Renewable energy is a key tool to decarbonize the electric power system. Nevertheless, the intrinsic variability of renewables represents a significant issue, especially in scenarios with high penetration of solar and wind energy. In particular, in the framework of Power Purchase Agreements (PPAs) - an increasingly common arrangement for deployment of renewable energy in markets like the U.S. - variability translates into additional risk borne by both developers and off-takers. To enable the desirable fast-paced deployment of renewables, effective mitigation of this issue is therefore necessary.
This study, carried out by Enel Foundation and Form Energy with the support of Enel Green Power, explores the impact of variability on risk and returns for long-term contracted windfarms in the Southwest Power Pool (SPP) market.
Quantitative results of the study demonstrate the ability of storage to effectively manage risk and returns across a variety of potential storage technologies, while currently available short-duration storage technology shows a positive yet limited impact. The analysis also evaluates a range of future renewables scenario and associated risk levels, offering a methodology to quantitatively assess the risk and return benefits of storage for financially settled, long-term contracted renewable assets.
This work has been carried out considering assets located in the US regulated markets, but the methodology is general and can be extended to other locations and markets. As the underlying conditions and risk factors are common across locations and market settings, the results of this study have a clear implication for a wide range of geographies.
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