Love is Blind, Virtual Power Purchase Agreement Tracking Shouldn’t Be

Amber:
Hello everyone, and welcome to today’s webinar presented by Verse on the topic of “Love is Blind, but PPA Performance Tracking Shouldn’t Be.” We’re really glad to have you all here today.

We’re going to give folks a few minutes to log in, but while we do that, I’ll go over just a few housekeeping items for today’s webinar.

We will be getting to as many questions as we can before the end of the webinar today, so feel free to input your questions in the Q&A section of the Zoom webinar portal at the bottom of your screen. We’ll attempt to get to as many as we can.

This webinar will also be recorded and available on our website, verse.inc, within 24 hours. We’ll also be sending an email with a link to the recording and a few additional resources to all registrants after the webinar.

With that, I’m going to go ahead and pass it off to Shehzad.

Shehzad:
Thank you. Amber, should I give it a couple more minutes or should I go ahead and get started here?

Amber:
People are logging in, so let’s go ahead and get rolling.

Shehzad:
All right. I’ll go ahead and introduce myself. I’m Shehzad Badalawala, the VP of Strategy here at Verse. I’ve been in energy for over 20 years. I started my career at Pacific Gas and Electric, the big investor-owned utility here in Northern California where a lot of renewable procurement first started.

Most recently, before Verse, I was at Google for three and a half years as an energy portfolio manager overseeing their fleet of data centers and renewable projects throughout the globe, and I set up an energy risk management framework there.

I’ll hand it over to Sam for his intro.

Sam:
I keep forgetting that I need to introduce myself first because that’s a tough résumé to follow.

I’m Sam Codall, the Director of Client Enablement here at Verse. I’m really excited to be with you all today. Prior to Verse, I spent four years with Schneider Electric on the renewable energy and carbon advisory team. Before that, I spent seven years with Bloomberg, first in DC focused on energy and transportation policy, and then later in New York with an organization called New Energy Finance, focused on energy transition technologies research and data.

So, excited to be here talking about “Love is Blind, but PPA Tracking Shouldn’t Be.”

Shehzad:
All right. With that, I’ll give a quick overview of what we’re going to cover today.

We’ll get started with who is Verse and what do we do. We’ll cover what does Love is Blind have to do with PPAs, then break down our analogy with sections like finding your fiancé, meeting in real life, navigating a long-term relationship, and one of the key takeaways: it’s okay to ask for help. Then we’ll close with Q&A.

So first, an overview of Verse: we’re an end-to-end energy management platform, and we’ve been around for three years and built a number of applications to make energy management easier.

That starts from the Data Hub. To run any clean energy program, you need a lot of data about what’s going on in wholesale energy markets, what’s going on with virtual power purchase agreement prices, and a whole host of other things like how much emissions are on grids and other factors that could affect your decision-making process.

Moving to the right, we have Planning, which is really about setting up clean energy roadmap strategies and looking at how those strategies might evolve with different assumptions about what PPA prices are going to do, what wholesale prices are going to do, and giving you the tools to make data-driven decisions.

Then, moving toward Valuation and Transaction, there’s evaluating offers. Oftentimes, you’ll get a bilateral offer for a virtual power purchase agreement, or you might run a request for proposal and get a number of offers. This is to help evaluate those offers, as well as to source, run, and administer those RFPs on your behalf.

As we go around the wheel further, we have a Utility Bill Management application to help get all of that important load data into one place. That interacts well with the planning application as we understand what the consumption side of your energy portfolio looks like.

Then we have a Risk Management application. The energy markets are more volatile today than they’ve ever been. We’ve seen that with changing weather, climate change, more volatility, and renewable intermittency leading to more energy price spikes. So this is a very important thing to manage—uncertainty in spend.

Then Portfolio Insights, which will be more of the focus for today, is about looking at how a PPA is performing, what we can learn from that information, what we can expect going forward, and understanding what’s happened before.

Sam:
All right. So what the heck—why are we talking about Love is Blind? How does reality TV play into anything we’re thinking about professionally here?

This all started with the CEBA Connect event. We were there in force, had a fantastic week, learned a lot, and connected with some great companies, developers, and people. What CEBA and the latest season of Love is Blind have in common is that they both took place in Minneapolis.

