I've had a desire to write a piece on WePower (WPR) for some time now, I guess now's a good moment as any other. I stumbled upon the ICO details actually quite accidentally and started reading about the project. Since renewables and energy efficiency are something I'm dealing with professionally for several years, I was actually thrilled to see a project like this. First off, what I believe WePower succeeded to do is create a value for investors for holding the token (unlike many other purely speculative cryptocurrencies). The project and its goal seem very promising, energy trading is a very lucrative business and I think everyone would like to give it a go as soon as WePower fully launches its system. We'll cover this part a bit later, let's start from the beginning.
What is the problem and why WePower could be a part of the solution? Well, even though renewable energy is becoming an increasingly attractive investment for everybody, the market penetration is still very low. Now, the following figure might say something about that (scroll a bit down).
*Chart taken from https://en.wikipedia.org/wiki/Energy_mix
I must say that I'm not discussing the figures in the chart, we'll use it as it is. So... 2013, right? Renewable energy share in the world energy mix around 19%. Isn't that something? Well, as fate would have it, IT IS NOT! Okay, we're in 2018 currently. But the situation has not changed dramatically. We're still behind on the installed renewables capacity and energy produced from renewables. Next up we’ll see why I think WePower can change this situation dramatically!
WePower Whitepaper analysis
You can find the WePower Whitepaper on their webpage: https://wepower.network/.
Identified market inefficiencies and problems
While there are many problems preventing full scale penetration of renewables in our old and inefficient energy systems, the Whitepaper starts by identifying issues on both investor's and producer's sides of the puzzle. Even though obtaining financing for renewable energy project from banks has been significantly improved in the past few years, it is still evident that many projects fail (often in the initial phase) or require significantly more time to get to realization phase. WePower therefore proposes to solve the problems of access to capital. Excellent. Furthermore, the Whitepaper also identifies market inefficiencies in energy supply and proposes to provide better access to energy for customers by directly connecting producers and customers. The benefits of establishing this link come hand in hand with the previous issue that WePower solves.
The proposed solution
The project owners sells a part of estimated energy production before the project is built and gets the financing from investors. Investors basically provide financing for a project which should be built by buying energy upfront at cheaper prices. Furthermore, the project owner provides a certain amount of the estimated energy production (0,9%) to WPR token holders for free. That's a requirement for every new project entering the WPR ecosystem (but read the Whitepaper carefully, at the time of writing, page number 13, chapter 3.5.1, point 2 says: "WePower is not liable if renewable energy provider fails to implement its obligation to donate energy.").
Besides the fact that WPR holders will receive free tokenized energy, they will have priority access to energy sale. Of course, other customers will be able to purchase energy through the WePower portal. According to this, I believe this is how the whole system should operate.
Extraordinary solution, I like the project very much so far! Well, everything except the mentioned warning in the Whitepaper which might significantly reduce the incentive to hold the WPR token at all!
The numbers and the explanation on the underlying WPR value
So let's now go through the numbers presented in the Whitepaper. Focus on chapter 3.5.2.
Let's go a bit into the numbers marked with red. So 1.000 MW of renewable power plants installed and financed in year 1 of the project. Let's compare the numbers with the figures in REN21's Renewables 2017 Global Status Report. Page 21 of the mentioned publication says that there were 136.000 MW additions of renewable energy capacities (excluding hydro power) in 2016. So, if we compare the WePower figures to this number, it is clearly visible that the foreseen figures make up less than 1% of installed capacity in year 1. In the following years, the number aggressively grows up to 64.000 MW in year 5 (let's say that's 2022). Let's take one forecast, e.g. International Energy Agency model results (link).
The model foresees that it could be possible that the renewables capacity growth is somewhere between 900.000-1.200.000 MW in 2022. So take, the WePower predicted number of 64.000 MW and you'll see that the number is quite realistic again. It might end up being only 5-7% of the total additional capacity in that year.
FORECAST OF INSTALLED CAPACITIES - PLAUSIBLE!
Let's go to energy production figures now that we've proven the capacities are fairly predicted. So...the first year has a prediction of 5.500.000.000 kWh, i.e. 5.500.000 MWh. When we divide that number with the installed capacity in year 1 (5.500.000 MWh/ 1.000 MW) we get 5.500 h of full capacity power production. PV plants usually might operate up to 1.000 full load hours, wind a bit more up to 1.600 h. So this actually means that the sold (and donated) energy will have to be produced over a longer period of time, as suggested in the Whitepaper. I suppose this will be done over the lifetime of the plant - say 20 years. If we take 20 years, that means that the plant owner would have to provide free energy for approximately 275 full load hours each year (5.500 h/20 years) because he already sold (and donated) that energy to get financing to start the project. That sounds reasonable and I'll tell you why (related to explanations above). First off, plant owner will not have to pay interest for the financing he obtained. Second, he will achieve a higher energy price by selling directly to the customers. Therefore, I strongly believe that this is a good model to speed up energy transition and increase penetration of renewables.
ENERGY PRODUCTION - PLAUSIBLE
Let's move on to risks!
Risks
Risks appear in every project. Two particular risks that I've identified in this case are:
- Energy licencing - A particularly difficult topic. In order to sell and distribute energy, a company must have a licence. In each country. This point might be quite costly and time consuming. Let's see how WePower tackles this.
- Smart meters - Party stopper. Check out the figure below, taken from JRC's web page on smart metering deployment in EU. It will still take time to ensure that all consumers have smart meters. Hopefully, that problem will not have to be tackled by WePower, but the authorities in each country. But this is a big problem for the business model because it limits the number of consumers to ones which have smart metering devices. There are huge differences among countries in the EU, imagine how it is if you compared worldwide.
Summary
I consider WePower an excellent project and strongly believe that the project will develop into a sustainable business which will accelerate transition to a carbon free future. I have to admit, I haven't invested in the token yet as I am waiting to see what will happen in the next few months (check out the project roadmap and you will see why :D). After I'm assured that everything goes according to plan, I plan to invest in the token. This is by any means not an investment advice, to is intended to be an educated analysis of a person working in the energy field.
I will also analyze and present my opinion some other energy related projects which I have come across, so stay posted for the next one.
Comment, like, don’t like, just stay informed.
*rides into the sunset