Renewable Energy and Portfolio

Asset Management consists of ensuring that electricity generating assets are managed, operated and maintained in a manner that maximises their performance and financial returns, and that they operate in accordance with their contractual arrangements. Asset managers will provide a range of services across legal, technical and commercial aspects.

Battery storage is a technology that allows energy to be stored and then released when desired. It can help to balance energy supply and demand, enhance grid stability and ensure continuous and reliable power supply. Batteries are sometimes located on-site with wind or solar generation, in an arrangement commonly referred to as 'co-located', with the potential to be charged directly from the generator. They can also exist stand-alone, and charge and discharge directly from the grid.

Commercial Operation Date is the date on which an electricity generator starts selling its electricity output.

Capacity factor refers to the actual energy output of an electricity generator over a period of time divided by the energy output that would be produced if it operated at its rated (or 'nameplate') capacity over the same period of time. It is generally expressed as a percentage.

Contract for Difference (CfD) is a mechanism supporting low-carbon electricity generation, which provides guaranteed long-term revenue for each unit of energy output. In the UK, CfDs are set for 15 years and are awarded to the electricity generator by the Low Carbon Contracts Company (a government entity). The CfD is based on the difference between the market price and an agreed 'strike price'. If the strike price is higher than a market price, the CfD counterparty must pay the generator the difference between the strike price and the market price. If the market price is higher than the agreed strike price, then the renewable generator must pay back the CfD counterparty the difference between the market price and the strike price. In doing so, the CfD ensures that the generator receives a fixed price per unit of electricity produced.

ORIT considers solar and wind to be 'core technologies', on the basis that these types of projects will form the majority of renewable energy generation.

A developer is a company specialising in creating and advancing a project to a certain stage, before typically bringing it to market. In the renewable energy sector, developers are responsible for identifying and designing renewable energy projects, usually to bring them to the 'ready to build' stage (although they may look to sell at an earlier or later stage). In order to reach ready to build, the developer needs to secure the necessary permits, land rights, grid connections and other prerequisites.

A distribution network operator (DNO), also known as a distribution system operator (DSO), is the operator of the electricity power distribution system which delivers electricity to most end users. Each country may have a number of distribution network operators, each responsible for the network in a certain region. The distribution networks typically operate at lower voltages than transmission networks, which are in turn managed by transmission network operators (TNOs). In the UK there are 14 different DNO regions which are managed by six different operators.

An assessment of the expected annual energy yield (see definition) of an electricity generator, usually carried out by a technical consultancy firm. Energy yield assessments for a key part of the evaluation of a project, and in setting budgets.

Energy yield is the amount of energy produced by an electricity generator, usually expressed on a per-year basis.

Engineering, Procurement and Construction refers to the tasks of designing an installation, procuring the necessary materials and constructing the project, undertaken by an engineering contractor.

Some jurisdictions offer (or historically have offered) feed-in tariffs, whereby electricity generators receive a fixed payment for each unit of energy they generate and export (or 'feed in') to the grid, regardless of market prices. Such schemes were implemented as a way to promote the development and build-out of renewable electricity generation.

Fixed revenue in the context of renewables refers to a predictable and steady stream of income per unit of generation by renewable energy projects, typically based on fixed price contractual agreements or subsidy mechanisms. This revenue is not subject to fluctuations in market prices or demand and remains relatively stable over a specified period. Fixed revenue arrangements typically support the development of clean energy infrastructure by reducing the exposure to revenue risk.

GWh stands for gigawatt-hour (1 GWh is equal to 1000 megawatt-hours) and is a unit of energy generation or electricity usage. A 1 GW generator would produce 1 GWh over the course of one hour.

GW stands for gigawatt, a unit to express large quantities of power or capacity in the context of electricity generation. One gigawatt represents one billion watts or one thousand megawatts. Watt is the standard unit of measurement for power in the International System of Units. It measures the rate at which energy is transferred or converted. It is commonly used to describe the output or generation capacity of power plants/electricity-generating facilities.

Green hydrogen refers to hydrogen gas (see definition) that is produced using renewable energy sources, such as solar, wind or hydroelectric power through a process called electrolysis. In electrolysis, water is split into hydrogen and oxygen using electricity and an electrolyser. The 'green' refers to the fact that the electricity used in this process comes from renewable sources.

The power lines and associated equipment for the transport of power from electricity generating stations to end users. There are geographic variations, but usually grid systems are divided into different networks, broadly categorised as transmission (higher voltage) and distribution (lower voltage). Generating projects require grid connection agreements in order to connect into grid networks.

Guarantees of Origin (GoOs) are an instrument defined in European legislation that labels electricity from renewable sources to provide information to electricity customers on their energy source. In many cases, GoOs are used as property rights to transfer the 'green benefit' of renewable electricity production from the seller to the buyer. In the UK, REGOs are a similar instrument to GoOs.

