Tag: Press

MEDIA ADVISORY: Solar + Wind Finance & Investment Summit

A year since the February 2021 power crisis in Texas, how have renewable energy hedge markets changed?

ERCOT lessons include new ways to incentivize generators to stay online when their electrons are most needed

BOSTON, Feb. 28, 2022 – Financial hedging tools used to manage clean energy generation and procurement risk have seen major changes in the past year, after the 2021 deep freeze in Texas upended power markets and resulted in outsized gains and losses for many in the industry. 

In an effort to limit their risk during such extreme weather events, many clean energy power producers have returned their focus to traditional as-generated power purchase agreements where operational shutdowns during price spikes are typically permitted with limited or no penalties. 

Lee Taylor, co-founder and CEO of REsurety will be featured on a panel at the Solar + Wind Finance & Investment Summit.
Lee Taylor, co-founder and
CEO of REsurety

The result could be a reduction of demand for clean energy from financially-motivated buyers, as well as a reduction in grid resiliency, warns Lee Taylor, CEO of REsurety, who will speak at the Solar + Wind Finance & Investment Summit next Monday in Scottsdale, Arizona. “If project shutdowns during periods of high demand have a limited impact on a project owner, there will be no incentive for resiliency, ” he says. 

Taylor is not alone in that view. Jay Bartlett of Resources for the Future wrote last March in the aftermath of the Texas deep freeze, blackouts, and $9,000-a-megawatt-hour power rates:

“The Texas power crisis has shown how different sales and hedge structures create very different levels of incentives for a wind project to generate during times of scarcity. While most attention focuses now on projects that either sustained great losses or earned windfall profits, more alarming over the long term are projects that were financially unaffected by the crisis. Those generators may have had little motivation to produce power during a time of great need. Appropriate incentives may not guarantee power supply—clearly, they did not last month—but aligning incentives between wind projects and system needs will better promote beneficial investments and operations. As wind and solar comprise an increasing percentage of power generation, well-designed hedge structures could prove instrumental to power system reliability.”

One solution is a hybrid between historically metered generation and proxy generation-based settlement methods. Future offtake contracts, such as vPPAs, can settle on metered generation but proxy generation (which represents what a project should have produced assuming normal operations and project availability) is utilized to calculate the financial impact of project operations. If that impact exceeds a materiality threshold, damages are owed by the project up to a cap. The materiality threshold and cap on damages would be agreed to by the project and the offtaker.

 “The goal is to preserve the best of both worlds,” says Taylor. “Projects understandably don’t want to bother with calculating proxy generation when the project is operating normally, and after winter storm Uri, projects are no longer comfortable with uncapped financial exposure to operations. This contracting method addresses both of those concerns, while preserving the offtaker’s interest in quantifying the financial cost of a project’s operational performance, and having some recourse when that cost is material.”

Taylor will elaborate during the panel, “Focus on Potential Gamechangers 1: Implementing Changes to the Hedge Market,” at 2:45 pm Mountain Time on Monday, March 7. Moderated by James T. Tynion III, Partner, Morgan, Lewis & Bockius, the panel will also feature Andrew Ehrlickman, Vice President, Brookfield Asset Management. The session promises to address how the financial fallouts from extreme weather events “have completely restructured the entire hedge industry by exposing huge risks lurking in the periphery.” 

The speakers will provide a deep dive into the long-term effects of recent freezes, heat waves, and storms; the changing risk appetites of parties and updated valuations in hedge calculations; and new hedge structures that are emerging. Also on the agenda: How to value weatherization, impacts on tax equity, and the appeal of merchant projects.

REsurety provides market intelligence, asset insight and risk management tools for clean energy sellers, buyers, investors and advisors. REsurety is a sponsor of the Solar + Wind Finance & Investment Summit, and will be at Table 96 where meetings can be scheduled. For media interviews with CEO Lee Taylor in person or by phone, please contact Allison Lenthall, [email protected], 202-322-8285.

About REsurety
REsurety is the leading analytics company empowering the clean energy economy. Operating at the intersection of weather, power markets and financial modeling, we enable the industry’s decision makers to thrive through best-in-class value and risk intelligence, and the tools to act on it. For more information, visit www.resurety.com or follow REsurety on LinkedIn.

REsurety and WattTime partner to increase accessibility to high-quality marginal carbon emissions data

Enhanced power grid insights will enable more effective investments in renewables, storage, and load siting.

Boston, Mass. and Oakland, Calif. –  Nov. 2, 2021 – Today clean energy analytics firm REsurety and environmental tech nonprofit WattTime announced a partnership to increase access to more comprehensive and granular carbon emissions data across U.S. and international markets. Through this partnership, they will leverage their respective strengths in measuring marginal carbon emissions to provide previously unavailable depth and breadth of visibility into the carbon impact of their energy-related procurement options and understand which choices offer the greatest benefit to the environment. 

