In recent years, significant reductions in renewable energy generation costs has seen many governments remove the financial subsidies typically available for renewable projects and instead turn to competitive auctions to extract the lowest cost possible for electricity procurement.
This has fundamentally changed the level of risk facing developers, investors and lenders on renewable projects as they’re now exposed to a more volatile merchant price rather than a fixed rate. As a result, they need to apply much greater rigor over their future revenue assumptions, all of which requires detailed insight on electricity price forecasts.
To help with this challenge, Wood PLC, a project engineering and technical services company, has launched a new power-price forecasting (PPF) service to help provide customers with greater certainty around the financial return they can expect from investment in renewable energy projects.
“Our PPF service enables customers to make more informed commercial decisions during capital intensive transactions,” explained Bob MacDonald, CEO of Wood’s Specialist Technical Solutions business. “With unsubsidized project development activity increasingly common, and wind and solar levelized cost of energy at, or below merchant power prices, understanding the long-term trends in energy and merchant power markets has never been more important.
In other words, this dynamic solution enables users to see where the investment risks and potential upside opportunities could lie throughout the lifecycle of a renewable project based on forecast electricity prices.
“Our customers are also keen to understand the economics of asset life extension on renewable energy projects and the impact that the decarbonization agenda will have on their business models,” added MacDonald. “By combining our technical skills and our commercial modeling expertise, we can help customers make smarter decisions and optimize their financial return at all stages of a project.”
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