Investment in renewable energy infrastructure is forecast to accelerate substantially over the coming year as investors in traditional infrastructure seek long-term, stable returns to counteract ongoing economic turmoil. However, performance validation will be central to permanently establishing renewables as the investment of choice post-pandemic, as investors seek new clarity on selecting assets likely to generate the best returns.
This is according to Clir, a provider of performance assessment software for renewable energy, which is working with a number of investment firms to quantify and analyze the performance of wind farms — both prior to acquisition and to optimize projects once acquired.
Demand for electricity has fallen sharply as industry and commercial premises shut down to tackle the spread of COVID-19, and, as costly-to-run fossil fuel power generators are shut off in response, renewables have taken an increasing share of the energy mix. As such, renewable energy assets continue to generate a strong return on investment even through lockdown measures and investment firms are taking note.
"In recent years, investors have accelerated their commitment to green infrastructure and renewables in particular," said Gareth Brown, chief executive officer, Clir. "This is not simply in response to increasing shareholder preference for sustainable, green investments — it is becoming clear to many leading fund managers that renewable energy is a smart investment decision that will continue to weather wider market challenges.
“However, many new and prospective clean energy investors remain uncertain about the consistency and long-term performance of wind and solar investments owing to resource risk. This concern is exaggerated by poor technical understanding of the assets, and, I would argue, holding many great deals across the sector back."
In order to understand the true performance potential of an asset prior to acquisition, Clir uses artificial intelligence (AI) to analyze supervisory control and data acquisition (SCADA) data in the context of the surrounding environment. This facilitates a prospective investor's understanding of whether an asset's performance is being realized, and if not, the actions required to optimize it. These insights result in an accurate prediction of future energy yield, guidance on potential improvements, and inform valuation.
"The fluctuation in weather and its impact on asset performance is unavoidable and uncontrollable, but it often hides underlying technical performance issues that can be explained, understood, and fixed with industry platforms like Clir. This issue holds up record investment in renewables because of a lack of understanding of the true causes of underperformance at the due diligence stage — a majority of which are fixable issues such as commissioning errors or poorly implemented curtailment strategies. This lack of understanding impacts the risk profile of an asset, resulting in poor valuation or unnecessary optimization costs post-acquisition," Brown added.