Category: Blog

Employee Spotlight on Nikhil Ramakrishnan, Marketing Specialist

“Where I grew up in India was a huge inspiration to me and shaped who I am today. So being able to incorporate parts of that in my music and my creative process is rewarding.”

Nikhil Ramakrishnan, marketing specialist at REsurety

“I grew up all over the place. I was born in Pennsylvania, but I only lived there for two or three years before moving to New York. Then we moved to Singapore for a year. Then back to New York and eventually we moved to New Delhi, where I did middle school and high school. It was definitely a lot of different cultures and a little bit of culture shock here and there. 

“When I first moved to India, I didn’t grasp how cool the experience was. I had to learn the language from scratch. I had to start at a preschool level because I didn’t know anything. After two or three years, I became fluent in Hindi though, which was pretty impressive, I didn’t think I’d be able to do that.

“For a long time, I really had no idea what I wanted to do. When I was in high school, I took a couple of broad business classes that gave a feel for each field within business. Afterwards, I decided that business would be the best fit. And within those classes, I was pretty good at marketing. I also enjoyed the marketing side the most. 

“I always knew that I wanted to come back to the U.S. for college. I had done 10 years in India, it was time for a change. I went into college as a marketing major. After taking a few classes, I knew that that was what I wanted to pursue.

“I like the connecting with people aspect, because you really have to understand what a person is thinking or what a person is looking for. That human touch in marketing is something that you don’t often find in other parts of business. And there’s so many different ways of targeting people and reaching people. People think and behave in so many different ways. There’s not just one blanket method of targeting or hitting on somebody’s interest. 

“I also really enjoy music. I make music in my free time. It’s mostly hip hop and rap tracks. It’s cool to see how my music has evolved. It started out as just a hobby with my college roommate and it’s now grown to where we’re putting on local shows, meeting new artists from the area, and growing our network in the music space as well. 

“Living in India definitely shaped my taste in music. I actually wrote a whole song about the city that I used to live in. Where I grew up in India was a huge inspiration to me and shaped who I am today. So being able to incorporate parts of that in my music and my creative process is rewarding.

“I just graduated from Northeastern University about two and a half months ago. The clean energy field was always something that I was around growing up, because my dad worked in energy companies. It was never a situation where I was forcing myself to pursue energy. It was just if an opportunity to work in energy came up, I’d definitely consider it. It just so happened to work out that way with REsurety. 

“I’m looking forward to growing and developing more as a marketer in this new role. It already feels like the work I’m doing is very meaningful and making an impact on the organization. I’m also excited for the amount of growth potential that the energy field has to offer. I think the future is looking really bright for it and I’m excited to be a part of it.”

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Clean Integration Podcast: Managing Intermittent Power Risks

Clean Integration Podcast by Soluna

Listen in as John Belizaire, CEO at Soluna Computing and Lee Taylor, CEO at REsurety discuss the challenge of intermittency in the renewable energy market. The podcast covers REsurety’s impact on the clean energy economy through their innovative tools like Locational Marginal Emissions (LMEs) and hedging strategies.

The Clean Integration Podcast features experts in the renewable energy industry discussing the path to making renewables the primary, most affordable energy source. The podcast is sponsored by Soluna, a utility-scale developer that combines renewable energy power plants with high-performance computing facilities.

The Enhancement and Standardization of Climate-Related Disclosures for Investors

Wind Energy

REsurety’s letter to the Securities and Exchange Commission Re: File No. S7-10-22, dated June 17, 2022

AN EXCERPT:

On behalf of REsurety, Inc., a leading analytics provider in the clean energy economy, we are writing in support of File No. S7-10-22: The Enhancement and Standardization of Climate-Related Disclosures for Investors. We also suggest two specific language refinements to improve the accuracy and transparency of Scope 2 emissions disclosures.

Anticipated Value of the Proposed Rule

For the last 10 years, REsurety has helped our clients understand the risks and value of buying and selling electricity from clean energy projects. Many of our clients develop renewable energy projects, have made voluntary public GHG reduction commitments, or own assets exposed to climate-related risk. The SEC’s proposal to require detailed climate-related disclosures has the potential to benefit our customers, as well as the public and the planet. By requiring disclosures from a large category of companies, the proposal protects investors from unintentional exposure to climate-related risk. By standardizing disclosure requirements and requiring attestation, the proposal can also help substantiate GHG reduction claims. In short, the proposed rule has the potential to increase efficiencies in capital markets, boost investor confidence and encourage companies to take effective climate action at scale.

Challenges with the GHG Protocol

While we strongly applaud the SEC’s aims, we are concerned about the pivotal role the GHG Protocol plays in the SEC’s proposal, particularly with respect to Scope 2 emissions disclosures. The proposed GHG emissions disclosure requirements are based “primarily on the GHG Protocol’s concept of scopes and related methodology”.1 The proposed rule cites the GHG Protocol Scope 2 Guidance as a methodological source for determining Scope 2 inventories.2

The GHG Protocol Scope 2 Guidance allows reporting entities to select from an extensive hierarchy of emissions factor data to calculate their footprints. Application of some of these emissions factors would result in footprints that differ materially from actual GHG emissions. For example, the current Scope 2 Guidance lists Renewable Energy Credits (RECs) as the highest-quality “emissions factor” data type but takes no position on where or when RECs are produced relative to their consumption. An entity consuming power in a coal-heavy grid could eliminate its Market-Based Scope 2 footprint by purchasing sufficient RECs from a very clean grid, even when such a purchase would have a negligible effect on actual GHG emissions.

By relying on average emissions factors, current Scope 2 guidance also risks sending signals to registrants that are at odds with the goal of reducing carbon emissions. Consider a registrant purchasing solar energy that mostly displaces coal generation, in a grid that also includes considerable baseload nuclear. Since the average emissions rate of this grid is much lower than the emissions rate of the displaced coal, the reduction in the registrant’s carbon footprint would not reflect the solar energy’s full carbon impact. As a result, the registrant may hesitate to contract for the solar energy in the first place, knowing that its actual carbon benefits could not be reported.

Read our full letter.

We love talking with anyone who shares our goals of more accurate carbon impact measurement and the tools to maximize that impact – so please contact us at [email protected] if you have any questions or want to connect and discuss.

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Footnotes:

[1] Proposed Rule, §I.D.2.

[2] Proposed Rule, §II.G.2.c (p. 195). The proposed rule also cites the EPA’s guidance on Indirect Emissions from Purchased Electricity, which is highly similar to the GHG Protocol Scope 2 guidance. See §II.G.1.b. (p. 160)


Disclaimer.

Employee Spotlight on Sarah Sofia, Software Engineer and Solar Energy Expert

“I remember in high school, people were often surprised that I was interested in STEM and art, but I think they’re super connected and that a lot of engineering is creative.”

Software Engineer Sarah Sofia talks about her career

“I liked math and science but I also danced very seriously growing up, doing ballet, tap, and jazz. I remember in high school, people were often surprised that I was interested in STEM and art, but I think they’re super connected and that a lot of engineering is creative. Whether literally you’re building something or building a structure in your head for how to visualize a model, it’s all very connected to how you think about art and drawing or sculpting. 

“Increasingly it was very clear that physics and engineering was really what I loved to do. And my dad is very into science so he instilled an early interest in that for me. He has a small business that’s at our house and his team makes tools to test reliability, thermal conductivity, and thermal management of electrical components. As I get older, I have realized that being around a lot of circuit boards, working with my dad to build different things, and doing science experiments in the basement, made a lot of science and engineering feel more tractable as an adult. Like when I was little, I would go into the shop and make jewelry out of solder and ribbon cable and then as I got older I wanted to understand what they are and what they do. Participating in that and having someone lead me to see all of the possibilities from a young age was really valuable. I feel like that’s a big barrier for some because you can have so much separation from how things are made or work. So getting that growing up and being like ‘oh I know how to make something’ was special.

“I was very into physics and astronomy in undergrad, then my trajectory sort of slowly changed. After graduating, I wanted something with an impact on the world I was living in, in a more direct way. It felt like a pretty natural transition to engineering from physics and I found solar as a really cool application of physics. I liked being able to go all the way from the fundamental physics of what is happening on a micro level, all the way up to energy going into people’s houses. I was fortunate to work with industry in grad school. I wanted to maintain that and continue working in industry, where it really felt like I was directly connected with renewables getting installed now and less hyper focused on a very small portion of something that’s important in a solar cell. 

“As I have been in this world, I increasingly just think energy is super cool. I’m really interested to see, particularly as new technologies come more online, how they will change and shape the way our grid is evolving. I think getting to a higher and higher percentage of renewables and carbon free energy poses a lot of challenges, but they’re really exciting and interesting challenges. 

“My big hobbies at the moment are baking and quilting. I’ve always loved the transformative process of baking. As I’ve gotten into baking more complicated things and figured out how to optimize recipes and why certain things make certain things happen, I think it is really interesting. And then you get a treat at the end! Then during Covid, I took a remote quilting class through a fabric store in Cambridge. They did Zoom classes and sent materials. It’s slow, but very fun. Whenever there’s some progress that you see day to day it’s very satisfying.”

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Currents Podcast: Recent Evolution of the Hedge Market

Currents podcast features discussions on project finance and recently interviewed REsurety's CEO Lee Taylor.

Listen in as Todd Alexander and Lee Taylor discuss the recent evolution of the hedge market due to the impacts of winter storm Uri. They get into the spectrum of hedging options before the storm, how each of those structures fared, how the hedging landscape has changed and more.

The Currents Podcast features in-depth discussions on the latest developments in project finance. The podcast is hosted by partner Norton Rose Fulbright’s Todd Alexander, who interviews key business leaders and policy makers to investigate important trends affecting the energy and infrastructure space.

Employee Spotlight on Jennifer Newman, VP of Atmospheric Science Research

Jennifer Newman

“I found anecdotally that a lot of meteorologists also play instruments.”

Jennifer Newman, Vice President, Atmospheric Science, REsurety, standing in front of a wind turbine.

“I grew up in the Boston area, and my dad was a sportswriter and my mom works in medical book publishing. So not really all that science-related. But I’ve always loved blizzards and snowstorms and thunderstorms. I still absolutely love snow. Growing up in New England, we definitely got a wide variety of weather. I was always fascinated by all of it and loved being out in it. 

“I have a younger brother who’s a software developer out in L.A. Sometimes we chat about agile development and things like that. We have this common vernacular now.

“Back then I took dance classes, I was in chorus, I played clarinet in the band, I acted. I was into the humanities, but I had this inclination for science and math. Everything appealed to me, so I went in as an undeclared major at Cornell University

“One draw for Cornell was its marching band. I did marching band throughout high school and all four years in college. I played the clarinet. We did every home and away game, and we also did a couple NFL games, and a Canadian Football League game. Rehearsals were three times a week. One of them was Tuesdays until 11 pm, which now I can’t imagine!

“Someone in the band was in the Meteorology Department, and he became known as the band meteorologist. I had never really found an outlet for all the math and physics, but once I saw, you can apply it to something that I really loved – the weather – that’s when things started to click. I found anecdotally that a lot of meteorologists also play instruments. 

Jennifer Newman, Vice President, Atmospheric Science, REsurety, with a weather balloon.

“I did an internship with the University of Rhode Island, sending up weather balloons with instruments to measure ozone. Then the summer after my junior year, I went to the University of Oklahoma and got into more severe weather research, and ended up going there for grad school too. 

“My thesis was on how to better detect tornadoes with current weather radar systems. I did a lot of storm-chasing down there. It took me a couple of years of going out driving around dirt roads in Kansas, but I did eventually get to bag a couple of tornadoes. You end up running into all kinds of people, like a crowd of people on a dirt road in Kansas or Oklahoma. Now that I own a house, I have to say I don’t think I’d be thrilled if there was a tornado coming through or hail, knowing I would have to pay to replace my roof. I think I’m good with an occasional minor thunderstorm.

