Soft costs have been increasing as a percentage of total system costs for non-residential developers. At Kevala, we believe that more and better quality data will fundamentally change how developers approach new solar projects.
In this excerpt from our new whitepaper, we show how our data reveals meaningful differences between nodal values in the same geographic areas, even the same markets.
Changes in nodal values are caused by fuel prices, weather, system upgrades, as well as large generators entering or leaving the market. It is fairly rare to see dramatic price differences for solar production like the 35% difference we found between two substations in California – but there are meaningful differences between substations in the same markets. In New Hampshire, for example, we found that some nodes had roughly a 10% difference in value using the last 5 years of historical data. Similarly, we can calculate price variability at each node to identify which substations offer the highest and most stable solar production prices.
Kevala’s nodal analysis helps developers in four types of transactions:
- Utility is the off-taker: Utilities can use a nodal analysis to compare proposed solar rates to the cost of meeting electricity demand in the same area – sometimes referred to as the “utility avoided cost”.
- Assess a contract for differences: The nodal pricing data creates the foundation of a risk analysis when entering a contract for differences or a virtual Power Purchase Agreement (PPA) – where developers price the value of electricity production in one place and exchange it for the consumption of electricity in another.
- Validate a merchant model: If power is being sold into the wholesale market using a merchant model, the entity
funding the project will want evidence of the revenue potential based on the level and volatility of the nodal prices for the project location.
- Support out-year revenue estimates: If the development is a commercial project with a short length PPA term, knowing the potential wholesale value of the production at the node will help developers make the case for the out-year value (after the PPA term has ended) of the project.
The nodal analysis gives developers a leg up in two ways: they gain early insight into revenue or pricing potential for new projects, and they reduce site-selection costs by narrowing the search to a smaller, targeted area. This
information also helps commercial developers (1) demonstrate the revenue potential of their project in the case of a
customer default, (2) create estimates for out-year revenue, and (3) support a contract for differences or a merchant
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