Hydrogen (typically in our context meaning the molecule H2) offers a way in which energy can be stored, as an alternative to batteries or other storage options. Hydrogen technology involves the production, storage and use of hydrogen as an energy carrier or fuel. It holds the potential to play a significant role in achieving clean and sustainable energy solutions, provided that it is produced and used efficiently with attention to sustainability and safety considerations. There are different methods to produce hydrogen as well as divers applications. Key sectors of the hydrogen economy include industrial processes, transportation, fuel cells and storage.

Inflation-linked revenue refers to a type of revenue that is protected against inflation fluctuations, by virtue of a contractual link to an inflation index (when inflation increases, inflation-linked revenue increases). Costs may also be inflation-linked.

An inverter is a device that converts direct current (or 'dc') electricity to alternating current (or 'ac') either for stand-alone systems or to supply power to an electricity grid.

MW stands for megawatt, a unit to quantify the power or capacity in the context of electricity generation. One megawatt represents one million watts. Watt is the standard unit of measurement for power in the International System of Units, and is equal to one Joule per second. It measures the rate at which energy is transferred or converted. It is commonly used to describe the output or generation capacity of power plants/electricity-generating facilities. For context, a typical modern onshore wind turbine would typically have a capacity of 2-5 MW.

A power price which has no publicly-guaranteed remuneration (i.e. subsidy free, and CfD-free, see definitions). A merchant plant would receive the fluctuating daily spot market price, instead of a fixed-one, for its electricity unless it reduces its merchant exposure through hedging (see definition) instruments such as PPAs (see definition).

An offshore wind farm consists of multiple large wind turbines that are installed in water such as oceans and seas. These turbines capture the energy from the wind, which turns their blades and generates electricity via a connected generator. The produced electricity is transmitted through undersea cables to the shore.

In the context of renewables, an offtaker is an entity that enters into an agreement to purchase the electricity generated by a renewable energy project. Offtakers play a crucial role in providing a market and revenue source for renewable energy producers. The arrangement between the renewable energy project owner and the offtaker is typically formalised through a power purchase agreement (PPA, see definition), outlining the terms under which the offtaker will buy the electricity generated. Offtakers can be utility companies, corporations, industrial facilities, government agencies, municipalities etc.

An onshore wind farm is a collection of large wind turbines that are built on land. These turbines use the wind's energy to generate electricity by turning their blades which are connected to a generator. The electricity produced is then fed into the power grid to provide clean and renewable energy.

An O&M (Operations and Maintenance) provider is a company that specialises in managing the ongoing operations and performance, and carrying out the maintenance of an electricity generation project. O&M providers play an important role in ensuring the efficient and reliable operation of these projects throughout their lifetime.

These terms are often used in reference to energy yield assessments (see definition). The P50 figure represents the generation number above which there is a 50% chance of the actual output to exceed the forecast production. Similarly, the P75 number has a 75% chance of being exceeded and the P90 number a 90% chance of being exceeded. P50 represents the most likely estimate of energy production from a renewable energy project and is considered the base-case scenario. P90 represents the 90th percentile of the energy production estimate. This means there is a 90% probability that the project will produce at least the amount specified as P90. In financial and risk analysis, P90 is used to account for the uncertainty and variability in energy production. It is a more conservative estimate and provides a measure of the project's resilience to potential underperformance. P90 values are often used to assess the project's ability to meet debt service obligations and quantify production in a low wind year.

Portfolio Management is the process of strategically managing a collection of investments/assets referred to as a 'portfolio' to achieve specific financial and operational goals while considering factors such as risks, market conditions etc. The primary objective is to optimise the balance between risk and return.

Power Purchase Agreement is a contract between an electricity generator and an electricity purchaser, defining all of the commercial terms for the sale of electricity between the two parties.

A ready-to-build renewable energy project refers to a project that has progressed through development stage and is fully prepared for construction and implementation. At this stage the necessary permits, rights, land access and grid connecton has been secured, and subject to contruction agreements being in place, the physical construction phase is ready to begin.

The remaining asset life of an asset refers to the duration for which the asset is expected to continue operating and generating revenue or value. It represents the period during which the asset is projected to remain productive, efficient and economically and commercially viable considering factors such as maintenance, land right duration, planning conditions etc. Understanding the remaining asset life is crucial for financial planning, investment decisions and strategic management.

A Renewable Energy Guarantee of Origin is an electronic certificate used in the UK to provide evidence that a unit of electricity has been produced by a renewable electricity generator. In Europe, GoOs are a similar instrument to REGOs.

Renewables Obligation Certificate is a green energy certificate issued to an accredited electricity generator for eligible renewable electricity generated within the UK. Certificates can then be sold directly or indirectly to electricity suppliers who will then redeem them against what is known as their Renewables Obligation.

Solar PV, or solar photovoltaic is a technology that converts sunlight directly into electricity. It involves using solar panels made up of photovoltaic cells to capture sunlight and convert it into usable electrical energy. These panels can be installed on open spaces, rooftops, or other surfaces exposed to sunlight.

A subsidy-free project refers to an initiative that operates and generates revenue without relying on financial incentives, subsidies or government support.

A transformer is an equipment that is used to change the voltage of an electric current. Transformers can increase or decrease voltage.

Transmission Network Operator or 'TNO' refers to the licensed entity that owns and maintains a transmission grid.