Use Case

Corporate Renewable Energy/Storage Analysis


Business Questions

What is the value and risk of the power purchase agreements (PPAs) my company has procured to satisfy its corporate sustainability goals?

How could behind-the-meter (BTM) battery storage help reduce my company’s monthly energy bill?

I have a number of PPA offers on the table, each with different prices, contractual terms, and geographic locations; which is best for my growing renewable energy portfolio?

How will additional aggressive renewable energy procurement targets over the next 5-10 years affect my company’s projected energy spend, and how uncertain will this spend be?

What is the value of a proxy generation or revenue swap, a volume-firming agreement, or another risk mitigation strategy in conjunction with a particular PPA?

The Need for Analysis

Corporate sustainability has become virtually synonymous with renewable energy procurement in recent years. This has led numerous companies to enter into power purchase agreements (PPAs) in order to procure “green” energy credits they can use to offset their energy consumption. As a consequence, many companies whose primary corporate mission is not energy-related have developed direct exposure to the extreme volatility and unpredictability of wholesale electricity markets.

As corporate renewable energy portfolios grow, it becomes imperative to understand the associated financial risks and to monitor how these risks evolve as market conditions change. The needs of each portfolio are different, and there is no “one-size-fits-all” solution for risk mitigation. Sophisticated analysis can help highlight the benefits and costs of prospective renewable contracts a corporation is considering purchasing or already has on the books. It can also arm the purchasing entity with an independent assessment of value and risk, enabling more effective negotiations on contractual terms and overall price at the time of contracting.

While direct renewable energy procurement is never likely to be entirely risk free, careful analysis of how individual contracts contribute to value and risk of the portfolio as a whole is a good first step toward an effective risk mitigation strategy. Selecting the right contracts with the right terms in the right locations and with the right energy shape and risk profile can go a long way toward building confidence in long-range energy spend while still meeting sustainability goals.


The Solution

cQuant’s solution for corporate renewable energy and storage analysis enables companies traditionally operating outside the energy sector to access the same level of analytical sophistication as the project developers selling the renewable energy. The multi-step analytical process includes robust Monte Carlo simulations of market prices at multiple levels of granularity in space and time (forward, spot, and basis) as well as simulation of resource intermittency and a quantification of its effect on contract value. Battery storage assets can also be modeled alongside renewable assets, either in-front-of or behind-the-meter, and the entire portfolio of renewable energy contracts can be viewed holistically or sliced at any desired user-defined aggregation level.

The simulation and valuation methodologies accurately reflect important real-time market dynamics including generation-price covariance (renewable penetration risk), node-to-hub basis variation, hourly generation and price shaping, and mean reversion effects in market prices. This allows unparalleled valuation of specific contractual stipulations such as price floors/ceilings/collars, revenue share agreements, hub settlements, volume firming agreements, proxy generation/revenue swaps, and others. Because results can be viewed either contract-by-contract or in aggregate, users can quickly compare and contrast different procurement scenarios to understand their net effects on the broader portfolio.

As results of this detailed and impartial analytics, cQuant users have noted enhanced negotiations with contracting counterparties as well as improved visibility into their portfolio’s value and risk within the wholesale electricity market. This has yielded increased confidence in financial forecasting and budgeting while supporting the continued pursuit of ultimate corporate sustainability: 100% renewable energy and beyond. Users Can:

Report expected energy spend and associated uncertainty for portfolios of existing and proposed renewable energy and battery storage contracts.

Run scenario analysis and stress testing to report financial downside and assess the effectiveness of risk mitigation strategies.

Investigate the bill reduction benefit from a behind-the-meter battery storage asset optimized to an organization’s utility rate schedule, its specific demand profile, and any co-sited renewable generation.

Quickly evaluate a broad range of procurement options to select those contracts that are best for the portfolio.

Develop an independent assessment of fair market value for a contract to inform negotiations with the counterparty.

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