“While taking a renewable energy class during the last semester of my Master’s program, I realized I really loved learning about wind energy and the meteorology applications. That’s when I decided to stay for a PhD so that I could learn more. During my PhD, I got to set up meteorological instruments at some operational wind farms and analyze the data, which gave me a great understanding of how important accurate measurements are for wind energy. After finishing my PhD, I did a postdoc with the National Renewable Energy Laboratory in Boulder, Colorado.

“I’ve always thought I liked working in industry more than academia, and I wanted to move back to the Boston area, because my family is still here. I started reaching out to my network, and was connected with REsurety. It was a smaller company then, about 10 or 11 employees, and they were looking to hire some kind of research scientist, so my skill set matched really nicely. 

“I was able to look in-depth into the challenges we were facing and improvements we wanted to make with our generation modeling. What I bring is figuring out what we’re doing well, where we can improve, and working with the engineering team to make those changes to our wind and solar models.

“Math and physics tend to be male-dominated fields. Having two female co-advisors in graduate school was very impactful in my life. Seeing that they had to work hard to be heard always inspired me to speak up and be confident. There was only one other female when I got here, and so I started Women of REsurety. I want the females here to have a connection to other women working at the company.

“I had a daughter five months ago, so my hobby right now is child rearing!”

Jen’s full bio.

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Carbon Accounting with the Greenhouse Gas Protocols: Successes and Emerging Challenges

David Luke Oates
David Luke Oates is a carbon accounting subject matter expert.
David Luke Oates

By David Luke Oates, SVP of Power Markets Research, REsurety

The Greenhouse Gas Protocol is a foundational component of modern climate standards. It is incorporated into the Task Force on Climate-Related Financial Disclosures’ (TCFD) guidelines for voluntary climate disclosures1, as well as the Science-Based Targets Initiative’s (SBTi’s) recommendations for aligning corporate targets with climate goals.2 It has also largely been paralleled in the U.S. Security and Exchange Commission’s recent proposed rule on climate disclosures.3

The GHG Protocol has achieved considerable success in providing a common framework for voluntary disclosures. But it is now a fairly outdated standard, and its flaws are becoming more impactful and problematic. The GHG Protocol Corporate Standard was originally released in the early 2000s, with updated Scope 2 guidance released in 2015. The nearly seven years since that release have featured dramatic increases in corporate clean energy purchases and interest in accurate corporate climate disclosures.4 There is now growing interest in updating the GHG Protocol and addressing some of its shortcomings.

At REsurety, we spend much of our time helping buyers and sellers of clean electricity to manage their financial risks and achieve their decarbonization goals. We are particularly interested in ensuring that Scope 2 accounting is as effective as possible. Today, the GHG Protocol Scope 2 Guidance has two major flaws: 1) it does not ensure that all actual carbon emissions are accounted for across entities and 2) it often doesn’t create the right incentives for entities interested in decarbonization. 

On the first item, the GHG Protocol’s Market-Based method for Scope 2 accounting allows reporting entities to apply REC purchases to cover their consumption at an emissions rate of 0 tons/MWh. It also allows entities to account for their grid consumption by applying a simple-average emissions rate. This average emissions rate reflects the same clean energy claimed through REC retirements, effectively double-counting the impact of clean energy and contributing to under-reporting of emissions.5 While this double-counting may have been of little concern a decade ago, the volume of today’s clean energy purchases make it a more serious problem.

On the second item, by relying on average emissions rates with low temporal and spatial granularity, current Scope 2 guidance risks send the wrong signals to entities interested in decarbonization. Consider an entity purchasing solar energy that mostly displaces coal generation, in a grid that also includes considerable baseload nuclear. Since the average emissions rate of this grid is much lower than the emissions rate of the displaced coal, the reduction in the entity’s carbon footprint would not reflect the solar energy’s full carbon impact. In general, the activities achieving the greatest amount of decarbonization are not fully rewarded under the current GHG Protocol, creating a misalignment of incentives. We think there is an opportunity to fix both of these problems.

Governments and corporate entities have recently made ambitious climate mitigation commitments. Truly delivering on these commitments will require a modernized set of carbon accounting rules to align incentives and avoid double-counting. We believe that a revised Scope 2 carbon accounting framework based on granular marginal emissions data can help address some of the shortcomings we mentioned above. We look forward to sharing more details on potential solutions to these challenges in the months to come.

In the interim, we love talking with anyone who shares our goals of more accurate carbon impact measurement and the tools to maximize that impact – so please contact us at [email protected] if you have any questions or want to connect and discuss.

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Footnotes:

[1] See p. 21, Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures, October 2021

[2] See p.3, SBTi Criteria and Recommendations, Version 5.0, October 2021

[3] See §I.D.2. (p. 40), The Enhancement and Standardization of Climate-Related Disclosures for Investors, SEC Proposed Rule, File No. S7-10-22

[4] U.S. corporate clean energy purchases grew from 1.2 GW/year in 2014 to over 11 GW/year in 2021. See Clean Energy Buyers Association Deal Tracker

[5] While this double-counting could theoretically be corrected by applying the residual mix emissions rate to all parties’ grid consumption, this approach is not feasible in many jurisdictions. Calculating the residual mix emissions rate depends on visibility into all private contracts for RECs between counterparties, something that individual reporting entities aren’t able to provide. In jurisdictions (such as the U.S.) where residual mix emissions rates are not available, current GHG Protocol guidance is to apply the average emissions rate to grid purchases. See GHG Protocol Scope 2 Guidance §6.11.4


Disclaimer.

Q1 2022 REmap Report

REsurety creates the REmap-powered State of the Renewables Market report every quarter to provide readers with data-driven insight into the emerging trends and value of renewables in U.S. power markets. We combine our domain expertise in power markets, atmospheric science, and renewable offtake to analyze thousands of projects and locations and summarize key findings here. All of the data behind this analysis is available via our interactive software tool, REmap. Please fill out the form to access the full report, the Editor’s Note is below.

Q1 2022 State of the Renewables Market Report

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Blair Allen, director, software customer success, REsurety

Blair Allen
Director, Software Customer Success, REsurety

Editor’s Note: As the first quarter of 2022 concludes, we reflect on historic highs and historic lows. Another record in ERCOT marks the quarter’s passing, just as one did a year ago following the market events of February 2021. However, unlike the soaring prices of last year, this record involves a prolonged period of negative pricing, and another turn in a developing plotline we commented on last quarter. Please fill out the form below to access the report.

Consider this comparison: in February 2021 ERCOT West Hub (along with others) settled at the market price cap of $9,000/MWh for three days; in February 2022 ERCOT West Hub saw a two day period where prices never rose above $0/MWh. Mild demand coupled with sustained periods of high wind and solar generation created the conditions for this negative pricing event, though these conditions weren’t isolated to only those few days. In fact, by the end of the quarter, West Hub would more than double the number of negative-priced hours than were seen in Q1 the year prior.

One impact of this increasing frequency in negative pricing is rising levels of curtailment, particularly among solar projects which, unlike wind, don’t benefit from the production tax credit and are less likely to operate below $0/MWh. For example, using the modeled energy in REmap, which tells us how projects could have performed based on underlying wind/solar resource availability, last quarter West Texas solar projects saw anywhere from 20 to 30% of their potential hourly production for a given month fall in negatively priced hours. However, in reality these projects weren’t operating at their potential capacity in these intervals, and either shut down or significantly ramped down production.

Another important angle to consider: whereas for the last few years hourly negative prices at West Hub were evenly split between on-peak and off-peak hours during this time of year, this year saw that balance shift to 60/40 in favor of on-peak hours. The cause for this shift is clear: increasing amounts of solar capacity means that low pricing is no longer just following the production profiles for wind, and is coinciding more regularly with the rise and fall of solar energy.

Looking ahead, as seasons change into summer conditions so too do we expect a change in the volume of negative pricing. An increase and shift in demand– which will steadily move more towards the mid afternoon as air conditioning ramps–and a decline in wind production at the same time should converge to steadily mitigate on-peak negative price frequency. Q2 will likely be a transitional period, with frequency of negative pricing hours remaining high to start before subsiding more materially by the end of the quarter.

Friends don’t let friends use 8760s

says Jennifer Newman, VP of Atmospheric Science Research, REsurety

As featured in POWER Magazine

Any company embarking on a new project must do its research to ensure that it calculates the proceeds based on the right financial information. With so much data now readily available, it’s more important than ever to use the right data, and make accurate calculations. 

REsurety's Jennifer Newman, VP of atmospheric science research, talks about 8760s.

Amid the boom in demand for renewable power plants, that is not always happening when backers go to measure the value of the energy they will generate. Here’s why, according to Jennifer Newman, Vice President of Atmospheric Science Research at REsurety, the Boston-based renewable industry data and analytics company. 

Q: What is an 8760 and how is it used in the renewable energy industry?

A:  An 8760 (sometimes referred to as a typical meteorological year or TMY) consists of hourly generation values for a wind or solar project for all 8,760 hours of a typical year. Importantly, 8760s are almost always used to represent average generation for a renewable energy project in a given hour. 

Q:  And what’s the problem? Why shouldn’t 8760s be used to estimate the value of power generation being produced by renewable energy projects? 

A:  An 8760 isn’t bad on its own – it’s a perfectly acceptable way of representing average generation. The issue is when a generation 8760 is paired with hourly power prices to produce either a revenue backcast (an estimate of the revenue a project would have made given historical prices) or a revenue forecast (an estimate of how much revenue a project could earn in the future). 

The problem with a backcast is that hourly renewable generation influences power prices during each hour. And that’s because wind and solar tend to be very inexpensive sources of electricity. So an hour where there’s a lot of wind or solar on the grid will tend to be associated with lower power prices, particularly in markets with high renewable penetration. When you use an 8760 instead of actual generation values during each timestamp, you aren’t able to capture that impact of hourly generation on hourly power prices.

And when analysts are using a model to predict future power prices, it’s a mistake to assume that conditions in the future will be similar to  an “average weather year”. Abnormal weather conditions can cause drastic price changes, as we all saw in Texas during February 2021.

Q: So what should be used to accurately calculate the value of renewable power generation?

A: There’s an abundance of rich datasets we can use to inform our decisions on whole new levels. For a backcast analysis, we should be using concurrent generation and price time series data to make these calculations and avoid errors (i.e. the generation volume that is used for 7:00 am on January 13th, 2019 should reflect the same weather conditions that generated the price that was observed in that same hour). In a forward-looking scenario, you should use a variety of different potential weather conditions beyond just an average year. Would you want to use a typical Texas February to project possible gains and losses, now that you know that Texas in February of 2021 is possible?  

Q: Where does a company turn then, to ensure it’s using the right information?

A:  At REsurety we offer the REmap tool, which models hourly generation for every wind and solar project in the United States, and will soon look forward at hypothetical situations to allow for future planning. REmap also offers data for synthetic situations – what-if planning for potential future sites – including historical modeled generation, observed power prices, and the combination of generation and power prices to estimate revenue. 

Getting beyond 8760s can not only steer a company to site a new renewable project in one location versus another, it can also provide guidance on the financial risk associated with a range of potential weather conditions.

Learn more, download the white paper.

Disclaimer.

Employee Spotlight on Shane Hall, Senior Software Engineer

Shane Hall

“For me engineers were heroes changing the world with pencil and paper.”

Employee Spotlight on Shane Hall, Software Engineer, REsurety

“Middle school science class kicked off my dream to become an engineer. I grew up listening to my dad talk about my great-uncle George Philbrick, who pioneered operational amplifiers in early computers in the 1950s. For me engineers were heroes changing the world with pencil and paper.

“My dad’s mother was an artist, and her brothers were engineers and pilots in WWII and the Cold War. Afterward, her brothers worked in computing, satellites and GPS tracking, which is relevant to what we do at REsurety today, using satellite data to model wind farms and solar farms. Analyzing the natural world through technology is practically a family tradition for the Halls.

