Token incentives have demonstrated their effectiveness in coordinating the growth of decentralized physical infrastructure or DePIN. Some more well known examples of this are Helium and Pollen, two competing players in the decentralized wireless sector which reward users with tokens to deploy 5G antennas to create a large-scale decentralized wireless communication network.  React Network seeks to bring a similar concept to the energy sector.

I. React Network Overview

React aims to bring the US power grid into the modern era by building a community network that links together various distributed energy resources and energy monitors to markets that value them. The contributors earn KWH tokens and stablecoins for their participation and services. Market compensation is based on demand for the network’s data and energy services. These services are paid via Data Tickets, which are minted by burning KWH tokens.

The Problem 

The energy system is experiencing a major overhaul, transitioning from central fossil fuel power plants to decentralized renewable energy sources. However, renewable energy sources are often unreliable because they depend on factors like the weather that can’t be controlled. Historically, the operation of the power grid has relied on the ability of power generation to be highly controllable and responsive, allowing it to be adjusted to precisely match demand. 

A stable power grid requires that generation aligns with demand to ensure the frequency is maintained at 60 Hz in the US (50 Hz globally). Any disparity between supply and demand can result in frequency instability, leading to grid failure, blackouts, and substantial financial and economic impacts.

Electricity systems are an area of shared federal and state jurisdictions in the US. Hence, there has been an eternal struggle to modernize the grid. The consequence of this failure is that the US has the highest number of power outages among all developed countries. The U.S. Department of Energy (DOE) has estimated that power failures cost approximately $150 billion each year.

Two types of distributed energy resources (DERs) are essential to tackle this problem: energy storage systems and controllable loads.

Distributed energy storage systems, such as batteries, store and dispense excess energy to align energy demand and supply seamlessly. Moreover, distributed energy storage minimizes the need for costly transmission and distribution infrastructure upgrades, thereby reducing the overall cost of upgrading the power grid.

Controllable load resources are smart devices that regulate energy demand. These devices can be remotely controlled to temporarily reduce or alter energy consumption. According to the International Energy Agency, a ten-fold increase in controllable load resource usage is necessary to achieve the 2030 target of net zero energy.

A network of batteries and controllable load resources is called a Virtual Power Plant(VPP). VPPs are used to provide load regulation or supply injection to the grid, similar to legacy centralized power plants. 

To tackle the problem of outages, it is also necessary to have real-time, detailed, and standardized data for demand forecasting, but the current energy data infrastructure falls short in that area. Data collection is often performed manually and doesn’t provide any insights into resource consumption patterns. The utility holds a monopoly on the data, making it very expensive. Moreover, the data from DERs is also restricted to the original equipment manufacturer (OEM).

II. React Network’s Approach

React is building the digital infrastructure layer necessary for the energy grid by:

• Promoting the use of energy monitoring systems and DERs
• Gathering and standardizing grid-edge data
• Establishing connections with all available DER resources
• Managing and coordinating connected devices for customers

Technical Architecture

Energy Monitors

Energy monitors are compact devices that can be attached to electrical panels to track energy usage and allow the React Network to collect real-time energy data. This data can be monetized as a standalone service, as well as used for measurement and verification for VPP operations. The data insights from the energy monitor can assist the contributor in reducing and optimizing their home electricity consumption.

An open-source energy monitor for the community is in the works. React is currently working with existing energy monitors for the network, before fully shifting to its own energy monitor.

Distributed Energy Resources

Selected DERs will be whitelisted to be eligible to take part in the React Network and is dependent on an available API. The more flexibility available in a load source, the higher value to React and to the grid.

DERMS

Distributed Energy Resource Management System (DERMS), is a software-based platform for controlling and monitoring DERs, both individually and in aggregate. 

Network Data Pipeline

The Network Data Pipeline  standardizes the data from various energy assets connected to the network and distributes and stores the off-chain. The Network Data Pipeline also communicates with the Distributed Energy Resource Management System (DERMS) software to manage the storage and transfer of dispatched signals. React Network plans to leverage Space and Time’s decentralized database and data warehousing systems in the future for off-chain storage purposes.

State Estimation / Forecast Modeling

React uses OpenEEmeter, an open-source Python toolkit to measure energy consumption, calculate energy efficiency and forecast energy production based on weather information

Elastic Asset Pools

Asset pools are regional groups of energy assets that can be coordinated to offer greater flexibility to the power grid. These pools are considered “elastic” as assets can be included in multiple pools, for example in both a utility pool and a wholesale market pool, based on their location, features, and commercial opportunities.

III. Network Demand & Compensation

React’s token model distributes value back to resource contributors in the form of KWH and stablecoins (initially USDC). KWH is an ERC-20 token on the Polygon and Ethereum blockchains.

