Getting Comfortable with DER Level Merchant Risk Part 1

This is a preview of the full Blog, which is coming soon (early September 2022)

Written by: Tom Michelman, Senior Director and Distributed Energy Resources (DER) Practice Lead
Preview Publish Date: May 24, 2022
Estimated Reading Time: 2 minutes

“Getting Comfortable with DER Level Merchant Risk” is the title of both 1) a Panel Session and 2) a Poster to be presented at RE+ 2022 September 19-22, 2022 at the Anaheim Convention Center in Anaheim, CA by SEA Senior Director and Distributed Energy Resources (DER) Practice Lead, Tom Michelman.

Part 1 of the blog will be an appendix to the poster with additional information and analysis that won’t fit on a poster. The poster abstract is as follows:

Increasingly DER developers and financiers must manage variable revenue stream merchant risk (e.g., revenue from ME Net Energy Billing and Class I RECs, NY VDER, NJ & MD Community Solar Net Metering and Class 1 RECs, BTM renewable with storage projects offsetting volatile retail rates everywhere). This poster is a companion to panel session of the same name. The poster will lay the foundation for the panel session by providing examples of DER Level revenue steam rate variability for different markets, along with some strategies used by developers and financiers to manage such risk.

Part 2 of the blog will present top level findings from the panel discussion, and will be published after the RE+ 2022 conference. The “Showfloor Session” will take place from 3:30-4:00pm on September 20, 2022. The abstract of the session is as follows:

Increasingly DER developers and financiers must manage variable revenue stream merchant risk (e.g., revenue from ME Net Energy Billing and Class I RECs, NY VDER, NJ & MD Community Solar Net Metering and Class 1 RECs, BTM renewable with storage projects offsetting volatile retail rates everywhere). This panel session will try to answer questions such as: What approaches are used (and preferred) to forecast variable revenue streams? How do you assess the validity of the forecast, when such forecasts are not amenable to a P90 approach? How do you get comfortable with the forecasted variable revenue streams? Discounting in pro forma? Laying off the risk on others, including offtakers? Portfolio approach, but if so, how do you deal with covariance risk (e.g., low natural gas prices decreases revenue streams in many markets)? What market innovations are you seeing or hope to see to mitigate and get comfortable with DER merchant risk?

If you have questions about SEA’s approach to analyzing variable DER revenue streams, contact Tom Michelman directly (tmichelman@seadvantage.com, o: 508-665-5854 / m: 978-580-6190).