“I started undergrad as a pre-med, because everybody tells you that’s the thing to do. Towards the end of my freshman year, I met Professor James Manwell, who ran the wind energy center at UMass Amherst. He was developing practical applications of aerodynamics and statistics and I found that inspiring. I decided I was going to take every class he had to offer. I eventually changed my major and continued on to my master’s in Mechanical Engineering, working with him in the wind energy center.

“In my sophomore year, I got an internship with ISO New England, the regional balancing authority. That gave me a lot of valuable hands-on experience, writing code, looking at real world constraints, and visiting the operator’s room, with 80-foot screens and folks actually operating the power grid in real-time. They took us on tours of a wind farm and other generator types like hydroelectric and nuclear facilities. It really helped me connect the theoretical to the physical.

“For my undergrad final project, I used the wind tunnel. It hadn’t been used much for years, and was in a forgotten back room that no one seemed to have a key for. It was a total mess. I spent many late nights there because it was so loud, and operating it during the day would disturb the lab next door. I’d start my experiments at 10pm. We didn’t have a reliable RPM sensor, so I had a strobe light which I used to catch the RPM of the little blades on 10-inch wind turbines. It was just me in this giant, noisy, dark room with a strobe light going and blades spinning at 10 RPM. I got a chance to learn about ‘wake’ analysis outside of the digital realm.

“I took a break between undergrad and grad school and worked on a cattle farm for a while. It had nothing to do with what I was going to do with my education or experience. I feel the work ethic I learned and the appreciation for being able to get up really early, and do something really hard, was formative. Despite the poor pay and the long hours, I would still look forward to it the next day for whatever reason – mucking through cow dung was a really beautiful break from my data-intensive day-to-day through graduate school.

“I still take and value those breaks from the code, but now it’s going backpacking or snowboarding, not shoveling cow poop.

“After a summer of farming, I began my graduate thesis project on ice accretion on wind turbine blades. I developed a program that would model ice growth under various inputs and variable weather conditions. I coupled that with other modeling tools to answer questions like: How much does that affect power output, and are the blades at risk of breaking from the added weight and force? It led me to embrace software and use programming to solve problems.

“My first job was in market research on startups, which I quickly decided was not for me. Then I took a job at a commercial-industrial energy consulting firm, where I cut my teeth as a software engineer. I gained experience both in building production software and client interaction.

“In the U.S., everything is an open market, you have to incentivize money to flow into this industry in order to accelerate it. And I think that’s what REsurety does really well: we’re lowering the barrier for capital to make it into the renewable energy market.

“We make granular information and data accessible and digestible for anybody in the finance industry. They can surface valuable insights and make a safer or educated investment. Ultimately this means that we are building more wind farms and solar farms, faster and more cost-effectively than we would otherwise.

“There are two sides to that coin, because just as it’s difficult for the finance industry to fully understand the investment risk, it’s difficult for developers to efficiently gather that much capital at once. So if we can better partner financiers with developers, we can make faster strides in reducing our dependence on carbon-based power.

“Now, I’m really focused not just on solving the problem, but solving the problem at scale. The last year I’ve been working not just as an individual contributor modeling wind, solar and power markets, but also taking on an architecture role and working with our product team to define how we’re going to build massive scale services for our customers.”

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Employee Spotlight on Lizzy Kalikasingh, Associate, Risk Analytics

Lizzy Kalikasingh

“I was very science and math oriented. And my favorite time of the year was the science fair.”

Employee Spotlight on Lizzy Kalikasingh, Associate, Risk Analytics, REsurety

“The first memories I have of wanting to pursue a degree in engineering are from third grade. They gave us a huge book of career opportunities, and I was like, ‘Oh, chemical engineering sounds like a cool thing!’

“I was very science and math oriented. And my favorite time of the year was the science fair. One of my favorite projects was hot and cold pressure systems, that was in second grade. Buoyancy was third grade. Then in fourth grade I did molecules, how ionic bonds work, with the styrofoam balls and pipe cleaner diagrams of organic compounds. Yes, that was my favorite time.

“A tour across my county in Ohio was a pretty big influence on me wanting to go into renewable energy. My dad and I went and visited five or six farms to see how they installed solar panels on their barn sheds, and how it helps these very rural communities. I thought if my county could do it, anybody can do it.

“I did an internship during high school with an agricultural facility in my hometown that does biochemistry sorts of things. I assisted a professor in synthesizing bio fertilizer based on an algae component. In Ohio, there’s a lot of agriculture with chemical runoff that harms wildlife and the environment, so having something like an algae compound in the fertilizer gives a new perspective – you can take something natural and reproduce it to help the environment as well.

“After I graduated high school, I did a gap year in Taiwan. I didn’t know what I wanted to do and I knew for some friends the experience contributed to them recentering themselves, and learning a new skill. I told the program they could put me anywhere, since I had already been to Europe and South America, where most other students choose to go. I wanted to go to someplace I had never been.

“When you’re in a country where you don’t know the language, you really have to rely on other people. So it was all about building connections and gaining independence. Taiwan is a very homogeneous country and I always felt like a foreigner everywhere I went. No matter how well I learned the language and how well I could navigate the train systems, it was still hard to assimilate completely, but everyone in the country was really friendly.

“I went to Case Western Reserve University in Ohio, and pursued a degree in Materials Science and Engineering. There is a lot of focus on renewables, with a campus wind turbine and solar farm. I had never thought a wind turbine was related to material science, but along with being electrical and mechanical, materials do play a big part of that construction. So, it was kind of a case study on degradation over time for certain types of materials, polymers and some rare earth metals. It’s something I definitely wanted to contribute to, so I did a lot of research in those facilities during my undergraduate career.

“Through a Great Lakes Energy Institute program, I became an operations intern at EverPower, a company that monitored and maintained a fleet of wind farms across the U.S. For them, I designed a tool that visualizes operational performance over time. It was like an app – you choose the month or time you want to inspect, and it’ll go through all the turbines and see if there’s anything that was meaningfully different from the selected look-back period. So you can see if a temperature sensor could be broken, if speed sensors are misreading, things like that. It would send a plot after it finished running, that with the resource report, was produced to the operations team. So that was very useful in determining how I wanted to go into data analytics based on operations rather than a research role.

“I then got an internship at REsurety, and never left! We have jerseys with our employee number on them. When I joined I was in the 20’s but I bet I’m 8 or 9 in seniority now. So it’s like I’m almost up to CEO-level seniority!

“I joined the Diversity, Equity and Inclusion Steering Committee, and it has really put me in a position of learning and accountability, helping people in the company with promotion transparency or having a safe space to talk about social stressors and mental health. There is a lot of social justice fatigue, and sometimes it’s hard to bring the mindset into the workplace where people tend to compartmentalize. But when we add that perspective to our work community, it makes it feel like other perspectives are welcome and you are heard.

”Creating interpersonal connections is one of my stronger skills. Right now, I’m deep in data, more of a machine runner. So I look forward to being a manager, contributing to company culture, facilitating teams, and guiding younger generations as a mentor.”

Join our team

Employee Spotlight on Matt Livingston, Senior Associate, Risk Analytics

Matt Livingston

“I used to get home from school and instead of turning on cartoons, I’d watch the Weather Channel.”

Matt Livingston, senior associate, risk analytics, REsurety

“I think it’s pretty typical in the meteorology community to have a weather event when you’re very young that was either very memorable, like a big snowstorm, or very scary, like a hurricane or a tornado. And I had a bunch of those when I was a little kid. 

“I was only two at the time, but I have memories of the blizzard of ‘96, when we got 30 inches of snow in New Jersey. I walked out on my back deck, and there was a layer of ice on top of the snow. So I didn’t have to use the stairs. I stood on top of the ice because I was so small, and just walked around. 

“Then there were a couple of tornado warnings, and a couple of big thunderstorms that knocked some big trees down toward our house and on cars in our driveway. So I basically became fixated on the weather as a really young kid, following all these violent weather events. 

“I used to get home from school and instead of turning on cartoons, I’d watch the Weather Channel. And if there was interesting stuff going on, the TV just sat on the Weather Channel for six or eight hours. So that’s where it started. And then I knew I wanted to go to Penn State to study meteorology because they have a pretty laudable program for that.

“There should be a sign when you get off Exit 161 in State College: ‘You have reached the middle of nowhere.’ So yeah, it was a different environment for sure. But a lot of great people in meteorology come through Penn State, and they’ve got some cool weather out there. A lot of my professors were frankly the same people who write the textbooks for forecasting severe weather. And then, ‘Oh, there’s a severe weather outbreak today, let’s all talk about what’s going on.’ That’s just an awesome experience that was totally worth going to the middle of Pennsylvania for.

“When I was in my freshman year, Hurricane Sandy was a huge event. In my part of New Jersey, the National Guard was deployed and power was out for a month. Some of the towns in my school district are essentially a barrier island, and it was a reminder to everyone there that, you know, these islands are probably not going to be here very long. But there’s a lot of smart people trying to work on solutions, and I’m happy to be part of that.

“There are a lot of different disciplines within meteorology. There are the ones I think everyone is most familiar with, your baseline physics and fluid dynamics. You go through a couple of 400-level classes, and then you train to go on TV. And there are people who just do cloud physics, how different particles stick to each other in the air and become raindrops or ice, or how they interact with pollutants and particulates. 

“But Penn State offered a major called ‘weather risk management’ which felt more up my alley. I liked the idea that weather could have a tangible impact on the world. I wanted to say, as a result of storm XYZ or whatever extra rainfall, we expect some tangible impact that people might care about. We all live in the atmosphere every day, so this should be applicable to a wide range of industries. And I identified energy as one that I would like to get into. 

“So when the REsurety opening was posted on the Penn State jobs board, there wasn’t anything as interesting as this. With the people I interviewed with, there was a lot of excitement. I liked the idea of applied meteorology, rather than just forecasting. And I thought, ‘Oh, this is a new industry and it’s growing fast. It’ll be a fun one to be a part of.’ I don’t think that assessment was off. 

“One thing we focus on is building an effective portfolio of risks, finding risks that cancel each other out, and how storage can help offset those risks. An easy one for most people is that solar and wind in Texas have a relatively complimentary profile, so you should have both, not just one. But trying to communicate that to people is hard. We try to find visualizations that are useful. And a lot of that shows up in our software. 

“You can think of risk transfer like an insurance product. A wind farm needs capital investment to get built, just like you would get a loan to build a house, but they need to prove to the bank that they’re going to be able to repay that loan. Usually they’ve measured wind speed for a while, and essentially what I do is take that information and synthesize an idea not just of energy production but of what we think the long-term revenue production of this plant is going to be. Then we go to a hedge provider and say, ‘given this expected risk profile of future revenues, what premium would you charge to mitigate that revenue risk for the project’. And if both parties agree, everybody shakes hands, the wind farm gets their construction loan, and gets built. The hedge provider gets a premium as well as upside if the wind farm over-performs.

“When we’re doing risk transfer transactions, it’s nice to see my work turn into a wind farm, and that wind farm will displace coal, and hopefully be a greener path forward for the energy economy.”

Join our team

Editor’s Note: Quarterly REmap Overview

A Rising Tide Lifts Many (But Not All) Boats – authored by Blair Allen & Matt Livingston

The fourth quarter of 2021 was notable for its unusual highs and its unusual lows. Power prices at projects across the nation were sky-high relative to recent history, largely driven by elevated natural gas prices. At the same time, some wind and solar projects experienced record levels of negative price frequency, limiting the benefits of the higher price environment. 

No ISO experienced this dynamic more than ERCOT, where both wind and solar shape declined relative to the 5 year average across every hub. Solar in particular stood out, with West Hub seeing a double-digit percentage point decline. This decline is noteworthy for what it may signal about coming changes in the market: solar’s rapid growth in ERCOT is eroding the premium shape profile it has historically enjoyed. 

