When considering the benefits of Large Scale Renewable Energy (LSRE) solutions, risk mitigation is a key component of the value proposition. But what does it actually mean?
The most obvious reference is to manage future price risk associated with energy procurement.
The cost of electricity for commercial and industrial consumers over the last 40 years, with data from the Bureau of Labor Statistics has grown 3.4% and 4.1% per year respectively. While price growth has slowed over the past few years, this rising trend is likely to resume.
Long Term Pricing Risk
By hedging against future price growth with an attractive price from an LSRE project now, organizations can lock in a price and realize significant long term upside when the market rebounds.
Short Term Pricing Risk
Organizations can benefit in the short term, too, as cost predictability from an LSRE project serves to mitigate daily and short term volatility in energy markets.
Other Cost Reductions
Energy costs are not the only component of your electric bill that LSRE can address, however. Depending on where a renewable project is located, it may receive capacity revenue, which is paid to electricity generators as a way to ensure future demand can be adequately met.
If contractually arranged, as off-taker from a LSRE project, you will receive and be able to monetize its capacity value. This stream of revenue can then help offset demand charges and hedge capacity charges on your electric bills now and into the future. In the event that carbon pricing (like recently announced to be extended to all provinces in Canada) is implemented in the U.S., organizations stand to save considerably on compliance costs by switching all or some of their electric load to a renewable source.