Q and A

What is a Virtual Power Plant?
Many people use this word, but for Respondo it means that an investor pays an owner of a power plant for the right to dispose of the power that is produced for a defined period, usually 3 – 10 years. This power is thereafter sold to the spot market in order to give a return for the investor. A Virtual Power Plant can be compared to a loan where the power plant owner receives money today and pays back by handing over the sales revenue from the sale of electricity to the person who pays him the money. Respondo has developed several types; VSPP (solar energy), VHPP (solar energy with battery) as well as its own solutions for solar energy and batteries mounted on roofs for private individuals, companies and public institutions.

Is it really just a form of lending?

It could be. But it could also be a completely normal electricity contract where power is bought and sold. A Virtual Power Plant is based on the fact that electricity is actually produced and sold and bought. This is a question of definition, but is important for determining whether a license is required for loan brokerage, or possibly a license for power trading and with payment of VAT. As interpreted today, it is the buyer and seller of electricity themselves who determine the contract types. Respondo has an advantage here based on its experience – the company’s key people were among the first to start commercial trading in physical and financial power contracts, as early as 1992.

How is money made from this?

The power plant owner is paid a fixed agreed amount for the power Up-Front, i.e. as an advance on future income. He secures this financially with a fixed power price and also provides a favorable financing solution by having money come into the books immediately rather than waiting for sales revenues over several years.

The investor who buys the power takes on the risk because the same power will be sold on the spot market and because it is uncertain what the price will be in the future. But at the same time, this gives the buyer an opportunity to profit if the price of electricity increases in the future. And that is what many people believe.

Since Respondo owns and operates the platform, the investor must pay a management fee to Respondo. This is to cover Respondo’s costs and provide the owners of Respondo with a return.

How is the investor’s money secured?

This is always a key question. The investment becomes a matter between the investor/power buyer and the power plant owner and is regulated in a separate agreement similar to the purchase and sale of power (PPA – Power Purchase Agreements). It may also be appropriate to use a solution based on so-called Crowdfunding. This is already a system that is widely used internationally and a form of secured client account is used. This system is regulated by the financial authorities and ensures safe money transfers.
Respondo never has access to this money and is only paid for its fees. More information about these solutions can be obtained by contacting Respondo.

Is there a high risk with such investments?

There will always be a certain risk and the investor will be fully informed about this. Respondo will reduce the risk by using standardized contracts that are used internationally, so that legal risk and disagreements about payment can be reduced. Respondo will also only invite financially solid power plant owners, so that the investor has reasonable certainty that they will be supplied with the electricity that they will sell on. The sale of the electricity then takes place on a power exchange that provides guaranteed settlement for the resale in the spot market. But the most important risk for the investor/buyer of the Viirtual power Plant lies in the future electricity price.

And how much can you earn on such an investment?

We don’t know. Nobody knows. Future developments in power prices are very uncertain. What many people think is the best reason to invest in a Virtual Power Plant is that you will make money from the price of electricity rising. That’s nice for those who are worried about high electricity bills. The virtual solar energy projects that were established in 2022 in Spain by Respondo, gave a documented return until now of 15% per year on average. However, it is not certain that the return will be as high in the future, as power prices were extremely high in 2022. Respondo publishes updated market information that gives customers the opportunity to assess the future price outlook for themselves, as well as the historical return rates on such power plants..

Why choose projects that Respondo has?

We believe that an investor should choose many projects and from several platforms, among other things to have a portfolio with several green investments. However, the success of the platform still depends on having projects with good profitability and on being able to provide good documentation about the projects and a continuous update on an hourly basis about the production and sale of electricity. In addition, Respondo has both news services and training packages for users, along with continuous updates on the power market.

Respondo emphasizes that this is not only about economics, but also about the environment. How?

When the sun shines and electricity is produced from a solar power plant, this means that someone else must reduce production. This is because a power system must always balance, which is something that the so-called System Operator ensures. Today, it is often the case that power plants that run on fossil fuels reduce production and thus reduce CO2 emissions for each kWh that the solar power plant produces.
However, which power plant reduces production can vary hour by hour. It is therefore not easy to find a correct answer to how much emissions are reduced. For example, international standards have been created based on average figures for the entire country and for the entire year. These involve a simplification and are used today by most players when reporting emission reductions.
The problem, however, is that these estimates do not reflect the actual conditions – they can in fact often give a completely wrong picture. Many have therefore wanted to come up with models that report correct figures hour by hour. Respondo has created a solution for precisely this. Through the platform, you can see the emission reduction of producing your own electricity hour by hour! This is a service that is in great demand and where very few have such models and systems as Respondo has developed. By purchasing a Virtual Power Plant, investors can also be awarded so-called Guarantees of Origin, which document access to renewable energy.