This negative relationship between renewable supply and market prices is well established for both solar and wind. But as the amount of renewable energy climbs higher (and the benefits of tax incentives linger), the frequency and magnitude of negative prices is increasing into new, record setting territory. This past quarter saw more negative price intervals in ERCOT West than in any quarter prior. 

REmap Q4 2021 Report

Looking forward, we expect these challenges to be moderated somewhat by the rapid growth of storage. Exactly how much the two will balance out, time will tell. But for the near future, we expect that renewables will continue to experience widening levels of participation in the bounty that high gas prices have brought to energy markets.

Please download the full report. We hope you appreciate the insight.

– Blair Allen, Director of Product Management and Matt Livingston, Senior Associate

DISCLAIMER: This blog post contains information related to REsurety, Inc. and the commodity interest derivatives services and other services that REsurety, Inc. provides. Any statements of fact in this blog post are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor do they purport to be complete. No responsibility is assumed with respect to any such statement, nor with respect to any expression of opinion which may be contained herein. The risk of loss in trading commodity interest derivatives contracts can be substantial. Each investor must carefully consider whether this type of investment is appropriate for them or their company. Please be aware that past performance is not necessarily indicative of future results. Derivatives services and other services that REsurety, Inc. provides. Any statements of fact in this blog post are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor do they purport to be complete. No responsibility is assumed with respect to any such statement, nor with respect to any expression of opinion which may be contained herein. The risk of loss in trading commodity interest derivatives contracts can be substantial. Each investor must carefully consider whether this type of investment is appropriate for them or their company. Please be aware that past performance is not necessarily indicative of future results.

A New Software Engineer at REsurety Explains Why She Joined the Team

Lauren Ransohoff

REsurety was just named one of Boston’s “Best Places to Work.” Lauren Ransohoff, a new engineer, shares how she made the decision to join our team.

Lauren Ransohoff, new software engineer at REsurety.

Lauren Ransohoff, of Providence, Rhode Island, trained as a mechanical engineer at Cornell University and University of Michigan before going on to challenging work in radar systems and nanomanufacturing. She explains her recent decision to accept a job as a software engineer in test at REsurety, just named one of Boston’s “Best Places to Work” by Built in Boston:

“I’ve always liked working with my hands and fixing things. My parents were both engineers, too. So I knew I wanted to do something in terms of math and science, and I enjoyed the problem-solving nature of software. 

“My background is a mix of mechanical engineering and computer science, mainly in integration and test for complex systems in aerospace and defense, before I came to REsurety.

“I was really interested in climate change back in high school; I even did one of my science fair projects on growing algae with carbon dioxide to research carbon sequestration. In college I worked on research in the Lab of Plasma Studies with the goal of supporting nuclear fusion research. 

“When I started applying to jobs out of college, I followed what was cool and interesting in terms of technology, and got away from climate change. At some point last year I was reflecting on my job and my future career plans. And as I started to think more about that, I realized that I did want to get back to work where I could have an impact on climate change.

“There really is going to be no aspect of our lives that will not be touched by climate change in the next 25-50 years. So it was important to me to find work that could somehow try to mitigate some of those impacts. In searching for jobs, and then finding a job at REsurety, I found that I could find a role that supports the clean economy, and I could also work on really technically interesting work that I enjoy. So I was really excited to find that happy combination here.

“In order for us to build a strong, reliable grid, and to have renewables make up a larger chunk of our power supply, it needs to make economic sense. And that’s one of the big theses of REsurety, is that we need renewables to be the most attractive option financially, so that people keep adopting and creating and using more and more of them. 

“When I first started, it was a very welcoming environment. I got coffee with a lot of the leadership team in my first few weeks. So that was cool to see that, you know, as a new member, they valued my opinions. Moreover, the people are really talented and driven by the company’s mission of empowering the clean economy. And we can see that throughout everyone’s work. 

“When I was on the fence about taking the job (I was deciding between two options), Lee the CEO and Sinéad the COO both reached out and were very generous with their time. In our conversations they gave me their views on where the company was headed in the future, what they were looking for from the role that I was to be hired into, and their hopes and goals for how it would help the team overall. The fact that they were so transparent on how I specifically could make an impact definitely influenced my decision.

“A lot of my background is in integration and testing on software modules, implementing automated testing, and running whole system-level tests. So I’m on the quality assurance team, where my main focus is on setting up different frameworks to ensure that we’re delivering quality products, and implementing automated testing to improve efficiencies. This is all the kind of stuff I’d done before, just in different contexts.

“REsurety started out more in analytics and working on contract structuring and settlement and that kind of thing. More recently, they started to expand into developing customer facing software products, like REmap. So some of my role, which has been fun to tackle, is taking part of that code that was meant for internal analytics, and helping translate that to a deliverable product. I’m glad I get to do this kind of work at REsurety, as part of such a supportive team.”

PODCAST: My Energy 2050 (Ep 46) Weathering Risk: The climatology of energy markets with Aaron Perry

MyEnergy2050_Aaron_Peryy

My Energy 2050’s Dr. Michael LaBelle speaks with Aaron Perry, a Senior Associate in Valuation and Risk Analytics at REsurety. Listen in as they discuss the role that long-term and short-term weather forecasting plays in reducing financial risks. Aaron is a climatologist and takes a long-term view on the impact weather has on renewable energy, like wind and solar.

PODCAST: SunCast episode 403 – Friends Don’t Let Friends Use 8760s with Dr. Jennifer Newman

A recent white paper from REsurety, with contributions from Hannon Armstrong, a leading investor in climate solutions, offers an in-depth analysis into how using an “8760” energy model can lead to significant errors in revenue modeling — topping 30% in some high renewable penetration markets.

Suncast Podcast featuring Jennifer Newman

Despite their widespread use in the renewable energy industry, using an 8760 to project financial performance can lead to significant errors in revenue models. In particular, revenue models that pair an 8760 with historical prices miss the impact of hourly renewable energy generation on hourly power prices. Because wind and solar plants are relatively inexpensive sources of generation, there tends to be a negative correlation between generation and power price in markets with high renewable penetration.

A recent white paper from REsurety, with contributions from Hannon Armstrong, a leading investor in climate solutions, offers an in-depth analysis into how using an “8760” energy model can lead to significant errors in revenue modeling — topping 30% in some high renewable penetration markets.

An “8760” (also known as a “typical meteorological year,” or “TMY”) is the average generation expected for a given wind or solar project for each of the 8,760 hours in a non-leap year. As implied by its “typical meteorological year” moniker, an 8760 contains average generation values reflecting typical seasonal and diurnal weather patterns. The problem with using an 8760 is that “typical” weather isn’t actually all that common, and high prices almost always coincide with extreme weather.

In today’s episode, Nico discusses the findings with the whitepaper’s author, Dr. Jennifer Newman, VP of Atmospheric Science at REsurety.

Momentum builds for LME data as clean energy stakeholders focus on emissions reductions

Momentum is building around a smarter way to procure and invest in clean energy with the greatest decarbonization potential. REsurety’s LME data helps clean energy buyers, developers, and investors do just that.

Momentum is building around a smarter way to procure and invest in clean energy with the greatest decarbonization potential.

Gone are the days when a PPA would be signed based on price alone. Instead, today’s energy market participants are focused on understanding the entire impact of their procurement activity. One of the most critical metrics used by energy buyers in support of this is the amount of carbon emissions avoided by their specific project.

REsurety’s Locational Marginal Emissions tool, launched in July, helps buyers with this problem. Our tool measures the carbon emissions impact of each project at its particular node. At its launch, more than half a dozen sustainability leaders¹, including large energy buyers, investors, and advisors, had signed up to use the tool.

Nonprofits Align on Decarbonization Importance

The increasing focus on decarbonization is not just being driven by large, for-profit energy buyers or investors, however. 

This past July, RMI released a white paper that analyzed the strengths and weaknesses of hourly load-matching with renewable energy. Most notably, it recommended that while hourly load-matching strategies can be valuable in the long run, they must be balanced with a near-term focus on emissions impact.

It is a “science-based imperative to reduce emissions as fast as possible in the near term,” the paper says, and focusing on emissions impact is critical. While hourly matching strategies provide other important long-term benefits, such as supporting emerging technologies, those benefits must be balanced against the urgency of emissions reductions today.

On August 20, the World Resources Institute (WRI) published an issue brief advising energy buyers on best practices for procurement. “Some generators reduce emissions more effectively than others,” the brief says. In order to maximize the decarbonization impact, “buyers can factor emissions abatement potential directly into their procurement decisions and prioritization of projects.”

Electric Grid Operators Get On Board

The momentum behind decarbonization has also been visible in the form of engagement from market operators.

This past spring, M-RETs, a non-profit platform for tracking environmental attributes, announced plans to work with MISO, a system operator, along with Google and EnergyTag, on a program to enable the hourly tracking of RECs and the associated carbon emissions impact of each MWh of clean energy generation.

Most recently, PJM, another system operator, said they have plans to publish 5-minute marginal emissions rates for load nodes within its footprint. The grid operator’s move further demonstrates the momentum behind precise emissions data as being a key input into data-driven sustainability strategies.

Continuing the Momentum

Efficient decarbonization of the grid is an urgent need – that’s why we need accurate marginal carbon emissions data. At REsurety, we’re working to make LME data available everywhere, starting first with ERCOT, PJM and CAISO. We’ve also patented our technology so that we can be transparent about precisely how LMEs are calculated and what specific grid dynamics are considered to measure nodal emissions at the most granular level possible.

We’re thrilled that so many groups – large energy buyers and investors, non-profits, and grid operators alike – are rallying around the same idea, and have recognized that granular emissions data is a critical input into enabling an efficient energy transition. By calculating the carbon impact at each node in the grid, we can help ensure that each purchase of clean energy, siting of a facility that uses electricity, or investment in energy storage is done in a way that maximizes decarbonization potential.

We have a lot of work to do to mitigate the worst of climate change. Enabling sustainability programs and investments to focus on maximizing carbon abatement is a vital step.

Let’s get to work.

To learn more about REsurety’s Locational Marginal Emission data product and how it measures the carbon emissions avoided by each clean energy purchase or investment, visit resurety.com/solutions/locational-marginal-emissions. For questions and to learn how your company can purchase LME data, contact us at [email protected].

Footnotes:
¹  Microsoft, Hannon Armstrong, Marathon Capital, Akamai Technologies, Quinbrook Infrastructure Partners, Broad Reach Power, and The Brattle Group

DEI @ REsurety

To succeed in our mission to empower a clean energy-fueled future, we need an interdisciplinary team with different perspectives and backgrounds, where all team members are encouraged to contribute their voice.

For REsurety to succeed in its mission to empower a clean energy-fueled future, we need an interdisciplinary team with different perspectives and backgrounds, where all team members are encouraged to contribute their voice. To support our commitment to fostering a diverse, inclusive culture both within our company and in the energy sector at large, REsurety launched a Diversity, Equity, and Inclusion (DEI) Team in March of 2020. The DEI Team’s primary goals are 1) to provide forums for education and open discussion, and 2) to hire and enable a diverse team.

REsurety’s DEI Team organizes monthly meetings to discuss topics relevant to DEI generally and within the energy and climate industry specifically. The main purpose of these meetings is to provide a safe forum for team members to discuss, debate and explore topics proposed by the DEI steering committee because of their impact. To date, topics have included the role of the Black Lives Matter Movement in advancing social justice, leading inclusive meetings, mitigating gender bias in the workplace and understanding the equity impacts of the February 2021 winter storm in Texas. 

The DEI Team also introduced a mentoring program that enables team members to accelerate their career development skills through long-term mentor relationships with more experienced colleagues. Mentees have used the mentoring program to work on their communication skills and to discuss paths to promotion within the company.

More recently, REsurety’s DEI Team has collaborated with our People Operations team to revise the company’s recruiting framework, with a focus on incorporating DEI principles into REsurety’s sourcing and hiring process. The revised framework provides guidelines and templates for interviewing committees to mitigate unconscious bias. It also includes a review of all new job descriptions prior to their being posted to ensure we maximize the diversity of candidates that will apply to the role.  

