Multicoin: Why we invested $12 million in Fuse to solve problems in the energy industry

Original title: The Great Energy Coordination Problem

Original author: Shayon Sengupta, Tushar Jain

Original translation: TechFlow

Today, we are pleased to announce that Fuse has completed a $12 million round of financing. Fuse is a core contributor to Project Zero, a renewable energy DePIN designed to solve major energy coordination problems.

Fuse was founded by Alan Chang and Charles Orr, who were early employees of Revolut and made important contributions to its early development. In 2022, they set their sights on solving the energy crisis. In recent years, Fuse has built a modern technology-driven energy company and built a powerful data and engineering system with the goal of serving customers more cost-effectively and surpassing the existing three major utility giants.

Currently, Fuse operates large-scale solar and wind farms and installs distributed energy resources (DERs), serving tens of thousands of homes as an electricity provider in the UK.

However, this is not enough. To meet the world’s growing energy needs, we will need to add 4,000 terawatt-hours of new generation capacity every year over the next decade—the equivalent of rebuilding the entire US electric grid every year. In addition, an additional $4 trillion will be needed each year through 2030 for grid modernization, storage, and transmission infrastructure—more than the annual GDP of Germany or Japan.

Geopolitical complexity exacerbates the problem: thousands of jurisdictions, cumbersome regulations and regulators, and a multitude of market participants, each with different incentives and constraints. The energy challenges we face over the next decade require a radical new solution, and that’s where Project Zero comes in.

Project Zero is a renewable energy DePIN that aims to accelerate the expansion and utilization of distributed energy resources (DER) by rewarding network participants for shifting demand during renewable energy hours, supporting the use of electric mobility, and adding new capacity through solar panels or batteries.

The production and coordination of energy is one of the greatest opportunities of our lifetime, but it cannot be solved by traditional means alone. While running Fuse, Alan and Charles realized that capital formation using crypto technology is key to future development. Project Zero is just such an innovation: it acts as an incentive layer that provides the foundation for coordinating the most decentralized parts of the energy value chain.

Decentralization Trend in the Energy Industry

The current trend in the energy industry is toward horizontal integration within specific areas, such as generation, transmission, or retail, rather than vertical integration across the entire value chain.

Installers like Trinity specialize in the deployment of distributed energy resources (DERs) but do not directly engage in energy retail. Conversely, retail energy providers such as NRG Energy typically do not offer DER installation services unless those services are combined with traditional power production.

Vistra Corp, a major U.S. power producer with diversified assets covering natural gas, coal, nuclear and solar, and operating multiple retail brands such as TXU Energy, Ambit Energy and Dynegy, is inefficient in coordinating supply and demand across its generation portfolio. Most of these companies operate independently, limiting their ability to achieve the greatest scale benefits.

These inefficiencies are particularly severe. Inconsistent data formats and incomplete consumption data make it difficult for grid operators to conduct real-time monitoring and demand forecasting.

Fragmented permitting frameworks across jurisdictions prevent renewable installers and service operations from scaling. Information silos prevent retailers from pricing and managing risk.

Fuse is rethinking the retail energy supply chain from first principles and intentionally operating at every stage of the supply chain to minimize efficiency losses at every stage of the lifecycle, from generation to distribution. They are focused on their mission to deliver affordable, clean energy at scale and are working backwards to achieve that goal.

In the near term, this means addressing two specific problems:

1. Consumer Inertia – How do we encourage consumers around the world to change their consumption habits to more effectively balance grid loads in demand response programs and further adopt home renewable products and distributed energy resources (DERs) such as electric vehicle (EV) chargers, batteries, solar inverters, heat pumps, and smart thermostats?

2. The Retail Energy Distribution Standards Problem – How do we integrate the fragmented processes between retail energy providers, grid operators, virtual power plants, and DER installation service providers that have historically made it difficult to achieve economies of scale in the retail energy business through geographic expansion?

Project Zero complements Fuse’s vertical integration strategy by serving as an incentive layer to help consumers flex their energy consumption and grow new renewable energy capacity.

Integrating Energy Assets at Scale

Fuse aspires to transform homeowners into conscious, active participants in their energy choices. The planet needs consumers who can proactively respond to their use of resources, not those who simply treat energy use as an item on their monthly bill. Fuse accelerates this transformation by creating delightful consumer energy experiences and managing the allocation of incentives from Project Zero to influence consumption patterns and encourage the installation of new capacity.

As a direct-to-customer energy retailer, Fuse is structurally positioned to capture and distribute the value created by solving some of the most complex coordination problems in the space: facilitating Demand Response Programs (DRPs), operating Virtual Power Plants (VPPs), building low-latency metering systems, and leading new interoperability data standards.