As Shehzad and I were brainstorming, trying to think of something fun and relevant, we were talking about reality TV shows. We were actually at a dinner with some clients talking about reality TV, and somehow it got related to what we were doing professionally and thinking about PPAs and some of the parallels. It just so happened that we had the Minneapolis connection.

So with that, we sat down and thought, okay, we’re actually going to build out this analogy. You tell us what you think of how we got there.

So what do PPAs and reality TV have in common—specifically, Love is Blind?

This is a show with chaos and drama. The interpersonal relationships are interesting to see unfold. But ultimately, at the end, both signing a virtual power purchase agreement and the premise of the show involve making a commitment before you see the full picture.

If you’re not familiar with the show, contestants are literally asked to fall in love through a wall. They’re in these pods. They talk to each other. They speed date. They learn about each other’s personalities and interests, but there is no physical interaction whatsoever. They don’t get to see each other.

So there’s flirting and all of the typical things you might see in the getting-to-know-you phase of a relationship. With PPAs, that flirting is through forecasts, project specs, and spreadsheets—all before a single megawatt is delivered.

When you’re asked, in the show, to propose and become an engaged couple before seeing the person, it’s kind of similar to going through that RFP process, negotiating a contract, and signing a PPA before the project even comes online.

So it is a leap of faith. You are making a long-term commitment, and you’re betting on the future. This is all based on this pre-construction emotional connection with what we think and hope the project will do—for us, for the grid, and for our company’s goals.

To summarize: PPA procurement begins with strong optimism but limited visibility. These are early-stage decisions that require a leap of faith, just like the blind engagements in Love is Blind. The real performance data comes only after, in the show, the reveal—and in real life, when the project comes online.

In any good show, there’s an introduction of the cast to pique our interest in how things might play out. In a PPA, this is not just a relationship with one party. There’s you, of course—the buyer—and you have to navigate the different developers and projects out there to find your match.

Those projects are interacting with the utility. That’s where the wholesale market is created, and you’re settling in that market. So the utility is a bit of a mediator there, and it’s shaping the outcomes or performance of that project.

And then, of course, there’s also the market. While you may be settling virtually on your virtual power purchase agreement, you are still buying power from the grid. So every role influences your relationship and how these things perform.

There are multiple players, and each has a unique impact on outcome. You’re signing that contract—which is your vows, if we want to jump back to the Love is Blind marriage analogy—but there’s also a market that impacts the outcomes. The market is the wildcard, or how life unfolds in the dating analogy.

So understanding each stakeholder helps us better inform—or potentially avoid—future misunderstandings.

We prefaced this a little bit in the introduction to “Why Love is Blind,” but in the show there are literally these pods. The contestants sit across from each other, they speed date, and they’re looking for natural connections. There are no visuals, lots of judgment calls being made. You narrow down from your many speed dates to the people you want to go back out with and get to know in greater detail.

For me, this is thinking about the RFP process, where you go to market, solicit all the offers, and then create the shortlist. There’s kind of a speed element, and then with your initial high-level analysis you say, these are the few contestants—or projects—that I’m interested in.

Ultimately, you find your person or you find your project, and that’s when you enter into exclusivity. We’ve gone through the RFP, negotiated a term sheet, signed that term sheet—and what does that term sheet give us? It gives us exclusivity.

This is still early stage in the process. While it might feel like a victory in the moment, there’s still a lot of time left. This early-stage diligence is really important. It gets you to a point where you’re having this one-on-one conversation, but it’s not the end of the road. In the renewables world, this is still pre-COD, or commercial operation date. The project doesn’t exist yet.

But it’s still something to celebrate. The engagement is official. You’ve signed a contract. You have a PPA. Everything looks great. You have an approved economic case that your internal stakeholders, your C-suite, your CFO, have signed off on. We’re understanding the potential impact toward our goals, and we get to tell people about it, which is really exciting.

But this is also when the work really starts. Just like in a relationship, you get to know someone, it’s a bit of a honeymoon phase, and as you spend more and more time together, there are certainly ups and downs.

So to summarize: signing the PPA is not the finish line. It’s really the start of the journey. It’s exciting because there is initial optimism, but there are going to be deeper complexities, especially once you have an operating asset.