We are a mission-driven organization with large ambitions.  We can only deliver on our mission and our goals by attracting, retaining, and empowering a diverse and inclusive team – and one that feels both the opportunity and obligation to drive positive change in the world beyond our walls.

If you share our values and our ambitions, we hope to hear from you!

Visit job postings

Who were the “winners” & “losers”? An analysis of wind projects in Texas’ 2021 deep freeze

In this analysis, we’ll take a closer look at the project-level hourly performance data and seek to identify key trends and takeaways from that granular dataset. We’ll focus on wind projects, as solar projects were widely known to have performed or overperformed relative to expectations.

Until recently, comprehensive granular data about which individual power plants were generating during the February deep freeze in Texas didn’t exist. As a result, most analysis to date has focused on aggregate fleet performance (such as our analysis of wind and solar performance given local weather conditions) or the meteorological conditions that caused the event. While limited project outage information was available from ERCOT, the hour-by-hour performance of each plant had not been made public – until now.

Hourly project-level generation data is released by the Texas grid operator on a 60-day lag, which means that February information was just released recently. Each month, our market intelligence tool REmap processes this data from the grid operator, making it easy to visualize and assess project-level performance with a couple of clicks.

In this analysis, we’ll take a closer look at the project-level hourly performance data and seek to identify key trends and takeaways from that granular dataset. We will focus on wind projects, as solar projects were widely known to have performed or overperformed relative to expectations.

This article analyzes the performance of wind projects in all of ERCOT. For individual project consultation and to understand what the February 2021 event means for your projects, either in development or already operating, speak to our REmap team today. 

Top Generators

To start, we want to highlight the high performing wind projects in ERCOT’s fleet. We’ll look at this by the project’s net capacity factor, that is, how much energy the project contributed to the grid adjusted for the size of the project. Here, we are focusing on performance during the deep freeze, so from February 11 through February 19.

Table showing top performing wind projects in ERCOT during the freeze.
Figure 1. Top 10 performing ERCOT wind projects 2/11-2/19, by capacity factor.

Top Revenue Makers

While generating essential megawatt-hours was critical to supporting the grid during the winter storm, another important topic is the financial impact of the event.

It is hard to overstate the impact of the February 2021 winter storm on power markets. Power prices were at or near $9,000/MWh for nearly 100 hours, leading to a cumulative price that was over 10 times that of the prior “extreme” market event in August 2019.

Graph showing ERCOT's real-time power prices.
Figure 2. Observed cumulative power prices at ERCOT North Hub in different months.

Overall, the financial “winners” were those projects that generated during the highest-price hours (the hours in which scarcity conditions elevated power prices). It is important to note, however, that the high value of generation during high priced events is often shared, in whole or in part, with the offtaker of the project as a result of contract-for-difference hedge settlements (in all its various flavors: vPPA, pgPPA, PRS, P99 Hedge).

Let’s look at the highest value projects across Texas at each major hub.

Graph showing top 5 wind projects by shape in the west hub.
Figure-3b2
Graph showing top 5 wind projects by shape in the west hub.

What’s common across Texas is that the around-the-clock (ATC) price of power in February 2021 exceeded $1,500/MWh. After that, what should stand out is that wind projects across South Hub were best-positioned to generate valuable energy and capture record-high prices. Projects at North Hub experienced a significant shape discount, while the best projects at West Hub experienced a more neutral shape relative to the around-the-clock (ATC) price. 

The highest realized value was achieved by Peyton Creek Wind Farm, with a generation-weighted realized hub price that exceeded $2,000/MWh

Congestion Impacts in ERCOT South

Not only did Peyton Creek Wind Farm benefit from valuable generation at the hub level, it also benefited from limited node-to-hub congestion (also known as “basis”). The project is located between Houston and Corpus Christi, with few wind projects nearby to compete for valuable transmission capacity. Many of the other highest-value ERCOT South wind projects are all located in a relatively congested area further south, and experienced materially worse grid congestion.

Map showing price in February 21 across Texas wind projects.
Figure 4. Node to hub basis (in $/MWh) in February 2021 across Texas wind projects.

Figure 4 shows that basis impacts varied widely across the ERCOT region during the winter storm. Positive basis (dark green) indicates that a project observed a higher LMP at the project node than the price at the hub. This is generally in the project’s favor, as offtake agreements usually settle at a hub. Any positive basis then is upside for the project, while negative basis implies a loss for the project.

Although most of ERCOT experienced relatively minimal node to hub basis during the winter storm, projects in the ERCOT South region saw significant basis impacts. When wind speeds are high and projects are generating, it’s not uncommon for projects in South Texas to suffer from congestion-related impacts.

To understand what was happening in ERCOT South it is helpful to dive one level deeper. Figure 5 shows the hourly price and generation data for a coastal Texas wind project, Cameron Wind, that saw significant negative basis during the event. The middle chart highlights the difference between the nodal and hub price at one specific hour on February 17th — almost -$4,700 — and the bottom chart shows the observed hourly generation. 

Graphs showing real time hourly price, node-to-hub basis, and generation for wind project in South Texas.
Figure 5. From top to bottom: real-time hourly price (project node in red, ERCOT South hub in green), node-to-hub basis, and generation for Cameron Wind in South Texas for February 13-20, 2021.

Unprecedented Variability

While coastal Texas wind projects fared the best (see Figure 3), there was considerably more variability in their financial performance in February 2021 than during past events. Figure 6 shows historical real-time shape in dollars per megawatt-hour from August 2019 to February 2021 for several wind projects along the coast of south Texas. 

Graph showing historical shape from August 2019 to February 2021 for coastal Texas wind projects.
Figure 6. Historical shape (in $/MWh) from August 2019 to February 2021 for various coastal Texas wind projects.

Figure 6 shows these projects all performed similarly during the extreme price event in August 2019, but diverged materially in February 2021. Several coastal Texas wind projects saw extreme negative shape values in February 2021, a dramatic divergence from the August 2019 event. The negative shape values are likely due to poor operating performance during high-priced periods. 

Poor Performers

The worst revenue and shape values were seen by the wind and solar projects that were offline for the duration of the high priced event. These projects were unable to generate — whether due to operating decisions, transmission constraints, or other reasons — when electricity was most in demand and power prices at their highest. (Analysis of hourly data shows, for example, that Big Spring Wind Power generated zero megawatt-hours between February 10th and February 19th.) As such, their generation-weighted value is significantly lower than the around-the-clock price of power at the hub. These projects were heavily concentrated in West Texas. 

Graph showing worst performing wind projects by shape in ERCOT.

Learn More 

The deep freeze in Texas was an unprecedented event in ERCOT’s history. Granular analysis of projects in the region gives visibility into which projects benefitted from the period of extreme market conditions and which projects didn’t. Going forward, as the focus of generators and policy-makers alike shifts towards resilience, having visibility into this performance data will become more important than ever.

REmap is REsurety’s market analytics platform, an interactive tool that allows users to quickly and accurately understand the impacts of weather and power markets on the value of renewable energy projects. To learn more, visit resurety.com/remap or contact us at [email protected].

A similar version of this post appeared in Windpower Monthly.

Modern Decarbonization Strategies Depend on Modern Carbon Impact Data

Purchasing renewable energy is a means to an end: decarbonization. Yet, renewable energy projects are not all equal when it comes to cutting carbon. LMEs solve a pressing need for more accurate and transparent data.

At REsurety, we’re developing a new carbon impact measurement tool called Locational Marginal Emissions (LMEs) that measure carbon emission reductions at the granular level: the electrical node where the carbon-free energy is injected into the grid. 

What becomes clear when working at this level of granularity is that one clean energy project can have dramatically more carbon abatement impact than another – even when they are located just a few miles apart. For example, we assessed the Locational Marginal Emissions of two otherwise comparable solar projects in west Texas and found that one displaces twice the carbon emissions as the other. 

Our team sees better measurement of carbon impact as an urgent need. Over 300 companies have joined the RE100 initiative, committing to 100% renewable energy. These companies have increasingly turned to virtual Power Purchase Agreements (vPPAs) to meet their sustainability targets. But when a corporation purchases off-site renewable energy through a vPPA to offset a portion or all of its energy usage, it typically measures its carbon impact in megawatt-hours (MWh) which – depending on the project – can dramatically over- or underestimate the true carbon impact of that project’s operations.

A shift is now underway from 100% renewable to carbon zero – which is quite a different goal. Renewable purchases are easy to measure, while measuring the carbon they eliminate has been challenged by a lack of data. 

Nevertheless, two dozen tech firms and environmental groups appealed to the Biden Administration to adopt a 24/7 Carbon-Free energy approach like the one Google is employing to achieve “clean energy every hour, every day, everywhere.” In March, the Administration in its American Jobs Plan agreed to apply that standard to federal buildings.

More recently, on Earth Day 2021, President Biden doubled down on the U.S. carbon-cutting commitment, promising world leaders to put the U.S. on a path to cut its carbon emissions in half by 2030.

The ultimate goal is clear: to reduce our carbon emissions as quickly and cost-effectively as possible to avoid further impacts of climate change. Which projects get us there the fastest and at the lowest dollar per ton avoided to date has been far from clear. As Google – which initiated the 24/7 Carbon-Free initiative in 2017 – has highlighted, the necessary data to track progress accurately “is generally unavailable.” We believe that LMEs solve that problem.

Our new white paper, “Locational Marginal Emissions: The Force Multiplier for Amplifying the Carbon Impact of Clean Energy Programs,” co-authored by Dr. David Luke Oates of REsurety and Dr. Kathleen Spees of The Brattle Group, dives into exactly why some renewable energy projects mitigate more carbon than others, and may thus be a better investment decision for meeting sustainability goals. “LME-based accounting can form the basis of more cost-effective public policies and corporate sustainability strategies,” Spees says, “by guiding the development of clean energy projects that maximize the carbon abatement value of every program dollar spent.”

The name Locational Marginal Emissions comes from the power-price corollary: Locational Marginal Price – the cost to serve one MWh of incremental load at a given location. In other words: if you’re going to consume one incremental MWh at that location, what generator or set of generators is that energy going to come from, and how much does that “marginal” generator need to be paid to produce that incremental MWh? 

The Locational Marginal Emissions metric uses the same fundamental concept, but it incorporates the marginal generator’s emissions rates. By calculating the LME, we can accurately measure the carbon impact, or the emissions reductions, of generating clean power at any given moment at any given location on the grid. 

Referring back to our example of the two west Texas solar projects, when we analyzed the data for those otherwise comparable projects, we found that available transmission led to one project displacing coal in the peak of the day’s sunshine, while transmission constraints resulted in the other causing the curtailment of another nearby solar project.

Whats-in-a-MW-Cumulative-Carbon-Abatement-by-Project-2
Cumulative carbon emissions avoided by two wind projects and two solar projects in Texas show just how much carbon emissions avoided by renewable energy vary, even within a given sub-region on the ERCOT grid.
The Need is Pressing

Tackling climate change at a massive scale requires us to maximize the carbon impact of every dollar spent on clean energy. And not every megawatt or megawatt-hour is created equal. We need transparency around the actual carbon emissions avoided by a given renewable energy project in order to select and invest in renewable energy projects with the greatest carbon-reducing impact on a dollars-per-ton basis. 

We are not alone – companies and their stakeholders are calling for more accountability around their sustainability targets and investments, ensuring that the scale of their impact matches the scale of their good intentions.

Right now we’re working on what these corporate ESG leaders have been asking for: clearer, more transparent answers on how many tons of carbon emissions are actually avoided by the renewable energy projects they’re buying energy from.

Data-driven insights made possible by Locational Marginal Emissions will allow companies to select and invest in renewable energy projects with the greatest carbon-reducing impact.

If companies are serious about reducing their Scope 2 emissions from energy use, they need better data — data that reflects the actual carbon-intensive units their clean energy megawatt-hours are displacing. 