WattTime and REsurety announced partnership focused on enhancing marginal emissions data

REsurety first unveiled its Locational Marginal Emissions (LME) data product in July 2021 with the support of major developers, investors, and corporates. LME empowers customers to measure and maximize how much carbon they cut through clean energy purchases. REsurety currently offers nodal LME data for the ERCOT (Texas) market. Through this new integration of WattTime’s regional emissions dataset, REsurety will also be able to provide regional marginal emissions rates across the entire continental United States as well as international power grids including Europe and Australia. 

“LME enables companies to measure the impact of their existing clean energy purchases with unrivaled accuracy and confidence, and empowers them to maximize the carbon impact of their future investments,: said Lee Taylor, founder and CEO of REsurety. “We are thrilled to have found a like-minded partners in WattTime as we work together to maximize our collective decarbonization impact.”

WattTime invented Automated Emissions Reductions (AER) software, which enables the shifting of flexible electricity loads to periods of cleaner energy and away from moments of dirtier energy, based on the time-specific marginal emissions rates in different grid balancing areas. In recent years, WattTime has also popularized “emissionality”, the practice of using the location-specific avoided emissions benefits of different renewable energy projects in the selection process. With WattTime’s help, organizations including Boston University, solar developed Clearloop, steel producer Nucor, and tech giant Salesforce have all incorporated emissionality into their renewable energy strategies. 

“With the growing urgency of the climate crisis and organizations’ desire to maximize the positive impact of their sustainability strategies and investments, REsurety and their LME platform offer a powerful tool to evaluate potential projects,” said Henry Richardson, senior analyst at WattTime. “We’re proud to support REsurety and enhance the emissions intelligence they are are able to provide.”

LMEs bring a new level of precision and accuracy to measuring the carbon abated or created at any given moment and at any given location on the grid. By calculating the carbon emissions at each node on the grid with hourly granularity, REsurety’s LME product offers, for the first time, visibility into the project-specific carbon impact of each clean energy purchase or investment. By integrating WattTime’s emissions data into its platform, REsurety will be able to provide its clients with regional marginal emissions data in areas where the nodal LME data is not yet available, thereby greatly expanding the geographic coverage of the platform. 

About REsurety
REsurety is the leading analytics company empowering the clean energy economy. Operating at the intersection of weather, power markets and financial modeling, we enable the industry’s decision makers to thrive through best-in-class value and risk intelligence, and the tools to act on it. Learn more about REsurety at: www.resurety.com or follow REsurety on LinkedIn.

About WattTime
WattTime is an environmental tech nonprofit that empowers all people, companies, policymakers, and countries to slash emissions and choose cleaner energy. Founded by UC Berkeley researchers, we develop data-driven tools and policies that increase environmental and social good, including Automated Emissions Reduction and emissionality. WattTime is also the convening member and cofounder of the global Climate TRACE coalition. During the energy transition from a fossil-fueled past to a zero-carbon future, WattTime ‘bends the curve’ of emissions reductions to realize deeper, faster benefits for people and the planet. For more information, visit https://watttime.org

REsurety launches REmap, expanding the industry’s access to critical value & risk analytics

Map-based SaaS tool provides unprecedented transparency and insight into clean energy markets, illustrating today how COVID-19 has impacted renewable projects and driven record-setting low prices.

BOSTON, May 28, 2020 /PRNewswire/ — A new information services product that harnesses a massive project performance dataset and suite of financial analytics that industry leaders use to make long-term asset and contract decisions for wind and solar energy has revealed that the low energy demand during the coronavirus shutdown, combined with low natural gas prices and high renewable generation, has resulted in unprecedented low power prices in multiple U.S. markets.

REsurety, the industry leader in clean energy valuation and risk analytics, said the insights available from its Renewable Energy Market Analytics Platform (“REmap”) include that the production-weighted wholesale price of electricity for wind projects fell to all-time lows during the COVID-19 pandemic across markets including SPP, PJM and MISO – with extreme lows reaching below $2 per MWh for the entire month of April in high wind penetration regions such as Oklahoma.

REsurety today is publicly announcing the launch of its REmap information service. The REmap tool integrates weather and power market data at an unprecedented scale, calculating hourly financial performance for 15,000 operational and greenfield locations, which REsurety uses to provide clients with the industry-wide context and site-specific depth of insight needed to make better decisions faster. 

“We’re expanding the access to our secret sauce,” said REsurety CEO Lee Taylor. For years, REsurety has used its proprietary data and analytics to support the analysis of hedging instruments. Now, through REmap, REsurety makes that insight available by subscription to support a much broader set of use cases, including greenfield prospecting, M&A diligence, and offtake and hedge analysis.