Shehzad:
All right. And while it’s not associated with Love is Blind, I had to do a shameless introduction of the Chippendales dancers from an SNL skit. You’ll notice this isn’t Patrick Swayze or Chris Farley, but they’re lookalikes.

For those of you who haven’t seen the skit, there’s an audition scene where both Patrick Swayze and Chris Farley are auditioning to be Chippendales dancers. Quite frankly, I would say Chris Farley was the better dancer, even though Patrick Swayze is famous for Dirty Dancing.

But the point here is that there is a big difference in how a project goes and what you can expect. What we highlight here is that in the ERCOT experience, you don’t know what you’re going to get until you’re living it and breathing it.

In 2023, for example, in Texas, there were very high prices. So everyone was very excited—both the people who had signed their PPAs and those considering ones or those whose projects were about to come online.

In 2024, it was a very different story. Prices were very subdued, so a lot of expectations were not met. While there is excitement when you’re signing or when you’re having a good year, there are also a lot of ups and downs.

This is where the rubber hits the road. In relationships, some people are serial daters or have been in many relationships and are aware of these ups and downs. But if you’re getting serious for the first time, maybe going on the show Love is Blind isn’t your best option.

Similarly, if your very first PPA came online at the beginning of 2023, you had a lot of wins to report internally. It felt good. There were a lot of ups. If you’re a first-time energy buyer and your PPA came online at the beginning of 2024, the scenarios you likely presented to management were not what happened in reality.

The point I’m emphasizing is that those first forays into dating—or into energy buying—can really set the tone. But it’s a long-term agreement, so we have to remember that.

Another reference—one of my favorite songs is The First Cut Is the Deepest. The first bad year is one everyone tends to remember, but remember the good times too.

I also want to highlight that with Love is Blind, there’s always that villain. Here we have Dave with his opening line: “So, what’s wrong with you?”

There are things to look for when you’re starting out building this relationship with your PPA or your developer. There are some things about your partner that you should know about, and there are red flags:

• Are they not giving you accurate invoices?

• Is there something systematic there?

• Are they not meeting their obligations for commercial operation date?

• Are there mechanical availability issues?

• Are they maintaining the plant?

• Is it going down and having outages when it’s not supposed to?

• Are they curtailing operations without informing you?

• Are they not communicating well?

These are things about your partner that you should look out for.

On the other side, there are just the twists and turns of life. You’ll have an estimate or forecast of what that power plant is going to deliver, but sometimes there’s more wind than other times. Sometimes there’s cloud cover. So generation deviating from expectations is not always within the control of your developer or your partner, but it still affects you.

Similarly, natural gas prices—which very much affect wholesale power prices—will affect the bottom line of your transaction and your commitment and how you feel about it. Related to that: low market prices. Everyone wants higher prices when they’ve signed or made a commitment, because they want that relationship to exceed expectations.

Basis blowouts are a little more technical. Where that project is located might be near transmission lines that don’t have enough capacity for that generation to get to the load. That means that generation is lower value and doesn’t earn as much revenue as expected, and it also doesn’t protect you against the high prices you might be facing where you’re consuming.

Highly relevant now: changes in law, supply chain issues, and other things that can affect the ability of your developer or your partner to meet obligations under the contract.

So these are two categories to think about: there are things about your partner that you should look for, but there are also external things that will impact how you feel about the relationship.

And communication is key through all of this. In Love is Blind, there’s a lot of emphasis on good communication and building emotional connection. At Verse, we say data is your PPA’s preferred communication style. You want to have those insights flowing freely in both directions so everyone is aligned and expectations are managed.

Here’s where we highlight a gap. Sam mentioned it earlier: a lot of this information is in spreadsheets, not communicated throughout the organization or with each other, delayed, or hard to interpret.

And of course, continuous feedback is important in this relationship. If something is an error, you want to flag it as quickly as possible, because the longer you sit on it and let it stew, the worse and more toxic it can become for the relationship going forward.

Sam:
So yes—now we’re in this long-term relationship. How do we navigate it? How are our expectations and our communications evolving as we grow as people and as energy buyers?

Reality has set in. You’re living together. You may notice some quirks that you didn’t see earlier in the relationship. As Shehzad mentioned, these can be things like construction delays, invoice issues, market risks, or curtailment events.

