of what's possible and what's not well that's then limited to uh application of blockchain-based Solutions in the energy sector right I think they're on one hand what you see of course from the Energy Regulatory side or is it the energy policy side is this which was already mentioned this pushed to let's say democratize energy production and and uh sharing the excess or the energy itself or giving access to energy assets for the uh energy regulations or energy policy framework designed by the European commission which creates a need for solutions that enable actually exchange of energy between users uh eventually on my on a consumer scale um but at the same time we have an Energy Regulatory framework uh which is you know implementing all the different member states in in different in different sorts of forms which the tricks actually the possibility to enable um uh peer-to-peer energy exchange or or these more innovative solutions and so that needs to be um yeah designed basically from from a legal point of view that to make that work and then on top of it you have the the financial regulatory aspect and the conservative which is basically focused on consumer protection so in that sense um it's it's it's a part of the market so so I would say that that perhaps The Innovation should also come from from B2B Solutions so business to business solutions where you don't you're not confronted with these uh let's say consumer protection laws um so it's a bit easier to implement those projects um as uh compared to to b2c Solutions so I would say B2B that's the way to to go and and of course I would love to see a regulatory safe havens where you can experiment uh but those also need to be created so the question is what takes longer does create those Havens or just start doing the projects and then try to change the law uh step by step well thank you gentlemen this was a liquid dog for another 45 minutes I suggest we we do that again but then uh you know own in on another subject Toby asks you very much invited to participate in the expert session on this subject that we will be hosting in at the end of May would be awesome and really nice if to have you there and an invitation from the working group yours is the captain uh is to participate and maybe come forward with one or two uh proof of Concepts where we can actually do things with the Coalition of the willing thank you all this was uh an energizing podcast and I look forward to talking to you next thank you very much for the invitation I appreciate it like the exchange with all of you thank you thank you that was it for today's podcast thank you for listening in and please subscribe so you don't miss out on our upcoming episodes if you want to get in touch with us you can find our contact details at www.tutokens.org