An understanding of the WePower proposition requires some insight into the industry in which it operates – renewable energy.
Investment in renewable energy is stalling, if not receding. In 2016, green energy investment amounted to $242 billion per year. That may sound like a lot but is actually represents a 23% decrease on the previous year, according to the WePower white-paper.
With a current US administration that is demonstrating outright hostility to the idea of climate change and, by implication, the green energy sector, and with green energy development largely dependent on the involvement of institutional players who privilege profitability over social utility, the general outlook for the industry overall has not been looking promising.
WePower, however, believe that they have a proposition that leverages the Blockchain’s ignorance of national borders to put forward a model that can stimulate, aggregate, streamline and even democratise green energy production to the point of making it an attractive investment proposition.
There are two aspects to the WePower white-paper that need to be understood in order to have a grasp of the business model they are putting forward – firstly, renewable energy as a tradable commodity; secondly, infrastructure.
National governments who seek to engage with renewable energy production generally do so through two common means: firstly, through subsidies; secondly through Green Energy Certificates.
The current trends indicate that subsidies are declining. We’ll come back to that point a little bit later.
Green Energy as a Tradable Commodity
Green Energy Certificates, on the other hand, remain common. These are essentially the representation on paper of a fixed amount of electricity – for example, 1MWh (roughly equivalent to the energy consumption of an average US household in one month) – that has been produced by a green energy supplier, usually as part of its contribution to the national grid of the country in which it resides.
Businesses are encouraged by national governments to engage with green energy production by purchasing these certificates to pay for their own energy consumption. The certificates are also generally tax-deductible.
The current process for any renewable energy producer to be onboarded to a Green Energy Certification program is generally a long, drawn-out process involving a lot of legal admin. The first WePower proposition is to reduce the standard complexity of this onboarding process from a matter of weeks or even months to one of hours.
A small energy producer simply signs up to the WePower network through a template agreement which is smart contract-managed. That template has already received formal approval from specialists in European green energy legislation.
A second barrier to entry for potential green energy producers is scale. Green Energy Certificates can normally only be issued by an energy producer if they are able to provide energy output above a certain threshold.
One option for energy producers within the current production model is to aggregate. The problem, however, is that under the current model, they need to be situated within the same national jurisdiction and within reasonable geographical proximity.
The blockchain-managed approach being proposed by WePower, however, allows for conceptual aggregation among energy producers. By aggregating as a single entity on the WePower platform, they can satisfy regulatory requirements for minimal energy output. In other words, WePower is now giving the ability for smaller energy producers to issue Green Energy Certificates as part of an aggregated entity.
Opening Up Investment
As indicated earlier, government direct subsidies for green energy production are declining. Consequently, institutional investors are increasingly reluctant to invest in green energy business models as these offer offer smaller perceived margins of profitability in comparison to other propositions.
On the other hand, a Blockchain-based green energy management model where the energy itself is represented as a token opens the door to individual investors. This democratisation of energy investment allows individuals and others with an inclination for privileging social utility over profitability to enter the investment arena.
The WePower general roadmap is conceived as three separate phases: Breeze, Storm and Hurrican.
This stage represents the development and roll-out of all core features of the proposed platform. This will incorporate, among other things, the creation of a Blockchain-based trading platform which allows for the representation of various kinds of green energy investment instruments – generally Green Energy Certificates as they exist in their various flavours – and their mapping to the WePower energy token.
This is intended to be a borders-agnostic, open platform that will allow for free trade of green energy irrespective of the characteristics of national contributors. Initial development will be Europe-focused with more general expansion following just after.
This aspect appears to be highly technical and seeks to address the challenges of virtual integration of disparate, physical grid networks. Taken from the white-paper:
Since this [aspect] deals with power grid integrations, it is also the most complex phase. A basic under-
standing of green renewable energy impact on the physical grid layer is required to understand what kind of optimization is being developed in Storm.
A fuller explanation of this aspect is beyond the remit of this review. Readers are encouraged to perform their own research and enquire with the project organisers for more detail.
At this stage, WePower will have developed sufficient functionality on its platform to allow investors, producers and consumers to collaborate in a meter-based, uniformised free market of energy consumption.
The next challenge that they appear to be setting out for themselves is to operate as a fully-fledged utility grid. In other words, they plan to develop over the longer-term the technological tools needed for monitoring energy consumption and regulating its provision as per the traditional role of a national grid, albeit in a kind of virtualised form.
The flexibility of the token itself – a timeless, virtual form of green energy certification which can either be consumed as electricity or sold as a commodity – adds inherent value.
The requirement for energy producers onboarded by the platform to hand over just under 1% of its energy production in commission, with this energy then reallocated to energy tokens which in turn are distributed to WPR token holders appears to represent some serious promise but only if the platform manages to appeal to a sufficiently large number of energy providers.
The ultimate success – or otherwise – of the business model centres on its ability to provide investors with a virtualised store of energy represented within the token itself that outperforms the traditional energy market’s pricing.
Concretely, with a token in the ICO sale being valued at around $0.4, the question boils down to whether the platform attracts enough energy contributors such that they are able to produce sufficient energy per token to outperform a current traditional market pricing structure that prices 1KWh at around $0.12 – $0.15. In other words, this is a long-term investment.
WePower are undertaking an aggressive marketing campaign which is clearly reaping rewards in terms of the attention it has been receiving. Visibly present on social media with followers numbering in the thousands on Facebook, Twitter and Telegram, they are not struggling to get their message across.
There is also a strong presence on Youtube with the project attracting what has generally been positive attention from high-profile figures in the ICO commentary arena.
The website and white-paper could have done with a little bit of sprucing up – aesthetically, both are clearly pedestrian in their presentation. There appears to be more of a focus on substance over form which is a tad unfortunate as we know many investors, particularly in the ICO field, tend to judge a book by its cover.
A strong team, an interesting proposition and a first-rate marketing campaign. The weaknesses here are generally thin across the board. The project also enjoys formal support from the Lithuanian government.
The tokenomics aspect of the project will be entirely dependent on the ability of the project to attract a large number of clients. With Wepower stating in their white-paper that they have a client pipeline to keep them busy for at least the first two years of the project, however, the signs at this stage appear to be as promising as they can be expected to be in the initial phase of this kind of project.
Ratings Score Methodology: a weighted average across three scores: Concept (10% weight), Blockchain Fit (30% weight), Execution (60% weight).
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