Current:Home > StocksInsurance-like Product Protects Power Developers from Windless Days-DB Wealth Institute B2 Expert Reviews
Insurance-like Product Protects Power Developers from Windless Days
View Date:2024-12-24 09:20:40
When wind power developers began knocking on the door of New York-based Galileo Weather Risk Management Advisors, the firm spotted a chance to help the industry sidestep its biggest hurdle to financial success: windless days.
By offering developers, power purchasers and financiers an insurance-like product that would cover a percentage of losses incurred by spotty wind production, Galileo believed it could soften the risk of wind variability and speed up clean energy development worldwide.
“There is a lot of financing going on in this sector, and people have been contacting us … about trying to develop products that would be meaningful for the industry and facilitate financing,” Galileo CEO Martin Malinow told SolveClimate News.
Galileo, which also has offices in London and Bermuda, formed in 2005 and sells weather risk management protection plans for traditional power, gas, wind, solar and hydropower in North America, Europe and Australia.
For wind clients, the idea was that Galileo would make payouts when wind speeds and energy output plummet to a specified level established by a contract. But as the firm began to shop its risk management plan around, it noticed that individual wind farms often lacked sufficient measurement tools for long-term wind speed forecasts, crucial information for its strategy to work across the board.
“We needed somebody that could give us a view of how the wind was blowing … and not rely on mechanical devices that could break down,” he said.
So Galileo tapped 3TIER, a renewable energy forecasting company in Seattle, to provide global weather modeling data for Galileo’s new WindLock product. Last month, the companies formally announced their first-of-its-kind financial instrument.
Enter 3TIER
3TIER takes the standard weather research and forecasting (WRF) model — a series of computer programs and data assimilation — and applies it specifically to wind speeds at the project site, Todd Stone, 3TIER’s communications director, told SolveClimate News.
WindLock uses 3TIER’s wind speed measurements to determine whether it would have to make payouts to a particular wind farm. The product manages “the uncertainty of wind-driven earnings,” Malinow said in a May 19 press release, “which will create greater capital market access and potentially a lower cost of capital for new projects or refinancings.”
Stone said demand for its product is a sign that the industry has come of age.
“Modeling has been used for these purposes for ten years or so, and I think the fact that people are now willing to make significant financial bets on the data is an indication of how good the modeling has become; how accurate it has become; and how commonly accepted it is as a long-term reference for wind resources,” he said.
“It is both an indication of the maturity of modeling, as well as an indication of the maturity of the [wind] industry.”
Risk Management Key
Audun Botterud, an energy systems engineer at the Argonne National Laboratory in Illinois, said that the wind energy market has a need for a financial risk management tool, though he said he is not familiar with the WindLock product in particular.
“By paying a premium, you can reduce the overall risk,” he said. “That is something that the banks and lenders are going to appreciate very much, because the relatively high level of risk in investing in wind power has been one of the drawbacks or hurdles to getting more investments in that type of energy.”
He added: “At the general level, I think those types of products, if they’re priced correctly, would continue the expansion of wind power by hedging the risk and thereby making it easier” to invest in wind energy.
Mike Whitaker of Plano, Texas-based Unique Capital LLC, a capital advisor for renewable energy projects, said that a wind risk mitigation product could help some investors shave off the 12 to 18 months of on-site data collection typically carried out before a wind farm’s construction.
“Overall, I think there is a market for [the product] and a need for it, but it depends on the cost and the tenure,” he said.
“Those hedges, to be successful, would have to match the terms of the debt to satisfy debt investors and would have to satisfy the terms of the PPA [power purchase agreement] to satisfy equity investors.”
Short-Term Forecasting Matures
Short-term forecasting tools are also making advances in lowering the risks for wind farm developers and investors.
3TIER recently upgraded its wind prospecting tool to a 90-meter resolution, up from the 5-kilometer resolution of its earlier version. The web-based map allows users to read wind speeds and wind variability at any given location and to see how wind resources interact with small terrain features.
The tool currently only covers the continental United States but eventually will be expanded for global coverage, Stone said.
“It helps [developers] avoid investing too much time and energy and ultimately resources in locations that are not going to be good enough” in the earliest stages of project development, he said.
He noted that 3TIER offers similar prospecting tools and weather prediction modeling for the solar energy industry as well.
20% Wind by 2030?
At the Argonne laboratory, a short-term forecasting project has been successful in developing new statistical algorithms to improve the performance of next-hour and next-day wind forecasts, Botterud said.
The project began in 2008 with funding from the U.S. Department of Energy (DOE)’s Wind and Water Power Program. As project lead, Argonne brought on Portugal’s Institute for Systems and Computer Engineering of Porto plus the Midwest Independent System Operator and developer Horizon Wind Energy LLC.
Botterud said the team is expected to wrap up its final reports in the next few months.
He added that short-term forecasting could help the DOE reach its goal of producing 20 percent of U.S. power from wind alone by 2030.
In 2010, wind energy made up 2.3 percent of U.S. electricity, up from 1.8 percent in 2009, according to a year-end report by the American Wind Energy Association (AWEA). Total installed capacity increased by 15 percent to 40,181 megawatts last year.
“If you can say something about how much the wind is going to blow and how much wind power you would get for the next minute, hour or day, that contributes to operating the systems much more efficiently,” Botterud said.
veryGood! (1)
Related
- Mechanic dies after being 'trapped' under Amazon delivery van at Florida-based center
- Shein has catapulted to the top of fast fashion -- but not without controversy
- California governor’s trip shows US-China engagement is still possible on a state level
- Why Love Island Games Host Maya Jama Wants a PDA-Packed Romance
- Advocacy group sues Tennessee over racial requirements for medical boards
- How Kendall Jenner and Hailey Bieber Toasted to Kylie Jenner's New Fashion Line Khy
- Sophia Bush’s 2 New Tattoos Make a Bold Statement Amid Her New Chapter
- 'Nomance': Shows with sex scenes growing more unpopular with Gen Z, according to new study
- Jennifer Garner and Boyfriend John Miller Are All Smiles In Rare Public Outing
- Abercrombie & Fitch slapped with lawsuit alleging sexual abuse of its male models under former CEO
Ranking
- Watch as dust storm that caused 20-car pileup whips through central California
- A spider web of Hamas tunnels in Gaza Strip raises risks for an Israeli ground offensive
- 2 dead in Mozambique protests over local election results, watchdog says. Police say 70 arrested
- Pat Sajak stunned by 'Wheel of Fortune' contestant's retirement poem: 'I'm leaving?'
- Chris Pratt and Katherine Schwarzenegger welcome their first son together
- A spider web of Hamas tunnels in Gaza Strip raises risks for an Israeli ground offensive
- 5 expert safety tips to keep your trick-or-treaters safe this Halloween
- Kailyn Lowry Is Pregnant With Twins Months After Welcoming Baby No. 5
Recommendation
-
Judge sets April trial date for Sarah Palin’s libel claim against The New York Times
-
Ex-Michigan star says someone 'probably' out to get Wolverines in sign-stealing scandal
-
García’s HR in 11th, Seager’s tying shot in 9th rally Rangers past D-backs 6-5 in Series opener
-
Sophia Bush’s 2 New Tattoos Make a Bold Statement Amid Her New Chapter
-
Army veteran reunites with his K9 companion, who served with him in Afghanistan
-
Hunt for killer of 18 people ends in Maine. What happened to the suspect?
-
Taylor Swift is a billionaire: How Eras tour, concert film helped make her first billion
-
Probe finds ‘serious failings’ in way British politician Nigel Farage had his bank account closed