“Clean energy markets are going through a revolution,” Taylor added. “The scale and complexity of risks facing clean energy projects and their offtakers are at an all-time high. Understanding and managing those risks requires a step change in information – and that’s why we built REmap.”

REmap leverages REsurety’s unique expertise at the intersection of atmospheric science, power market modeling and big data. Billions of data points from many sources are collected, cleansed, and analyzed to provide the financial metrics that are critical to renewable energy decision makers’ success. Existing customers include developers, hedge providers, C&I buyers, and advisors.

“REmap is a sea change in the access to quantity and quality of data,” said Joan Hutchinson, Managing Director of Marathon Capital, an early REmap client. “It has assisted Marathon in providing our clients with data-driven insights and solutions efficiently – even before project data is shared.”

Jim Howell, CEO of Birch Infrastructure, also a REmap client, commented, “Identifying the optimal location to invest in renewables has always been somewhat of a dark art – relying on intuition and point-specific analyses. REmap gives us the information we need to truly optimize our procurement and hedging activities.”

Reposted as in PR Newsire.

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].

REsurety Surpasses 5 Gigawatts of Renewable Energy Risk Mitigation Contracts

REsurety-enabled risk mitigation products have become standard operating procedure for clean energy industry leaders.

BOSTON, Jan. 9, 2019 /PRNewswire/ — REsurety, a leading provider of valuation analytics and risk management services to the buyers and sellers of renewable energy, announced today that it has reached a critical corporate and industry milestone, having surpassed more than 5,000 MW of risk management transactions. Transactions closed in 2018 with Microsoft, Enel Green Power North America, Engie, Orsted, Macquarie, and several other large international companies have fueled nearly half that cumulative volume in 2018 alone, signaling broad and accelerating adoption of REsurety’s risk mitigating products and services. 

“2018 has been a breakout year for REsurety and for the industry’s adoption of risk management tools,” said Lee Taylor, CEO of REsurety. “Our 5GW milestone shows the incredible demand for certainty when it comes to buying and selling renewables. Both project owners and their corporate off-takers are finding our risk mitigation products to be an accessible and cost-effective way to avoid revenue or cost volatility.”

REsurety renewable energy risk mitigation products deployment graphic.
REsurety Deployment of Renewable Energy Risk Mitigation Products

REsurety’s success in 2018 was highlighted by several high-profile transactions. As separately announced on Jan. 4th, 2019, Enel Green Power North America has utilized the Proxy Revenue Swap (PRS) hedging structure to support the revenues of 295 MW of its 450 MW High Lonesome wind project in Texas – marking it the largest PRS ever signed.

“The wind industry has made great strides in driving down costs over the last decade,” said Hannah Hunt, Deputy Director for Electricity Policy and Demand, American Wind Energy Association (AWEA). “More recently we have seen improvements in driving down soft costs and REsurety’s approach of using weather and pricing data to reduce volatility risk is another great success story for the industry.”

Recent announcements by clean energy pioneers such as Microsoft in the U.S. and Orora in Australia demonstrate that buyers of renewable energy are also embracing REsurety products to manage the volatility associated with their purchases of clean energy. Both companies, as well as a third, undisclosed corporate buyer, contracted for products that will help them manage the cost volatility of their renewable energy purchases and will become an ongoing part of their procurement processes. In 2018 REsurety closed 19 new transactions across its Proxy Revenue Swap, Volume Firming Agreement (VFA), Balance of Hedge and Proxy Generation PPA product lines.   

“Taking on and managing the risks associated with vPPAs has become a real hurdle for corporate purchasers of renewable energy,” said Roberto Zanchi from Rocky Mountain Institute’s Business Renewables Center. “The early success of risk mitigation contracts as a standard part of the procurement process sets a strong precedent for other companies who are similarly eager to achieve sustainability goals while mitigating financial risk exposure.”

As the global clean energy industry matures, the combined risks of power market volatility and intermittent fuel sources have migrated away from governments and utilities to the producers and end-consumers of clean energy.  That increasing complexity and scale of risk requires a new breed of information and risk management products. REsurety has led the way in developing those tools in collaboration with Allianz Global Corporate & Specialty, Inc’s Alternative Risk Transfer unit, Nephila Climate and more recently Microsoft.

REsurety’s expertise in weather and energy market price information serves as the foundation for the successful insurance products that are offered by REsurety’s partners Nephila and Allianz. REsurety’s extensive proprietary data systems for weather and energy markets provides insight into the value and risk of weather-fueled renewable power generation. This constantly growing and expansive dataset, and related analytics, enables REsurety and its partners to offer a range of risk mitigation products catered to meet the specific needs of clean energy buyers and sellers.