Reposted as in PowerMagazine.

Seven key trends from renewable energy’s 2020 performance & takeaways for 2021

While detailed analysis of the Texas event crisis is still ongoing, the authors note, they examine some of the notable takeaways and trends in renewable energy markets from last year’s performance.

The deep freeze in Texas seems almost certain to be the top energy story of 2021. The meltdown of the ERCOT power grid had dramatic implications at the individual project level, as the financial performance of each project was driven by the weather conditions at its particular location. For example: iced blades caused some wind projects to shut down near the beginning of the cold weather event, missing out — or causing their offtakers to miss out — on a potential windfall due to the record-breaking $9,000/MWh pricing that was sustained for days during the event. Meanwhile, some solar projects exceeded expectations during key high-priced hours.

We are excited to dig into the specifics of which projects performed and outperformed as the granular data becomes available. While detailed analysis of the Texas event crisis is still ongoing, we’ve analyzed the hourly generation and price data from every available renewable energy project in 2020 to help understand takeaways and trends in renewable energy markets from last year’s performance.

The shocking events of last month notwithstanding, we expect many of these trends to continue in 2021 and beyond, while other new trends are sure to emerge as well. Here, we share seven of our findings, and the data behind them.

1. Renewable energy project value continues to be highly variable.

The value of renewable energy project generation across the country in 2020 ranged from a low of less than $1/MWh to a high of $57/MWh. (Measured as the value of project generation, sold at the nodal/hub real-time Locational Marginal Price (LMP), where project generation is either observed or modeled depending on data availability.) A complete summary of renewable energy project values observed in 2020 across various markets is below:(N/A values represent limited data)

Generally, we see that the highest-value projects are located in areas of low renewable penetration of the same technology — for example, wind in CAISO or solar in ERCOT. These projects can distinguish themselves by offering a production profile that is complementary to other renewable energy projects nearby and can capture high-value hours currently underserved. Said otherwise, projects that can generate when generation from other sources is low stand to benefit from higher market prices due to basic supply and demand.

Looking in more detail, we see a wide range of value across individual projects, driven both by project production profiles and local congestion on the grid.

Below we dive into the drivers behind some of the wide-ranging values in the table above.

2. Congestion continues to be a revenue-maker or breaker.

One data point that should jump out in the above table is that the highest-value project of any renewables project in the country is a wind project in ERCOT West! While most wind projects within ERCOT West produced power worth comparatively little (the average real-time generation-weighted nodal price in 2020 was ~$10/MWh), the Notrees Wind Farm achieved an average nodal value of $56.60/MWh in 2020. Congestion in the first quarter, driven in part by oil and gas drilling in the Delaware Basin, drove the nodal price up for this West Texas wind project, causing entire months to average as high as $260/MWh.

The driver behind this price spike was localized congestion, which elevated prices at this particular location and suppressed them elsewhere. Coincidentally, the least valuable project in 2020 was also a wind farm in ERCOT West; it realized an average real-time LMP of less than $1/MWh in 2020.

Being on the right side of congestion will continue to be a key determinant to a project’s financial success.

3. Resilient projects lead with a competitive edge.

The fact that cold weather can cause wind farm outages due to the accumulation of ice on turbine blades is not new. Recently, images of iced over blades on non-generating wind turbines have flooded media outlets, but a similar event happened in late October 2020.

In late October 2020, an ice storm affected parts of Texas showing how projects that planned for extreme weather events are best positioned to take advantage of price spikes.

REmap-Insights-Figure-2

Several projects were forced to stop production during the ice storm due to ice accumulation on wind turbine blades. Projects that kept generating benefited from high wind speeds and elevated power prices, while projects that shut down earned little real-time revenue.

As a result, neighboring projects with a similar wind resource earned very different levels of merchant revenue. An example is shown above: the as-generated value of power generated by Barton Chapel wind farm at ERCOT North Hub was over 2.5 times than that of Green Pastures Wind, a wind farm located just slightly to the northwest.

Given that the market impact of the ice storm in October 2020 was tiny in magnitude compared to last month’s events, we expect that the recent cold snap drove even larger discrepancies in project value. Both the October ice storm and the February polar vortex underscore how projects that plan for extreme weather events and build resiliency into their systems have a competitive edge.

Given that high prices tend to correspond to extreme weather, clean energy buyers should also be aware that a project’s resiliency during these events has significant financial impacts — and should align incentives in their offtake contracts accordingly.

4. Texas summer price spikes were tame in 2020, but what of 2021?

REmap-Insights-Figure-3

During the heatwave of the summer of 2019, the ERCOT market saw what was at the time unprecedented price volatility, with real-time prices reaching as high as $9,000/MWh for the first time in the market’s history. This was great news for renewable energy project owners and offtakers, so long as their project was generating during the handful of price spikes. The same is true during last month’s events, during which prices reached $9,000/MWh for days at a time.

As we detailed in the 2020 P99 Hedge That Wasn’t white paper, the situation was and will continue to be quite painful for any renewable energy project with a firm volume contract in place that did not generate enough energy to meet their firm volume commitments during price spikes.

By comparison, in the summer of 2020, the ERCOT market saw prices that were much lower than in 2019. In August, ERCOT West around-the-clock real-time prices averaged just $33/MWh in 2020, compared to $131/MWh in 2019. The value of both wind and solar projects in ERCOT West, similarly, dropped in August 2020: wind generation was worth just $24/MWh, and solar generation $52/MWh — a 70% and 80% reduction in value, respectively, from August 2019.

REmap-Insights-Figure-3

As a result, projects and offtakers that benefited from the prior year’s volatility had a much less profitable summer. For renewable energy projects with firm volume commitments, however, summer 2020 offered a reprieve from the pain of 2019 as lower weather-driven volatility resulted in more stable contract performance.

Last month’s events demonstrate that critical weather events are not isolated to one month or one season. Whereas 2019 saw summer spikes, 2021 has already seen record-breaking winter peak load records that resulted in new record-breaking prices in Texas.

We will all be watching the weather closely in 2021. This is particularly true for offtakers attempting to hedge market rate exposures and projects with fixed volume swaps, as they remain highly sensitive to price volatility and whether or not the sun is shining or wind is blowing during any exceptionally high-priced hours.

5. Wind energy prices at SPP North Hub bottom out during low-demand periods.

The average real-time value of wind generation at SPP North was worth $1/MWh over the entire month of November 2020. This record-low price point was driven by a combination of above-average wind speeds, below-average demand, and more than 1.6 GW of new wind build coming onto the grid in 2020.

REmap-Insights-Figure-5

The graphic above shows that the value of wind generation was in fact well below $0/MWh in many locations across the ISO, if settled in the real-time at SPP North Hub.

This low price month stands in sharp contrast with the events of last month, where prices were regularly in the hundreds or thousands of dollars as cold gripped much of the region.

With more than 3 GW of additional wind capacity planned to come online in 2021 in the SPP ISO, we will be watching to see if record low generation-weighted prices continue during periods of low demand.

6. Solar in CAISO stabilizes after five years of shape decline.

After five years of consistent degradation in shape scalar (the ratio between the as-generated value of power and the around-the-clock value of power), CAISO solar projects bounced back in 2020 with a slight uptick in value.

REmap-Insights-Figure-6

While solar shape remained near record lows of around 80% of the ATC price, this is a material uptick from the prior year’s value, which for many California solar projects was below 70%. The increase is attributable in part to price spikes that were concurrent with solar generation during the heatwave in August.

Going forward, we will be watching the California solar value closely as hundreds of MWs of battery storage capacity come online in 2021 and increase the grid’s ability to shift solar generation away from the hours of abundant sunshine.

7. Basis in SPP is a less sore subject.

Basis, or the difference between the LMP at the project node and at the relevant hub, is a significant contributor to a project’s bottom line. Historically, wind projects in SPP have struggled with significant basis impacts to revenue, with nodal LMPs often spending many hours at or below zero.

In 2020, the average as-generated basis cost for wind projects in this area was $3/MWh, meaning that on average over the year market price at the project’s node was $3/MWh lower than the relevant hub price when weighted by project generation. This is a significant improvement from years prior, in which basis costs reached as high as $20/MWh.

While 2020 saw node-to-hub basis improve across SPP wind projects, it’s unclear whether this trend will continue. Developers that site their projects in locations that minimize basis risk or that employ downside-protection options will be best positioned for long-term success.

Reposted as in Utility Dive.

Four key solar market trends from 2020

Solar power

Reposted as in PV Magazine.

Four trends that illustrate how solar power markets performed in 2020.

Buying and selling solar energy is complicated by constant changes in weather, congestion on nearby transmission wires, project downtime for maintenance or repair, and other market conditions outside of an owner or buyer’s control.

REsurety has identified four key insights on how solar markets performed in 2020, as well as the data behind them.

1. Texas solar outshines all others. 

The value of utility-scale solar project generation in 2020 ranged from around $19/MWh in MISO (Midcontinent Independent System Operator) to roughly $31/MWh in ERCOT (Electric Reliability Council of Texas). Here, value is measured as the value of project generation, sold at the real-time Locational Marginal Price (LMP) at the hub, and where project generation is either observed or modeled depending on data availability.

Overall, realized values hovered relatively close to the market average of roughly $25/MWh at the hubs reviewed. Only projects with a full year of data (and thus had become fully operational prior to 2020) were included in our analysis.

The highest realized prices of 2020 were in ERCOT, where solar is expected to—but hasn’t yet—come online in impressive numbers in the next couple of years. Solar projects that are able to be built and fully operational sooner rather than later will likely take advantage of a positive solar shape scalar (defined as the ratio between the as-generated value of power and the around-the-clock value of power). However, solar shape degradation is sure to arrive in Texas as it already has in California.

Here is a summary of project values observed in 2020 across various markets. Note that ATC refers to the around-the-clock hub price:

2. Localized congestion chooses winners and losers. 

The highest-value solar project in ERCOT this past year was in far west Texas. In spring 2020, “West of the Pecos Solar” benefited from local congestion that elevated node-to-hub basis to a high of over $80/MWh in March.

Unfortunately for nearby solar projects, the benefits of congestion were not widespread; most other projects saw limited benefit from the localized congestion, and some were negatively impacted. Being on the right side of congestion will continue to be a key determinant to a project’s financial success.

3. Are we past the days of $9,000/MWh pricing? 

Most project owners and operators in Texas remember that exceptional summer of 2019 when real-time power prices met their upper limit of $9,000/MWh for the first time in ERCOT’s history.

This was welcome news for solar project owners and offtakers, provided the project was operational and generating during those exceptionally high-priced hours.

The situation was painful for any renewable energy project (wind or solar) that was not generating due to operational outages or poor resource availability and still had to meet any firm volume commitments (as detailed in our P99 Hedge That Wasn’t white paper).

This is precisely what happened on Aug. 15, 2019, between 3 p.m. and 4 p.m. Cloud cover developed over much of West Texas, causing a drop in solar generation that contributed to real-time power prices reaching $9,000/MWh. Solar projects with a fixed volume swap and affected by the cloud coverage were left in a very painful financial position, as they would need to pay market prices for the generation they were short under their contract.

In 2020, Texas experienced significantly lower power prices. ERCOT West ATC real-time prices averaged $33/MWh in August 2020, compared to $131/MWh in August 2019, a 75% drop.

Solar-specific value dropped as well: Solar generation in the ERCOT West region was worth just $52/MWh in August 2020, an 80% reduction in value from August 2019.

One thing is clear: Projects and offtakers that benefited from 2019’s volatility were much less profitable in 2020. For solar projects with firm volume commitments, summer 2020 offered a reprieve, as lower weather-driven volatility resulted in more stable contract performance.

Projects and offtakers alike in Texas will be watching the weather closely in 2021, as they remain highly sensitive to price volatility and whether or not their projects are performing as expected during high-priced hours.

