Lesson 7 Overview

Lesson 7 Overview

As Energy Market Professionals, we run across many different types of risk that we will need to manage going forward. Certain of these risks are very obvious - like the cost of the natural gas commodity increasing as the weather gets colder leading into October. Other risks may be less obvious - like the long term cost of the natural gas commodity remaining at long term historically low levels and thereby placing the value proposition of your utility scale solar power plant at risk. Other risks are seemingly less direct - such as the potential for the US Legislature to reduce or eliminate the Investment Tax Credit for a solar project or the imposition of tariffs on certain components. In this lesson, we will talk about identifying risks and ways to mitigate (or exacerbate) them through market-based and non-market-based instruments. We will further our understanding of risk management and how certain instruments can be used to de-risk our projects.

Learning Outcomes

By the end of this lesson, you should be able to:

Explain the simple risk management financial derivatives;
Develop risk management solutions for each identified risk in your project;
Develop Pxx values for a typical solar project;
Explain how contracts work to mitigate certain risks but introduce other risks;
Develop a holistic risk mitigation strategy for your project.

Reading Materials

Risk.net (2022) Editorial: How Energy Risk Managers are Responding to Extreme Volatility(link is external)
kWh Analytics (2023): Solar Risk Assessment 2023(link is external)
Video interview with Jayson Kaminsky, CEO of kWh Analytics. If this video is slow to load here on this page, you can always access it and all course videos in the Media Gallery in Canvas.

Video: Interview with Jayson Kaminsky (32:44)

Once the video begins to play, you can access the transcript for this video by choosing the transcript icon, to the right of the magnifying glass icon, in the upper right corner of the video player.

Interview with J. Kaminsky by M. Kleinginna © Penn State is licensed under CC BY-NC-SA 4.0(link is external)

Registered students can also access videos in the Media Gallery in Canvas.

What is due for Lesson 7?

This lesson will take us one week to complete. Please refer to the Course Calendar in Canvas for specific due dates. Specific directions and grading rubrics for assignment submissions can be found in the Lesson 7 module in Canvas.

Complete the assigned readings and viewings for Lesson 7
Complete Quiz 5
Project work - Risk Management Measures

Questions?

If you have any questions, please post them to our Questions? discussion forum (not email). I will not be reviewing these. I encourage you to work as a cohort in that space. If you do require assistance, please reach out to me directly after you have worked with your cohort --- I am always happy to get on a one-on-one call, or even better, with a group of you.