The big question is: Are you who you said you were? Those are the actual personality traits—the things, the red flags, that are in your control.

But there’s also the element of: Are you who I thought you would be? That’s about controlling our expectations and evolving our expectations as well.

There are things that are in and out of our control, which is why ongoing tracking of your virtual power purchase agreement is essential—not just to confirm delivery against promises and vows, but also to understand performance risks and externalities, the market-controlled rather than partner-controlled elements of the relationship.

With transparency, we help adjust those expectations, which can help preserve trust in a relationship. Healthy relationships need this realignment of expectations.

So I’m budgeting and rebudgeting, and as reality changes, as actual performance happens, I can in real time adjust my expectations. But communication isn’t just between your team and the project. There’s also communication within your organization. Leadership needs to be eyes-wide-open on what’s happening and how the market is evolving.

The key is to adjust things before they go off the rails rather than be reactive once they do.

That means realigning internal budgets, being transparent about deviations from expectations, maybe understanding what an invoice amount should be before you even get that invoice based on the market conditions. Forecasting aligns performance of the asset with your budget and expectations. Resetting those expectations helps avoid repeated disappointments or finger-pointing and helps preserve trust within your organization.

It is okay to adjust your plans, and reality does deviate from modeled outcomes.

Shehzad:
All right. Not to be a stereotypical Californian here, but I think about batteries a little bit like therapy.

When it comes to projects out here in California, there was a time when solar and wind could be signed by themselves, but nowadays everyone needs storage because of the duck curve. We can think of this as a battery being kind of like therapy.

It’s now very commonplace, and it helps smooth out the highs and lows. It stores up energy for when you need it most and allows us to manage some of that volatility and pressure on certain times of day—or certain times of our lives.

This is one of the things we also want to highlight: in California, most new plants—particularly solar—come with storage. It’s kind of a given nowadays. There are very few buyers that will do solar in California without battery.

Even more, for existing facilities, we’re seeing people ask, “Can I add storage now?” because they need help managing the ups and downs or the duck curve as it evolves in places like Texas and other markets.

Globally, we’re seeing things in Germany and Spain where the middle-of-day solar value is depressed. So storage is another thing to think about, and it is becoming industry practice, particularly for solar assets.

Sam:
Bringing it back to the relationship, would you say it’s potentially like a prenup—where it may not guarantee your happiness, but it can certainly protect some of the downside?

Shehzad:
Prenups are considered a little not romantic, but yes. Therapy—some people would say therapy is not romantic either. “Why are you doing that? Is something wrong?” But at the same time, yes, I agree. It’s a nice thing to just talk about up front, that you’re going to go to therapy and that it’s a healthy part of the relationship.

And then, meeting the parents. Of course, we don’t think the parents get to make the decision on the relationship, but let’s all be honest—it’s a big factor in how the relationship is going.

We think of meeting the parents as leadership asking questions like:

• How is that relationship going with your developer?

• Can you explain why the prices we’re receiving are different from what you told us we were going to get?

• Why aren’t we having as many good times as we thought we were going to have, or as many high-priced hours?

• Why are things so different from what you communicated in terms of being off budget this quarter?

Then, for all of those sustainability initiatives, you want to get the RECs to meet your 100% renewable goals or whatever goals you have for your organization.

These are the big questions leadership is going to ask regularly. In this case, the parents can be counted on to always ask the questions. So you want to be in a position to answer them effectively and confidently.

And we all know what happens if you’re not answering your parents’ questions confidently—that’s usually not a good sign for a relationship.

Sam:
So with all that in mind, I just want to underscore here: it is okay to ask for help.

When we were introducing the cast to the show, we skipped some really important people: the hosts. This is the Lacheys—Nick Lachey of 98 Degrees fame, for those of you who listened to music in the late ’90s and early 2000s.

What they have here is the Arya platform as one of the hosts. Let’s talk about our feelings. We can always be working on our relationship. Every couple needs both romance, of course, but also a good therapist—and your PPA needs human judgment, of course, but also good data tools.

Strong couples talk about things. Strong buyers audit their invoices. They think about their business process. They request technical reports from the developer. They validate delivery and performance. It’s not all emotional—some of it is practical.

So you should always be working on your relationship, whether that means fixing certain items, identifying discrepancies, or simply tightening up communication and process.