4. Solar in CAISO stabilizes after five years of shape decline.

After five years of consistent degradation in shape scalar, solar projects in CAISO (the California Independent System Operator region) bounced back in 2020 with a slight uptick in value.

While solar shape remained near record lows of around 80% of the ATC price, this is a material uptick from the prior year’s value, which for many California solar projects was below 70%. The increase is attributable in part to price spikes driven by the heatwave in August.

Going forward, we will be watching this shape value closely as hundreds of megawatts of battery storage capacity come online in 2021 and increase the grid’s ability to shift solar generation to meet market demand.


Summer 2020 Brought ERCOT Market Challenges, But Nothing Like 2019

REmap harnesses weather and power market data to show how wind and solar producers were financially impacted in August 2020 in ERCOT.

The Texas power market made headlines in August 2019 when wholesale prices for electricity repeatedly spiked close to and even hit the $9,000-per-megawatt-hour (MWh) cap. This August, average hourly prices peaked at “just” $1,700 per MWh, the afternoon of Aug. 15.

There were many reasons for the reduced price volatility in Texas this year. First, it was hotter in Texas in August 2019, reaching 104 degrees in Houston on Aug. 13 and 14, versus this year’s high of 99 degrees on Aug. 16.

Peak demand was close to the same—74,820 MW on Aug. 12, 2019, versus 74,164 MW on Aug. 13 of this year, across ERCOT, the main Texas grid. But ERCOT’s reserve margins have increased since last year with the addition of new capacity—most notably solar.

‘Shape’ Of Texas Wind This Summer Spared Price Spikes

In ERCOT, we see that production-weighted prices for wind projects in August 2020 ranged from good to not-great. Most wind projects saw production-weighted prices in the high $10s to low $20s per MWh. Projects near the Gulf Coast were again the standout, getting into the $40s and $50s per MWh.

As we added data for this August and removed last August, the trailing 12-month average pricing for wind projects decreased across all of ERCOT’s major trading hubs, with prices now close to or dropping below all-time lows. But financial performance for clean energy buyers and sellers should also be measured through the “shape” metric.

Shape measures the value of a clean energy project’s generation relative to the value of baseload power. So for example, a renewable energy project that generated power only worth an average of $20 per MWh during a month when baseload power averaged $30 per MWh would have a negative $10 per MWh shape.Figure 1. In August 2019, the most negative wind shape values were concentrated in the northeast part of Texas, whereas in this map from August 2020, the most negative shape values were concentrated in the northwest part of the state. Coast wind projects fared best.

The August 2020 shape (Figure 1) for wind projects ranged from -$15 per MWh relative to baseload, to more than +$16 per MWh, with the vast majority of operating projects falling toward the bottom of that range. While this is admittedly a volatile range, it pales in comparison to last summer, which saw wind project shape values as negative as -$111/MWh and as positive as $84/MWh.

Across both summers, the highest positive shape values were reserved for the few projects operating directly along the ERCOT coastline.

Solar Outperformed Wind, Though Moreso in 2019

For solar producers in ERCOT, meanwhile, production-weighted prices in the real-time market ranged from the low $50s per MWh to the low $60s per MWh. These prices were much higher than wind, but a far cry from last August, when Texas solar fetched rates nearing $350 per MWh.

Solar shape in ERCOT this August ranged from positive ($17 per MWh relative to baseload) to very positive (into the $30s per MWh). In August 2019 that positive shape ranged from the $80s to north of $200 per MWh—reinforcing how last August was comparatively more volatile, but also resulted in a higher payout for solar projects across the board.

However, it is worth highlighting here that a positive shape as compared to baseload power does not necessarily mean strong financial performance for a solar project, as its hedging strategy can cause high sensitivities to poorly-timed cloud cover. 

The image below (Figure 2) shows the shape value of solar in August 2020 when we compare the as-generated value of power against the average hourly generation profile (the “12×24 shape value”)—a structure that is used in some financial hedges for solar projects.

The cause of the disparity between the shape winners and shape losers during this period was primarily driven by a few hours of cloud cover, seen in the accompanying cloud cover photograph. (There was a similar story to tell in California this August, with ill-timed cloud cover hurting solar generation during price spikes).Figure 2. August 2020 “12×24” solar shape values in West Texas were materially impacted by cloud cover, dipping lower than -$5/MWh in the ERCOT West real-time market.

REmap lets us leverage atmospheric science, power market modeling and big data to bring unprecedented transparency and insight to the clean energy industry — empowering better decisions, faster.Figure 3. Cloud cover over ERCOT during an afternoon price spike on Aug. 31, 2020. Source: NEXLAB, College of Dupage

The lessons we draw from examining August 2020 and August 2019 region- and project-level performance highlight how weather and its timing can impact clean energy financial performance. Temperature, wind speed, and cloud cover (Figure 3)—and when they occur—are increasingly the drivers of success for a given project or off-take contract.


Reposted as in Power Magazine.

Coronavirus disruption just the latest example of “new normal” for energy markets

The only certainty in renewable energy markets is uncertainty. CEO Lee Taylor shares his insights on tools available today to understand and manage risk – tools like REmap, Volume Firming Agreements, and Settlement Guarantee Agreements.

Reposted as in Renewable Energy World.

Whether it is managing summer price spikes in ERCOT, declining natural gas prices, or ever-increasing solar penetration in CAISO, clean energy buyers and sellers know the challenge is to accept that risk, and manage it effectively. 

At the end of the day, clean energy buyers want to sign contracts that work for extended periods of time with minimal surprises. Wind and solar developers want to find power buyers or hedge providers that offer them enough certainty to support project financing. Brokers and advisors need to understand energy market risk profiles before walking into a client’s office (or starting a Zoom call). 

The coronavirus is just the newest curveball — of many — that the market throws at our view of expected value in clean energy markets. Understanding and managing risk requires a sophisticated look at long-term project performance under all of the scenarios the market can muster: Demand spikes, demand lulls, generation spikes, generational lulls, and so forth. 

To enable this type of analysis, my colleagues and I have collected a decade-plus of weather and price data from an array of sources for 15,000 operating projects and greenfield locations across the U.S. We’ve harnessed that information to map and analyze the value and risks of our clients’ next wind or solar project. For the first time, we’re making this market transparency and asset insight available by subscription through our Renewable Energy Market Analytics Platform — or “REmap” for short. 

We believe REmap can help companies all along the supply chain, from developers to operators to C&I buyers, brokers and advisors, understand historical energy market trends, perform due diligence and contextualize current events, and evaluate risk management options.

But an understanding of the risks you hold as a renewable energy buyer or seller isn’t sufficient. Tools are needed to keep the risks you decide you want to hold — and shed the ones you don’t.

PPAs and why you deserve better

Clean energy buyers, in particular, are increasingly looking to manage the risk inherent to their Power Purchase Agreements. The virtual Power Purchase Agreement (vPPA) is a familiar tool for Fortune 500 companies looking to meet their sustainability goals. 

And vPPAs have proven quite effective at achieving that goal. Unfortunately, vPPAs have underperformed the financial goals that many buyers have set in parallel with their sustainability goals. 

Because of the vagaries of weather patterns and commodity markets, for many buyers a vPPA results in, at best, a flawed hedge on energy costs, and at worst, a speculative position on power markets. And that’s a challenging position to be in, with energy prices at or near all-time lows around the country. 

Clean energy buyers need ways to keep meeting their sustainability goals — but not at the expense of their financial goals. We’ve found that two ways to achieve this are Volume Firming Agreements (VFAs) and Settlement Guarantee Agreements (SGAs).

On the path to greater security

A Volume Firming Agreement allows a clean energy buyer to hedge its energy consumption costs more effectively than they could with a vPPA on its own. VFAs have been used since 2018 to control for shape and volume risk in renewable energy deals. Financially, a VFA converts the variable generation profile of a weather-fueled wind or solar project into a fixed shape that can more closely match the buyer’s consumption profile.  

A Settlement Guarantee Agreement, in contrast, locks in the future dollar value of vPPA settlements, transferring the future settlement volatility risk to an insurer that’s in business to absorb risk.  

It’s certainly true that energy markets are volatile today. They were also volatile during the natural gas price collapse of 2008; the heat waves of 2011 and 2019; and the polar vortex of 2014. 

Risk is a fact of life in our industry, but we can’t let it stop us. That’s why REsurety’s focus has always been to drive a more financially resilient clean energy industry by offering tools to understand and manage that risk, even now from our home offices.

A more fine-tuned understanding of what our product is worth – today and tomorrow, no matter what comes – will help renewable energy emerge as a bright spot in the economic recovery. And when this crisis is over, we’ll be even better prepared for the next one. 

Covariance risk: What it is and how to manage it

Norton Rose Fulbright’s June 2019 Project Finance NewsWire features an interview with Lee Taylor, REsurety’s CEO on covariance risk and how to manage it. It starts on Page 21. The article is based on a Feb. 2019 Currents Podcast.

Project sponsors, banks and tax equity investors in transactions with hedges may be overlooking some risks that wind projects are bearing. Each risk should be borne by the party best able to manage it. In some deals, this may not be happening.

One such risk is covariance risk.

There has been a fundamental shift in how electricity is sold by independent generators. As utilities cut back on the amount of electricity they are buying under long-term contracts from independent generators, financial parties, like banks and commodities firms, entered the market to buy power. Utilities have tended to buy “as-generated power,” meaning they pay a fixed price regardless of how much power is generated and — critically — when it is generated. In contrast, financial parties typically buy power in fixed blocks: with a set volume of power every hour over the life of the contract.

Financial parties buy power this way either so that they can match up with a predictable load or, more commonly, so that they have a known volume of power to sell to the physical consumers of electricity.

Selling fixed volumes of power in every hour of a contract creates challenges for an electricity supplier like a wind farm. The owner of the project does not know, and has no control over, how much electricity it will produce in any given hour, and even though there are seasonal and diurnal averages, what actually happens in any hour is highly variable.

Covariance

”Covariance risk” is the risk that a project will have a strong (typically negative) relationship between generation and price — so an hour of abnormally high generation will correspond to a low power price, and vice versa. While this condition can limit the value of power from a merchant wind farm relative to baseload energy, it is particularly challenging when the project has made fixed hourly delivery commitments (physically or financially) as the project not only misses out on revenues during high price hours, but is in fact a buyer of energy during those hours due to a need to purchase any shortfall between its hourly commitment and its hourly generation.

Chances are the reason the project came up short is a shortage of fuel: the wind died. And if the wind dies at a single project, it likely died at all of the neighboring projects — which means overall energy supply to the region has fallen, driving up energy prices — so the cost to cover the generation shortfall will be expensive.

To put this condition in financial terms, the current cap on energy price in ERCOT during a supply scarcity event is $9,000. Suppose a large wind farm in ERCOT has committed to sell 50 megawatt hours of electricity during a certain hour for a fixed price of $20 a MWh. It is a hot day in August. The wind dies and power prices spike to $9,000 a MWh in that hour. The project is at risk of having to buy 50 MWh at $9,000 each just to sell them under the existing contract for $20 each — a net cost to the project of $449,000 for a single hour.

The insurance markets are typically better positioned to absorb that kind of risk than are independent generators because insurers have a much greater capacity to absorb and diversify that risk.

An insurer can hold wind risk in Texas, solar risk in Australia, hydro risk in Uruguay, and so on, with the idea that extreme weather patterns are unlikely to hit every area simultaneously. The ability to diversify the risk makes the insurer the party best able to manage location-specific, weather-driven risks.

Balance of Hedge

Renewable generation projects can manage covariance risk through a hedging product called a “balance of hedge.”

The balance-of-hedge product is designed for projects that will sign or have already signed a hedge with a bank or commodity trader to swap floating market prices for fixed prices on fixed volumes of power. It transfers the risk of being short during high prices and long during low prices. The insurer will assign an expected value to all of the residual excess short and long positions. Because of the enormous amount of potential volatility, the insurer will price the risk below the expected value so that it should make money for the insurer during an “average” weather year, but will eliminate the project’s exposure to extreme weather conditions.

