Earlier we posted our review of WePower ICO, asking them 11 questions which we believed were critical, and deserved answers from the team. The WePower team sent us their response, which is being shared below.
You can read the original post with the 11 questions in detail here.
Why has renewable been losing private investors since 2011?
This observation is not entirely correct. It’s true that the energy sector has not been as hot as the Communications, SaaS, Retail, Transportation or other prominent verticals in the venture capital space. However, it has a lot to do with the nature of the energy sector and venture capital industry.
Up until now it was very hard to find business models in the energy sector that could be turned into platforms with a potential of 10x returns over 5 years or less. As a result VC model itself as investment vehicle with its own specific expectations simply was not very well suited for the energy space. This is why I would not generalise the investment interest in the energy space based on the VC funding trends. It is really an apple to orange comparison.
When it comes to WePower and more specifically our market approach and business strategy, we are really focused on the energy trading and renewable energy development industries. Both are very different from the VC space. Energy trading is massive industry that taps into the energy volumes used by people as a commodity every day. We are offering an alternative trading instrument that is similar to the power purchase agreements, which are traded and have a market already.
Renewable energy development is also a large industry. There are over 200 billion dollars of investment that goes into it every year. WePower offers a solution that can make these investment flows run in a simpler, cost effective and globally open way. We are really tapping into existing industries that were relatively little digitized so far but this is changing now with the blockchain.
Why can’t I redeem energy from another country until Phase 3?
You actually can. The only difference is that you will get a financial return coming from liquidation of the token into the energy wholesale market as opposed energy itself. Cross-border trading takes time to develop and this is why we need to get to the Phase 3 to have it running. However, that does not mean that the token (Energy token) will not be valuable to the buyers before WePower is present in their market. If we cannot deliver energy, we’ll liquidate the token into the wholesale market.
Are you sure my energy will arrive 4 to 6 months after I buy your tokens?
Assuming that we are still talking about the Energy and not the WPR token, we base this estimation on the time that it takes to develop a renewable energy production facility.
Technology is there. We do not need to reinventing solar panels and wind turbines. Simply speaking, what project developers do is essentially to prepare a business plan, get it confirmed with a creditor, find a location, buy solar panels, place them and connect to the grid. This is not the same as developing the technology. It’s been done many times now, there are clear processes and time expectations.
On the energy supply and demand aspect, it is correct that energy supply/demand is variable - we use more energy in the evening, less at night. Green energy production is also variable - there is less wind in the morning, more soon at noon, ect. This creates fluctuations on hourly and daily basis, which need to be balanced and are traded on. However, over longer periods of time energy production and consumption is quite predictable. I would not be so concerned about that if you look at 4-6 month periods.
What happens when a solar owner sells energy that doesn’t belong to them?
This simply can’t happen. Tokenizing energy into smart contracts enables very clear and transparent mechanism that accounts for every unit produced and supplied into the grid. One of the key values of blockchain is that it enables this functionality.
When does the due diligence happen and who conducts it?
Due diligence will happen for every producer and it will be a mandatory requirement to get listed on the platform. WePower will conduct due diligence for every producer up until we have enough information to build automation. We are not inventing a wheel here. Most of the crowdfunding platforms are solving the same problem.
For the energy investors, we will be running a KYC procedure just like we were running for during our token sale. We already have a verification engine that we’ve built and developed with our partners.
Will wholesalers really be interested in buying up millions of individual tokens?
Token is a smart contract (similar to a power purchase agreement). Wholesalers are buying and trading energy and energy certificates already today. I’m not sure why you think that it is not viable. It’s simply a wallet with tokens, each representing 1kWh of energy. Once the energy is produced, smart contract executes and energy is exchanged on a pre-agreed cost.
How can WePower guarantee my token never drops below book value?
WePower, just like any startup, cannot guarantee it success. No startup can. But based on our roadmap and expected results, estimates can be made. These are estimates that we will work hard on to deliver and hopefully even exceed.
When it comes to the token, the WPR token in this case, it has got several utilities. The book value is its utility related to the access to the energy contribution pool. This utility based on our estimates reaches break even point after 3 years. There other utilities related to auction priority access and liquidity into the crypto market. They are driven by different market behaviours, which given their nature are hard to predict.
Liquidation option completely depends on the interest and strategy each buyer. We simply provide options, which actually have been very well received by our contributors.
Why does IRR go down over 4 years?
The IRR calculation discounts for cash flows, which means that given the same outflows and inflows every year the rate will always decline over time. This is how IRR is calculated.
Why would a consumer pay more for “local” energy?
Due to their environmental conditions in some countries renewable energy is still more expensive than energy produced from coal or other energy sources. However, some buyers prefer to buy green energy because of their corporate policies and general market positions. This is where they chose to pay a premium. If you pay a premium you naturally want to know with certainty that the energy you purchased actually comes from renewable sources. Trade transparence is a major problem, which blockchain can solve better than paper energy certificates.
You know letters aren’t worth the paper they’re printed on, right?
Sorry but that’s just an opinion. Government partnerships take time to develop. This letter marks the start of the conversation. We have an ongoing discussion about joint projects with Lithuanian government owned energy companies. This letter gave us a vote of confidence that helped initiate discussions.
Can someone donate energy to me so I can finish reviewing this white paper?
I believe that might be the energy that your readers donate by reading your articles, right? ;)
In terms of the roadmap, we have a high level roadmap presented but many of the details cannot be disclosed until the platform is developed because it is a valuable intellectual property. We do not want to give a head start to the copycats on the architecture that we’ve spent a lot of time to develop.
However, next week we are going to start an engineering blog where our CTO will be covering product development and engineering updates. I recommend to follow it.
In regards to the white paper length and large part dedicated to explaining the industry and the context, we actually had very positive feedback from many people. Many people do not really know much about the energy industry and with a good amount of context were actually able to at least understanding.
Disclaimer: This response from WePower ICO is posted as is (with minor corrections of typos) and does not constitute an endorsement from the publication.