Scenario: Solving for Energy Price Volatility

In the wake of the Russia-Ukraine war, energy price volatility has exposed the need to embed energy security and price stability into national energy policy considerations and investment decision-making.

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Generators and consumers alike are looking for economic stabilisers that support further investment into renewable energy assets and that allows for low cost generation that tackles the cost of living crisis.

Historically, renewable energy generators have locked into price certainty through power purchase agreements. This price certainty however comes at a discount to market value compressing the returns of generators who might otherwise deploy that capital towards further generation, which in itself, brings down costs.

A Paratus insurance product would enable the generators to determine a price floor, for which they pay a tax-deductible premium. Paratus price against an official forward market power price curve. The insured is protected against drops in the energy price that fall below the floor whilst retaining the benefit of any upside above the floor, improving IRR’s. The generator uses the implied volume of generation at the time the insurance product is taken out. This forms part of the evaluation underpinning the writing of the insurance product. The insurance can be solar profiled, with coverage available over a number of European jurisdictions.

The Paratus renewable power insurance product is pending regulatory consent.