Enel, through its U.S. renewable subsidiary Enel Green Power North America, has begun construction on the near 450-MW High Lonesome wind farm in Upton and Crockett Counties, in Texas. Once complete, High Lonesome will be the largest wind farm in Enel’s global renewables portfolio.
The energy generated by a 295-MW portion of the wind farm will be hedged through a Proxy Revenue Swap (PRS), a risk management strategy aimed at minimizing price and weather-related risks.
“The start of construction of our largest wind project to-date represents a major commitment to growing our business in the U.S. and specifically in Texas,” said Antonio Cammisecra, Head of Enel Green Power.
In Texas, Enel currently operates the 63 MW Snyder wind farm, located in Scurry County.
“The project underscores our ability to work with partners to tailor energy solutions to fit their needs and continue to manage and deliver to our customers the complex deals necessary in today’s evolving energy market,” added Cammisecra.
The new project is currently financed through the company’s own resources and is expected to enter into operations by the end of 2019. Once fully operational, the wind farm will be able to generate around 1.7 TWh annually, while avoiding the emission of over 1.1 million tons of CO2 per year.
Enel has entered into a PRS for a 295-MW portion of the project with insurer Allianz Global Corporate & Specialty, Inc.’s Alternative Risk Transfer unit, and Nephila Climate, a provider of weather and climate risk management products. The PRS is a financial derivative agreement designed to produce stable revenues for the project regardless of power price fluctuations and weather-driven intermittency, hedging shape risk in addition to risk associated to price and volume.
“The construction of High Lonesome is a strong testament to the popularity and success of innovative renewable energy protections,” said Karsten Berlage, Managing Director, Allianz Risk Transfer. “The majority of today’s stakeholders champion the continued growth of renewables and that is why Allianz is committed to flexible strategies such as the PRS that mitigate those risks — long term.”
Under the agreement, High Lonesome will receive fixed payments based on the expected value of future energy production, with adjustments payed depending on how the realized proxy revenue of the project differs from the fixed payment. The PRS for High Lonesome, which is the largest by capacity for a single plant globally and the first agreement of its kind for Enel, was executed in collaboration with REsurety, a provider in renewable energy risk management and information services.
“Renewable energy projects are under increasing pressure to deliver predictable returns despite the increasing volatility of the value of intermittent generation,” said Lee Taylor, Co-Founder and CEO, REsurety. “We developed the Proxy Revenue Swap specifically to deliver unrivaled certainty of cash flows, regardless of power price volatility and weather-driven intermittency.”