Course description
Introduction to Portfolio and Risk Management for Renewable Energy Portfolios: Wind, Solar, Hydro and Battery Storage is a two-day VIRTUAL instructor-led course presented by the energy training experts at Mennta Energy Solutions. This interactive workshop is designed to provide a deep level of understanding of valuation and risk management for wind, solar and battery projects.
The course starts with an overview of the new dynamics in wholesale spot and forward electricity markets as a result of increasing renewable penetration. Practical examples using case studies illustrate the main risks for renewable and battery projects such as market, volume, operational, legal and counterparty risks.
The course explores risk assessment, modeling and mitigation techniques for merchant wind and solar projects using financial hedges, structured products and insurance. Multiple case studies will show how to perform valuation, risk analysis and hedge design for renewable and battery projects and portfolios.
We will also discuss best practices in risk metrics and hedging strategy for renewables portfolios with emphasis on understanding how much renewables can be relied on under real-world operating conditions.
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Content
Wholesale Power 101
- Power system components: Generation, Transmission, Distribution
- Regional transmission (RTOs) and independent system operators (ISOs)
- Main physical market players: Utilities (IOUs, Munis, LDUs), Independent power producers (IPPs), Retail electricity providers (REPs)
- Oversight bodies and their roles: FERC, CFTC, NERC, State Public Service Commissions
- Energy, Capacity and Ancillary Services Markets
- Renewable attributes
Increased renewable penetration Spot and Real Time Market Dynamics
- Drivers of investment in renewable energy
- Physical power markets: Day-ahead, intra-day and real time
- Locational Marginal Prices: Energy, Congestion and Losses
- Zonal vs. Nodal markets
- Generation stack and impact on evolution of heat rates in key markets
- Marginal fuel prices: Coal, Natural gas and Renewables changing role in price setting
- Overview of Price Drivers: Supply and Demand shocks
- Net loads and hourly price shapes: The Duck curve
Increased renewable penetration, Market Fundamentals and Forward Market Dynamics
- Structural change in power markets: Impact of increasing renewables penetration
- Physical and Financial Power Market Players
- Transaction platforms and characteristics: Bilateral, OTC and Exchanges
- Risk dimensions: Flat price, Basis price, Proxy hedge risk
- Long or short? Volumetric and Financial Considerations.
- Case study: Long and short exposures in physical portfolios
- Net open positions reports
- Sources of forward price data
- Market forecasts vs. Forward Curves
- A tale of two markets: ERCOT and CAISO
- Wholesale price volatility with renewable intermittency
Renewables Risk Assessment and Quantification
- Typology of risks in renewable investments and batteries
- Market Risk (Price, Basis risk)
- Congestion Risk
- Weather-related volumetric risk
- Operational risk
- Environmental Risk
- Counterparty Risk
- Legal and regulatory risk
- Financial risk (e.g. access to capital)
- Business /Strategic Risk
- Case studies on market, counterparty and operational risks
Physical Hedges and Environmental Products
- Short-Term Energy and Long-term Energy
- Physical Forward Contract
- Physical Power Purchase Agreement (PPA)
- Peak, On-Peak and Wrap products
- Physical transaction firmness: Firm, System firm, Unit firm, LD, Non-firm
- Resource Adequacy Capacity
- Imports and Exports
- Renewable Energy (PCC1 and PCC2)
- Carbon Free Energy
- Air Resource Board Allowances
Financial Hedges: Futures, Swaps and Financial Transmission Rights (FTRs)
- Futures Contracts
- Financial Fixed-for-Floating Swap with Fixed Volume
- ISDA and Collateral agreements
- Negotiating, entering and exiting financial swaps
- Key differences of hedging with futures vs. Swaps
- Financial transmission rights (FTRs) and Congestion Revenue Rights (CRRs)
- Case study: Hedging basis risk with FTRs
Interaction between Renewable Intermittency and Price Risk
- Sources of uncertainty in renewable portfolios: Supply and Demand considerations
- Volumetric risk from wind, solar and hydro resources
- Case study: Impact and likelihood analysis of price and production risk
- Weather and Load variability
- Shape risk and Block products
- Case study: Risk of hedging renewable generation with financial products
- Battery storage as a hedge instrument for utilities portfolios
Introduction to Simulation and Risk Metrics
- Introduction to risk metrics and key risk indicators
- Understanding and interpreting “at-Risk” and conditional “at-Risk” metrics
- Overview of probability distributions and percentiles
- Value vs. Flow Metrics: VaR vs. Net Revenues at Risk
- Credit Risk metrics: Expected Exposure and Potential Future Exposure
- Stress Tests and Scenario Analysis
- Main metrics used for renewable portfolios
Hedging Strategy for Renewable Energy Portfolios
- Risk management and financing decisions for renewable projects
- Alternative hedging programs: Programmatic, discretionary, risk-based
- Setting hedge benchmarks and program objectives
- Comparative Analysis of Hedging Strategies
- Market, credit, and regret risk from alternative hedging strategies
- Practical Considerations Implementing a hedge program
- Group discussion