Blog News Events Publications Directory Community Industry Voices Media

Renewable energy and risk management

An interview with Luca Pedretti – COO, Co-Founder, Pexapark

ComTech Advisory: How did Pexapark start?

Luca Pedretti: Together with Michi, we had a vision to address the growing needs of the renewables space for many years. From our respective careers, we had extensive experience in structuring and risk managing PPA transactions with renewable energy producers, in various markets. We started to realise the tremendous demand there was from renewable energy players to understand the mysteries of the electricity markets. In particular we saw a need, and an opportunity to channel our skills towards creating a company dedicated to the new emerging renewable world, dealing with price risk. Eventually, we sat down together and began to write a business plan. We started connecting with our network, and after this initial spark, things developed really fast.

AdvertisingBrady Technologoes

ComTech Advisory: What business problems did it set out to resolve?

Luca Pedretti: The renewable energy industry is transitioning into a new era.  At the beginning of the clean energy transition, a renewable energy producer or asset owner could happily rely on a secure and generous cashflow for up to 20 years, because renewables were backed by  government subsidy schemes. But today, these schemes are slowly being rolled back as the cost to build renewable assets is decreasing. Now, investors  are looking to secure their revenues with bilaterally-agreed, private long-term agreements such as Power Purchase Agreements (PPAs). These are a critical aspects in securing the financing needed to build each project. Typically, PPAs are only used to hedge a portion of the asset’s expected volumes. The remaining will be sold in shorter term agreements or on the spot market. So, for the first time, these market players are finding themselves exposed to merchant markets and the inherent pricing, volume and profile risks born from managing renewable assets.

This is where Pexapark steps in. Our solutions and services have been designed to enable renewable market players dealing with key critical tasks when trying to price, analyse, manage and sell renewable power.

ComTech Advisory: What are the key products in Pexapark’s portfolio?

Luca Pedretti: Firstly, we addressed one of the biggest market concerns of the renewables industry at that time: ‘how do you price a PPA?’

Unlike other commodities, PPA prices are not publicly reported and remain in secret. So, we developed PexaQuote – a trusted PPA price reference platform where market players can see daily pricing for all standard PPA contracts in any of the 18+ markets we cover. We recently added energy storage pricing data to this platform for Germany, UK, Finland and Spain.

Our pricing methodology is continuously refined taking into account traded prices, observed PPA prices and anonymously sourced bid and ask prices from professional market participants. We are proud to have made the PPA market transparent and seeing explosive use of them in all spheres of the renewable energy market. Major price and news providers are already streaming and using our pricing data feeds such as Refinitiv and Bloomberg.

Next, we started to work on the building blocks for an operating system that provides the infrastructure needed to manage renewable energy sales, supporting users from deal analysis through to active management of portfolios and risk. Our enterprise software solution directly imports forward pricing curves from our PPA price reference platform, but users can also input their own pricing curves and assumptions. We allow control of all energy related data input, providing transparency and insight that is used to answer questions such as, ‘what will the revenue distribution and risk exposure look like for a baseload PPA versus a Pay as Produced PPA?’; ‘What is the optimal hedge size for this asset?’; ‘Where should I build my next wind park?’; or in today’s market situation of expensive assets and increasing risk discounts , showing how any of these choices impact the revenue performance and risk exposure of an overall existing portfolio. We can demonstrate untapped diversification benefits from multi-technology and multi-country renewables portfolio, allowing investors to systematically adjust investment and PPA strategies otherwise not possible.

Our solutions give visibility to the changing risk exposure on an asset-by-asset basis and at an amalgamated portfolio level. Users benefit from data driven decision support for the active management of their open positions. We combine our daily market- based pricing intelligence with production data to produce financial budget forecasts for month-end, year-end or for the full asset lifetime. This includes calculations of merchant revenue, subsidy schemes, reconciliation payments, GoOs and more.

Whilst not technically a software product, a key offering from Pexapark is our PPA transaction advisory. PPAs are very complex contracts and back when Pexapark started operating, very few organisations had readily available in-house PPA transaction experience. Although today PPAs are more common, there is still a shortage of expertise in the industry. To address this, we introduced PPA transaction services and built a team of PPA transaction experts who come from diverse energy backgrounds including leading utilities, investment funds and consultancy. These experts originate, structure, negotiate and transact PPAs on behalf of clients. They also deliver a range of training academies to upskill organisations on how to master PPAs.

ComTech Advisory: How do you expect the Pexapark’s operating system to be used by businesses with broader portfolios?

Luca Pedretti: The software is a powerful enterprise solution, which can be used both as standalone, as well as in tandem with solutions that companies already use. Repository financial, risk and PPA data can easily be exported from the operating system via open API onto any other in-house business systems.  Therefore, users can enrich the existing business-wide analysis and reporting they undertake for other energy commodities with their renewable specific data.

ComTech Advisory: What is next in terms of direction and new products?

Luca Pedretti: We are very excited about our new energy storage pricing data and we are already working on further enhancement of our offerings in this space. There is a significant industry shift towards implementing batteries to off-set both growing pricing cannibalization and balancing risks and to maximise revenue potential for renewable projects in future years. But whilst the interest is growing, there is still a vast amount of education needed to make it possible for power producers to build and implement a solar-plus-storage co-location model. Our pricing data offers a strategic starting point for understanding the value that can be gained. We have also introduced new storage academies to educate on how co-location models work and how a solid business case for introducing a storage asset to a generation plant can be made. Our first academy was presented with our partner Fluence, who is a global market leader in energy storage products and services. Our next is planned for later this year in Barcelona.

Our team will be at E-World at Essen, Germany on 21-23 June 2022 and we hope to see you there to give you a demo of our solutions. You can find out more info and sign up for our free E-World PPA academy here: Meet us at E-world | Pexapark

Luca Pedretti - COO, Co-Founder, PexaparkAbout Luca Pedretti – COO, Co-Founder, Pexapark

Luca has 15 years’ hands-on experience in energy risk management for renewables in open markets – valuating, structuring, negotiating and managing PPA transactions across Europe of more than 3,000 MW.

Prior to co-founding Pexapark, Luca spent 10 years at Axpo Trading, with the last 4 years spent as Head Origination. Luca has also spent time working overseas in Indonesia providing advisory on microfinance.

Luca holds a Master in International Politics and Governance from the University of St. Gallen, Switzerland.

Luca is passionate about renewable energy and risk management and secretly writes blog posts about it.