“Net zero greenhouse gas emissions by 2030… Committed to carbon neutrality across global operations by 2035… Industry leading efforts to reduce greenhouse gas emissions across our business lines…” Sound familiar? 2021 saw some of the most aggressive carbon reduction goals across both the legacy energy industry and the corporate world. To achieve these goals, numerous companies have entered into power purchase agreements (PPAs), invested in on-site solar and storage, purchased renewable energy credits (RECs), participated in community solar, offered green tariffs to customers and more, putting clean energy initiatives front and center. Consequently, many companies have developed direct exposure to the extreme volatility and unpredictability of wholesale electricity markets. As a result, realizing the level of analytical expertise required to properly budget, forecast cash flows, and measure the values and risk associated with their new, cleaner portfolio.
Part One in cQuant’s Journey in Renewables called out the important factors that should be examined when evaluating PPA contracts. Part Two explained how to create historical generation profiles specifically for renewable assets. In Part Three, we will uncover the hidden complexities in reaching true carbon reduction goals. The three complexities we will discuss include, renewable generation intermittency, reaching 24/7 carbon free without storage, and the importance of capturing the diversification affects across an entire energy portfolio.
Renewable generation presents different risks to energy portfolios than traditional dispatchable generation. The most talked about type of risk is intermittency or the predicted and unpredicted weather events that affect generation. With intermittency, problems arise when unexpected events affect normal generation, such as a cloudy day or lack of wind. Or on a more severe level, demand going through the roof due to a non-forecasted ‘black swan’ event. On the opposite end of the spectrum, companies will also face the problem of over-generating when the market is unfavorable to sell into.
Risk cannot be eliminated in complex portfolios exposed to intermittent generation, but it can be understood and managed with probabilistic simulation analytics. In addition, a diverse portfolio with solar, wind, and storage can help to combat the effects of intermittency, with the assets serving as back-up energy procurement options when the sun doesn’t shine, or the wind doesn’t blow. And when it comes to over-generation in an unfavorable market, battery storage is an effective solution for saving the oversupply for times where undefined intermittency bares its teeth.
Reaching 24/7 Carbon-Free Energy (CFE) is the current goal of reduction efforts. With 24/7 CFE, as complexity evolves, and our understanding of intermittency risk increases, we usually find that diversifying a portfolio is not enough to ensure every KWh of electricity consumption is balanced with CFE sources for every hour. This is where storage becomes essential. Still, there is much to consider in terms of battery size and duration. The most prevalent storage solutions in use today are short duration (4 hour) batteries. These short duration batteries, although helpful, may be insufficient in solving the entire problem. cQuant believes that further innovation into longer duration storage will be necessary to reach 24/7/365. Companies will be required to analyze and manage more complex portfolios with combinations of solar, wind, short duration and long duration storage, and complex financial contracts, raising the importance of the tools needed to manage these portfolios and identify risk.
In conclusion, the journey to carbon-free is ever evolving based on new advancements in clean energy. And though the complexities above are all different, the common solution to better understanding them and reaching carbon-free is utilizing robust analytics for simulation. cQuant offers a cloud native energy analytics platform that fully arms our clients with the cutting-edge tools necessary to battle uncertainty and reduce cost by spotlighting the opportunities to mitigate risk. We have expert analytics for all energy assets and contract types with deep experience in emerging renewables and storage technologies.
cQuant.io is an industry leader in analytic solutions for energy and commodity companies. Specializing in Total Portfolio Analysis, cQuant’s cloud-native platform enables physical asset, financial contract, market simulation and risk management analytics in one place. cQuant is the leader in analytics for renewable, storage and other clean energy technologies. cQuant’s customers have greater insight into their financial forecasts and the drivers of value and risk in their business.