Value distribution to resource contributors takes two forms: baseline incentives, and market compensation. Baseline incentives, in the form of newly minted KWH, are issued to resource contributors by the network to incentivize early participation and network growth. 

Baseline incentives reward resource contributors for connecting data and energy devices to the network. The rewards a resource contributor earns are a function of how many connections they maintain per energy monitor, as well as how active they are in community growth and network building.

To qualify for baseline incentives, a resource contributor must deploy a React-whitelisted energy monitor.

Market participants pay for 1) network data, and 2) Energy Management Services(EMS) dispatch calls.

The counterparties that could potentially use these services include:

• Consumer energy technology and energy efficiency companies
• Utilities
• Retail electricity providers (REPs)
• Energy demand forecasting
• Fire insurance

The expectation is that, over time, market compensation will overtake baseline incentives to compensate resource contributors, removing the need to continuously inflate the KWH supply. 

IV. Team & Investors

Team

Anode Labs is responsible for developing the React Network. Anode Labs has 3 co-founders, Jason Badeaux, Dallas Griffin and Evan Caron.  

CTO, Eric Miller has more than 15 years of experience in software development and was previously VP of Engineering at ClearTrace, an energy data and carbon accounting platform.

Investors

Anode Labs raised $4.2M in seed funding in November 2022. Lerer Hippeau and Lattice Fund led the round with Digital Currency Group, Climate Capital, Allegory Labs, VaynerFund and Gaingels participating.

V. KWH Tokenomics

Source: React Docs

The team and early investors have been allocated 40% of the token supply subject to a 3-year vesting schedule with a one-year cliff.

The baseline plan for issuing tokens has a duration of 8 years, with a gradual rise in issuance over the initial 3 years, followed by a linear decrease of 30% over the remaining 5 years.

Baseline incentives payments are dependent on the amount of React Incentive Credits (RICs) earned every week. RICs are obtained through the following means:

• Energy Monitor Baseline: Each energy monitor connected to the network earns a base amount of 1,000 RICs.
• Connected DER Multipliers: Assets connected to the same building as the energy monitor receive a RIC multiplier.
• Referral Multiplier: Community members receive a referral code and can earn a 1.5x multiplier for each new user they refer for the following 4 weeks.
• Asset Reputation Scores: The reputation score determines the reliability of contributors and impacts their earned RICs. A contributor with a maximum score will not receive points above their baseline, while unreliable assets will quickly lower their base score.

The weekly RIC balance is then compared to the total network’s earned RICs to calculate the percent of the weekly token emissions to which they are entitled.

React utilizes a Burn-and-Mint equilibrium model with a small variation. Instead of sending KWH to a burn contract to produce Data Tickets, KWH will be sent to the React DAO treasury to mint new Data Tickets.

Apart from utilizing KWH for network service demand, Staked KWH earns enhanced governance participation rights and those who stake will receive a time-based multiplier.

VI. Centralized Competitors

Swell Energy – Developer, financier and operator of integrated residential storage infrastructure and supporting grid services

David Energy – Integrated energy provider that leverages connectivity to customers’ DER assets for demand response and other grid services

Leap – Technology infrastructure to connect DERs and wholesale markets

Arcadia – Standardizing existing utility and energy data and making it available via a unified API.

Tesla – Provides an option to its Powerwall customers to join its VPP network.

VII. Valuation

React raised $4.2M back in November last year and 9.8% of the KWH tokens are allocated to the investors. Assuming it’s an all token warrant deal, Fully Diluted Valuation (FDV) will be around $41 million.

As React is still in its nascent stage, it is not possible to conduct a valuation analysis at this point. However, for context, Arcadia, a centralized competitor, recently raised a Series E round at a $1.5 billion valuation. Its most recent revenue figures amount to approximately $178 million, translating to a revenue multiple of 8.5x.

VIII. Ending Thoughts

React Network is yet another example of how token incentives can be used to coordinate disparate parties into creating decentralized infrastructure. If it succeeds, it can make the adoption of renewable energy truly sustainable.

IX. Sources

1. React Network Docs
2. CTVC

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This article has been written and prepared by Kooky___ and the GCR Research Team, a group of dedicated professionals with extensive knowledge and expertise in their field. Committed to staying current with industry developments and providing accurate and valuable information, GlobalCoinResearch.com is a trusted source for insightful news, research and analysis.

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Disclaimer: Investing carries with it inherent risks, including but not limited to technical, operational and human errors, as well as platform failures. The content provided is purely for educational purposes and should not be considered as financial advice. The authors of this content are not professional or licensed financial advisors and the views expressed are their own and do not represent the opinions of any organization they may be affiliated with.

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