Growth Industry: a brief outline of service providers

This paper takes a brief detour from the asset-owner-financier theme and instead provides a very high-level overview of a market segment that has recently gotten more attention from mainstream media and is focused on consumers:  the role of energy marketers and service providers.  The energy transition favors electric power – all of which is metered – and companies have significant opportunity to improve their understanding of usage across time and space and the variable pricing they face in both dimensions. They will increasingly be in position to make more intelligent decisions about their operations and the corresponding cost of power. This overview is simply an introduction to some of the services that are increasingly at their disposal. 

There are countless forecasts that the recent trend in development of renewable generation will continue indefinitely into the future, based on the same drivers as in the past several years: cheaper inputs, more efficient technology, and ongoing government incentives.  By contrast, there is relatively little attention paid to the life blood of development: availability of investment capital.  In this paper, we try to shed some light by identifying the various stages of development – including construction, operation and integration with other assets – and the financing requirements associated with those stages.  

Investor interest in the U.S. power market is very different from oil and gas markets, and recent market activity reflects this distinction.  Investors in oil, in particular, sense a buying opportunity for the commodity.  Investors in power are less active in the commodity, but this could change in the future.

 There is significant interest in standardizing the PPA process and creating contracts that are more readily able to be traded on an open exchange. Through the work of several firms, mostly in the U.S. and Europe, these efforts are picking up steam.  

We look more closely at different types of fixed-price contracts utilized across energy markets, including oil and gas; to understand their role in helping companies manage their exposure to energy prices; and to highlight features that are unique to physical or financial structures

A brief summary of the changes taking place in power generation and the implications for energy risk management.