For example, July 2018 was very hot in Texas. Power prices spiked during a period when wind speeds were low. Anyone with a bank hedge that month probably had a rough month. A balance of hedge smooths out the pattern of cash flow for a project with a fixed-quantity price hedge. The underlying hedge converts the floating revenue for a project selling its electricity into ERCOT into a fixed revenue stream, but if it is a fixed-volume hedge, it does not protect a project from coming up short on the fixed volume that the project has promised and having to cover the shortfall in floating revenue owed under the hedge. The balance of hedge covers this risk.

There may be only a limited appetite for a balance of hedge at the project level for an existing tax equity deal. The tax equity investor and lender have already underwritten the transaction based on their evaluations of the power contract and hedge. Most sponsors would do better to have the project company sign the balance-of-hedge contract with the insurance company when the tax equity is first put in place. Doing it later requires consent from the tax equity investor, who may be reluctant to reopen a transaction, especially as it may require a re-marking of the position.

From a credit perspective, a letter of credit is typically used as collateral for the balance of hedge. This is often posted at the sponsor level. However, if the sponsor lacks access to an LC facility or wants to offer a lien instead, then the lien must be harmonized with the lien-based collateral that has probably been provided to the bank that is the counterparty to the main bank hedge. Anyone entering into a bank hedge without putting the balance of hedge in place at the same time should negotiate for the ability to use incremental liens as collateral for the insurance company that is the counterparty under any balance of hedge put in place later.

REsurety is not an insurer. We support balance of hedge transactions by providing analyses to insurers who use those analyses to offer and set the price of balance-of-hedge products. While other insurers are working to enter the market, the vast majority of balance-of-hedge contracts — and other related products — have been offered through a partnership between Allianz Risk Transfer and Nephila Climate.

Assessing the Value

A white paper on our website called “The P99 Hedge that Wasn’t” looks at the hourly performance of every operating wind farm in Texas. We were able to use this data to analyze how a wind farm that purchased a bank hedge would have performed historically, including through the 2014 polar vortex, the 2011 heat wave and other major weather-driven events.

That said, a perfect view of the past cannot guarantee future performance. A good example occurred when coal plants dropped out of the ERCOT generation fleet in 2017 and the ERCOT reserve margin shrank, increasing the likelihood of high price events during low wind periods. Predicting how pricing will be affected in a market with less thermal generation and much more wind and solar is hard. You are predicting how various weather and commodity conditions will interact with a generation stack that has never existed before. Every month there are more wind farms in Texas than ever before. We spend a lot of time looking at how projects and markets performed over the last five or six years under high and low gas prices, high and low temperatures and high and low wind speeds, and analyzing how this is likely to change over time.

That depth of analysis is critical to insurers’ ability to underwrite balance-of-hedge and related products. Fundamentally, our job is to build a distribution of risk. We provide information around that distribution and identify sources of uncertainty and insurers like Allianz and Nephila use that information to offer and price products.

On average, the market has underestimated covariance risk in bank hedges and, in particular, in the Texas market. Utilities have taken this risk historically under long-term contracts where they commit to take whatever electricity is generated.

The covariance issue is weather-driven. High heat or extreme cold during low weather events is what causes significant changes in the as-generated versus fixed quantities of power. The year 2018 saw some unusually cold temperatures in January and some unusually high ones in July. This led to a significant amount of dislocation, and the market woke up to the exposures that projects are bearing.

Now we are in 2019, and we see pretty diverging views across the market about what happened last year and how it might change. If we re-live a 2011 heat wave with the current generation supply stack, nobody knows how that will play out, but it is clear that it would be a significantly bad event for almost any wind project with a standard fixed-quantity hedge.

Solar v. Wind

Solar developers should think about covariance risk the same way as wind developers.

A lot of solar is being built in Texas, in part because power prices are high in the summer when wind speeds are low, so there is an attractive pricing dynamic for a solar operator. At the same time, the whole solar industry is aware of what happened in California with the duck curve. More solar electricity is generated during the middle the day than the grid requires. If the grid sheds the excess electricity, it can depress power prices in the same way that happens during an especially windy hour in the winter in Texas.

The prevailing view currently is that the extremely rapid growth of wind in Texas compared to solar creates a great opportunity, but the solar industry in Texas has the potential to become a victim of its own success. The question is where is the equilibrium reached, and how big of a role storage will play.

The focus on Texas has been driven by the fact that most of the financial hedging for wind projects to date has been in ERCOT. However, interest in hedges is expanding into other regions like SPP and MISO where the same relationship can be seen between wind speeds and power prices. There is less wind in PJM, so there is less of the causal issue of high wind speeds pushing down power prices, but there is still the same general correlation of lower prices during high wind periods. The severity of the issue varies from one market to the next, but it affects every power plant whose output is intermittent.

The longest balance of hedge being offered today is 10 years. Pricing gets more expensive the longer the term in some markets, but not in all markets.

The concern about price spikes during low wind events in the summer is most acute for the next three to four years in Texas. That is partly due to a belief that solar capacity additions will help to moderate price spikes during the summer months when extreme covariance risk is most acute.

Corporate Buyers

The issue of covariance is not unique to the seller of electricity. If a project enters into an as-generated power purchase agreement with a corporate buyer, it will have transferred the covariance risk away from the project and to the buyer of electricity.

Microsoft has been the most active in thinking about and managing this risk, and it was the first to embrace a solution through use of a “volume firming agreement.”

A “volume firming agreement” works in much of the same way as a balance of hedge: it locks in a fixed value to the sum of the hourly short and long positions held by a corporate buyer who is meeting a fixed-shape load with an as-generated PPA.

Suppose a data center requires 50 megawatts of power every hour to run its operations. If it has signed an as-generated PPA with a wind farm to manage the risks of its electricity costs, how well that PPA performs as a hedge on energy costs depends on the correlation between the wind project’s output and power prices. For example, if the wind dies and power prices spike and the data center still must buy 50 megawatts of power each hour, the data center is buying very expensive power despite the fact that it signed a PPA to mitigate energy price risk.

Microsoft decided it would like to shed that risk to an insurer in the same way that a project does.

Usually, the underlying PPA has already been signed and the volume firming agreement is added after the fact as a way to convert the PPA into something that is significantly more effective in managing the energy costs of a corporate buyer.

However, we are starting to see more corporate offtakers look at putting a volume firming agreement in place at the same time the PPA is signed. That gives them certainty about how their PPAs will perform as expected from the start.

In some cases, the project selling power under the PPA may or may not be aware of the volume firming agreement as the corporate buyer has a view that it should be free to manage its risk however it chooses without having to involve the project. In other cases, it becomes a three-party discussion among the project, the corporate buyer and the insurer. In either case, the PPA and the volume firming agreement are separate contracts.

Overall, projects and their investors should expect offtake arrangements to be much more dynamic in the future. Whereas traditional 20+-year busbar PPAs managed nearly all of a project’s risks for a long period, today offtake contracts are typically shorter term and have various flavors of risk management. 

The Next Generation Of Risk Management For Renewable Energy

Contributing author, REsurety’s CEO Lee Taylor, breaks down how Proxy Revenue Swaps work, and outlines the benefits of risk mitigation tools.

Reposted as in North American Windpower.

Before the rise of renewables, when our electricity system primarily relied on fossil fuels, the main risk driving power markets was the relationship between the price of the fuel being burned and the price of power in the market.

Enter renewable energy, where the fuel is free – rendering fuel price risk irrelevant. Unfortunately, that strong economic benefit comes with a cost: While the price of fuel for a wind farm is certain, the volume of fuel that shows up in a given hour, month or year is uncertain. This transition from fuel price-driven risk to fuel volume-driven risk created the need for a new generation of risk management products.

Renewables in general and wind in particular have been significant contributors to power markets for many years, so one might reasonably ask – why all the attention on this “new” risk now? Until fairly recently, the predominant buyers of renewable energy were utilities, often buying to satisfy renewable portfolio standard (RPS)-driven obligations. The mechanism used by utilities – the power purchase agreement (PPA) – secured a fixed price of energy for the project regardless of when and how much of that energy was produced. As a result, much of a project’s fuel volume-driven risk was transferred to utilities and, ultimately, to the utilities’ customers.

Today, with utilities making up an ever-smaller percentage of renewable energy buyers, fuel volume-driven risks are being pushed back onto project owners. One example is the fixed-volume contract-for-difference hedging structure, also known as a “P99 hedge”. As we discussed in a 2018 white paper, The “P99 Hedge” That Wasn’t, a P99 hedge is a great tool for mitigating commodity market exposure, but it does not address – and, in fact, often increases – a project’s financial exposure to fuel volume-driven risks.

As renewable energy project owners realized the scale and complexity of new risks they were taking on, they began to look for solutions. Insurance markets quickly started offering those solutions, with the first, and so far most successful, being the proxy revenue swap (PRS). Typically offered by an insurer, a PRS guarantees a certain level of revenue to the project, irrespective of power prices and when and how much the wind blows.

proxy revenue swap graphic

So how does a PRS transaction actually work? Instead of guaranteeing a fixed price of power ($/MWh), as does a PPA or a P99 hedge, a PRS guarantees a fixed value ($/year). In exchange for that guaranteed value, the project pays the insurer the variable value of “proxy revenue.”

Proxy revenue is calculated on an hourly basis as: i) the volume of energy the project should have produced during that hour, given the fuel resource measured at each individual wind turbine, multiplied by ii) the price of energy at the settlement point (typically a hub) during that hour.

To illustrate, assume an insurer guarantees an annual value of $10 million of proxy revenue. Once operational, the project has a poor first year (earning $5 million in proxy revenue) and a strong second year (earning $15 million). In the first year, the insurer pays the project the shortfall between the earned proxy revenue and the guaranteed value (i.e., the insurer pays the project $5 million).

In the second year, the project pays the insurer the excess between the earned proxy revenue and the guaranteed value (i.e., the project pays the insurer $5 million). In both years, the project earns – after the PRS payments are made – $10 million, and the variability of proxy revenue is absorbed by the insurer.

Along with the PRS, other hedging products have been developed to give project owners options based on their specific project requirements. For example, if a project already has a P99 hedge but wants to manage the risks driven by uncertain volumes of hourly generation, it can use a balance of hedge (BoH). A BoH transfers the fuel volume-driven risk from the project to the insurer. When combined, the P99 hedge and BoH recreate the same certainty of value for a project as does a PRS.

Volume firming agreement graphic

Innovations in risk management strategies are not limited to addressing risks held by clean energy sellers (project owners). Commercial and industrial (C&I) buyers of clean energy have become increasingly concerned with the fuel volume-driven risk they are taking on through their PPA contracts. In signing a PPA, C&I buyers take on the same volume and timing-of-generation risks that utilities take on – but unlike a utility, C&I buyers don’t have a rate base to rely on to help absorb volatility and risks.

In response, we again see insurance markets providing risk mitigation solutions – often in collaboration with leading C&I buyers. A great example comes from Microsoft, which last year announced its co-development and use of a volume firming agreement (VFA). A VFA enables C&I buyers to eliminate the financial exposure to fuel volume-driven risks inherent to PPAs. Combined with a PPA, a VFA provides C&I buyers certainty in their future energy consumption costs – irrespective of when and how much the wind blows.

As wind and solar markets mature, the appetite for clean energy purchasing has expanded from utilities to a much larger world of C&I buyers, banks and insurers. That’s great news for the growth of our industry and the sustainability of our planet, but it requires an understanding of the new risks being taken on.

Importantly, it also requires embracing new tools available to manage those risks. At first glance, this can be daunting, but with the increasingly widespread adoption of these new risk management tools, they are rapidly becoming standard operating procedure for our industry.

Lee Taylor is CEO of REsurety Inc., a risk management and information services company based out of Boston. He can be reached at [email protected].