Risk quantification and risk management in renewable energy projects
This paper presents the findings of a study commissioned to develop a methodology for risk quantification and risk management for renewable energy projects.
While there has been a substantial growth in renewable energy systems (RES) over recent years, they are not necessarily meeting their full potential. In particular, different perceptions of risk by investors, developers and other stakeholders have constrained the potential for renewable energy.
This report presents a transparent and reproducible set of techniques to assess the risk/return profiles of RES investments. In doing so, the project aims to develop RES-specific guidelines for the classification, assessment and management of different risk elements associated with RES project valuation. The specific objectives addressed in this report include:
- To identify and assess major risk elements (and sub-elements) in renewable energy projects;
- To define potentials of, and methodologies for the quantification and management of different risk elements;
- To assess existing instruments to reduce risk (e.g. risk-insurance, public bonds, public funds to pool risks, public grants);
- To identify and assess innovative support measures which could reduce the financing costs by changing the risk profile of a particular project.