Digitalisation crucial to satisfying investor needs amid evolving post-subsidy market challenges
It is not an understatement to say that 2020 has been one of the most turbulent years in recent history, with the Covid-19 pandemic leading to seismic shifts in industries the world-over.
But despite significant supply chain disruption, the renewables industry has remained remarkably resilient compared to conventional power and wider infrastructure asset classes.
A growing variety of investors have subsequently entered the space, expecting to grab a slice of the pie and reap the dual benefits of non-correlated returns and greener credentials. But the renewable energy market is not so black and white. Broader trends at play in the space are generating new investor needs, and renewables owners must adapt their offerings to meet these accordingly.
Indeed, the renewables market has been undergoing a shift of its own amid the phase out of state-backed subsidies, with portfolios growing more diverse and owners adopting more merchant-led approaches. This has raised several new challenges in the industry as projects have become increasingly exposed to volatile power prices.
Whilst the renewables sector has continued to perform strongly during the pandemic, the coronavirus has brought these new market risks to the fore, and developers and renewables project owners now need to provide investors with confidence around the business case of their projects to encourage future investment.
Understanding market conditions and their impact on a project will be a crucial part of post-subsidy asset management. Indeed, in a ‘fully merchant’ environment, the task of managing the financial risks involved in energy sales may be equal to – or greater than – the challenge of maintaining technical performance.
Renewable energy owners need to adopt digital software platforms that can future-proof portfolios by mitigating technical and market risks in tandem. Only by meeting this challenge will owners be able to satisfy and retain new investors in a post-subsidy environment.