Demand Response Programs (DRPs)

Fuse unlocks the potential of Demand Response Programs by dynamically adjusting energy consumption at the edge of the grid. While DRPs can reduce peak electricity demand by 20%, the majority of eligible households around the world do not participate in these programs. This means that millions of kilowatt-hours of electricity can be shifted or reduced during peak times, significantly reducing operating costs.

When electricity demand is high or supply is low, Project Zero can provide token incentives, not just discounts, to owners of energy resources in the network (such as smart appliances, water heaters, thermostats, combined heat and power systems, solar panels, and batteries) to reduce or shift electricity use. This balancing ability allows Fuse to stabilize the grid at critical moments, aligning supply and demand.

Source: NYC DCAS

These shifts in consumption patterns can help each household gain more than $3,000 for every megawatt-hour of demand reduction. At scale, a portion of the revenue from these programs could be returned to consumers through token incentives that can be used to reduce energy bills or redeemed directly for instant rewards.

As more households choose to dynamically adjust their electricity usage through incentives from the Project Zero protocol, Fuse is able to make more competitive bids in Demand Response Programs (DRPs). This allows Fuse to offer greater and more predictable load reduction or shifting capabilities, which we believe utilities and grid operators are willing to pay extra for.

Virtual Power Plant (VPP)

Installers of distributed energy resources (DER) such as solar panels, battery storage, electric vehicles, and smart appliances often fail to work with energy retailers to provide the best system size and configuration for households. Not only does this result in low penetration of DER in markets where it’s needed most, but these systems are often disconnected from the overall grid.

Fuse’s vision is to provide Zero with incentives to drive households to add new renewable energy capacity and ensure that these new resources are used efficiently. This enables Fuse to operate as a virtual power plant, aggregating all distributed energy resources into a single flexible entity that provides valuable services to the grid.

When the grid faces high demand or low supply, Fuse instructs distributed energy resources (DERs) to increase energy production or release stored power. For example, solar and battery storage systems in a virtual power plant can quickly release or absorb power to help maintain grid frequency within a narrow range, while smart thermostats and water heaters can temporarily shut down or adjust in response to changes in demand.

As a virtual power plant, Fuse participates in wholesale energy markets, aggregating its DER footprint in local markets to bid at a larger and more predictable scale, rather than acting solely as an energy retailer. Fuse can also provide services such as voltage support, which are critical to grid stability. These services can generate significant revenue, typically up to $100,000 per megawatt of capacity per year.

By enhancing the reliability of these services, with advanced metering technology and an analytics-rich approach, we expect Fuse to be able to secure more favorable contracts and higher payments from grid operators. Ultimately, the benefits of these open market operations will be passed back to the users who contribute assets to the network.

Advanced Metering and Real-Time Data

An ongoing problem for energy producers and retailers is the lack of real-time data on power plant failures, demand fluctuations, and other factors that directly impact energy production. This makes accurately and profitably pricing energy a major challenge.

Fuse fills this gap by building direct relationships with consumers and collecting ad hoc, minute-by-minute data. This real-time information is fed into Fuse’s advanced billing engine, powering all pricing decisions. We believe this will enable the company to achieve higher profitability and participate in wholesale markets. This means cheaper, cleaner energy in every market covered by the network.

With a growing customer base and clear visibility into the grid that serves them, we believe Fuse is better positioned than most to profitably participate in energy markets, and therefore be able to help other players in the process.

Building an Open Protocol

Operating at scale, Project Zero is an open platform that provides transparency into all energy resources generated and consumed, with permissionless access by any participant in the energy value chain.

As Fuse accumulates more and more energy assets at the edge, Project Zero begins to function as a powerful and trusted neutral layer. This is the right way to build a global energy system for the 21st century: connecting accessible energy resources through consistent, interoperable data standards that anyone can build products and services on top of.

The Path to Energy Abundance

Fuse’s unfair advantage in competing against industry giants is in tactically removing barriers in the machine through cryptographic coordination primitives. This approach should more effectively acquire and engage users in the closed-loop generation and distribution process, positioning Fuse to become a new kind of global energy retailer: one that not only trades electricity more profitably through asymmetric data and system improvements, but also incentivizes renewable energy adoption and ultimately rewards its customers at every turn.

Alan and Charles have deep operating experience in regulated consumer environments. The Fuse team is a group of customer-driven builders and market operators focused on solving the most pressing energy problems of our time.

Fuse is gradually nurturing Project Zero as its first core contributor to build an open and shared platform and bring us closer to energy that is "too cheap to meter." For more information, visit www.zero2050.com.

Original link