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Renewable energy company uses risk-management software

Tioga Energy, a supplier of renewable energy services to commercial, government, and non-profit institutions, is using @RISK software from Palisade to illustrate to customers in California the potential financial benefits of signing up to a solar power purchase agreement (PPA).

Tioga provides project financing through its SurePathSM Solar (PPAs), and maintains and operates solar systems on behalf of its customers. Tioga’s offering delivers predictably priced power and enables organisations to to both 'green' their operations and reduce energy costs. In order to illustrate the benefits of solar, Tioga needs to estimate future electricity prices and make comparisons by showing the savings from a new solar system.

To forecast possible price increases, Tioga Energy inputs California's historical electricity rate data into a model developed using Palisade's risk analysis software, @RISK. This generates a probability distribution for electricity rate rises over the 20-year PPA period, which shows that there is a 25 per cent likelihood that price increases will be less than 4.8 per cent, and a 25 per cent chance that rate rises would be more than 8.7 per cent.

The @RISK model therefore helps Tioga Energy evaluate the likelihood that a customer will save money for a variety of PPA scenarios (i.e. the rate at which electricity would initially be charged and the amount by which it would then increase each year). It also calculates the magnitude of savings for the different combinations of first year costs and subsequent rises. Consumers are therefore able to better understand the pricing and make an informed decision about whether to sign up for a PPA.


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