e-POSTER: Technical Risk in the Brave New World of Proxy Revenue Contracts
21 May 19
10:30 AM
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11:00 AM
Tracks:
Finance and Investment, Poster Presentations
Energy offtake agreements featuring “proxy” generation and revenue calculations have proliferated in the US in the last several years. With the promise of reducing operational risk for buyers or offtakers, these products depend on a complex wind speed-derived proxy generation calculation to represent what a project should have generated as a basis for settlement payments. DNV GL has observed the structures of proxy generation contracts diverge, resulting in a range of products on the market that are commonly—and potentially incorrectly--lumped together. Understanding the nuance in the structure of any such agreement and the technical risks involved in proxy generation calculations, is critical to understanding the risk/reward profile for either party. Additionally, as these agreements are applied to complex terrain sites, it critical to understand the additional uncertainty and possible bias in the measurements used to calculate proxy generation. Leveraging DNV GL’s experience in development stage contract review, and conducting diligence for financing of projects employing such revenue contracts, this presentation will clarify the spectrum of products available. Through re-analysis of DNV GL’s extensive wind project operational database and turbine power performance test data archive, the presentation will also discuss the potential uncertainty and risk of bias that terrain complexity introduces. Lastly, we will propose measures to mitigate the risks discussed above.