With that, I’ll throw it over to Shehzad for some lessons learned from reality TV before we talk about some of the therapeutic tools that the Verse platform can provide.

Shehzad:
Thanks, Sam.

And reminding ourselves why we’re here: signing a virtual power purchase agreement is about sustainability. We want to get steel in the ground. As stewards of the environment, that’s why we’re here.

Similarly, with Love is Blind, the intent is to find love. In a power purchase agreement, the number one reason is to do well by the planet and get a new power plant built. So just remember the motivations for being here.

As Sam mentioned, be proactive rather than reactive. Once that relationship has started, there’s a lot of work that needs to be done. Look for red flags, communicate, understand.

Regular and defensible reporting builds trust. Meeting the parents, talking to friends, talking with your partner—these are all important. Communication, again: our love language is data. So communicate with data, with each other and within your organization.

Also, love isn’t always blind. There is the reveal. You start to live it. From there, it’s not just: “Okay, this isn’t what I want.” It’s: “Let’s understand what’s going on.”

You’ve made this commitment. So understand your partner, understand how to work together, build those business processes, and communicate.

Red flags matter, though. When you see them, identify them and adjust. While it’s not the ideal outcome in Love is Blind to end the relationship, that can happen. Termination is expensive, but it can happen.

Also, a slide that didn’t make it was about non-monogamy—we all realize you might have multiple partners in this game of renewable procurement. But red flags in one relationship can be learning lessons for your next one.

A successful couple, like Sam highlighted, is about expectations versus reality. Make sure you understand what’s happening, communicate, talk, and adjust to your new reality because market conditions change.

Some things are about your partner and are in their control, but some things are just about the external environment: market prices, natural gas, transmission development. So be able to understand what’s within your control, what’s not, and diagnose and act accordingly.

And finally: it’s okay to ask for help. That’s why Verse is here. We’re here to be your listening ear and help you communicate and navigate these things.

And we’re not just listening.

Sam:
Shehzad walked us through the end-to-end apps at the top of the webinar. Focusing just on the Portfolio Insights piece right now, I wanted to map it back to the conversation we just had about Love is Blind.

I hope if you haven’t seen it, this presentation has piqued your interest and you do go watch it—without sharing Netflix passwords, of course.

Let’s think about some of the items we talked about:

Validating invoices — that is catching the red flags. As an energy buyer, you need to quickly verify that you’re paying what you should pay. Verse has a contract library where we can pull in the invoice, the generation data, and use your specific contract framework to make sure everything checks out and that the invoice is the actual amount that you either owe or can collect.

In the contract, there are more than just terms and conditions about the settlement price. There are a number of terms, and some are quite nuanced. But this is the vow—you stand at the altar, “till death do us part”—and let’s make sure we’re doing everything in our best interest to meet the other parts of those vows.

Whether it’s basis differential, intervals, mechanical availability—each contract has separate terms that may also have liquidated damages associated with them if they’re not met. So keeping an eye on the commitments made and making sure those performance guarantees are met is important, and that’s something the Verse Arya platform supports.

As we’re building this relationship and thinking about communication, we want to communicate in real time. Intra-month, thinking about how the asset is performing so that you can be ready after the last day of the month—and well before you receive an invoice from your counterparty—to communicate internally, whether with finance, treasury, or your C-suite, what they can expect and how you can budget for it.

Before the end of the month, before the end of the quarter, what is my most up-to-date forecast, and how has this PPA performed?

Then going from real time to thinking about the future: it’s important to plan, and that’s where budgeting comes in. Using a defensible virtual power purchase agreement forecast—something that iterates as market conditions change—is really important for maintaining trust and confidence in your energy and sustainability program.

From using our best available estimates in the near term to blending into a more fundamental forecast into the future: what can I expect? How can I expect this asset or portfolio of assets to perform?

And then of course, we want to impress our parents. Understanding your portfolio performance is really important so that you can react quickly with insight, understand the nuance and complexity of the market, but communicate it in a way that someone who might not live and breathe it on a daily basis can understand.

That’s where the Verse analytics support comes in. We are providing centralized tools to drive consistency and confidence as you’re making decisions, adapting your communication styles, and adapting expectations—providing visibility so you can respond faster and react to performance issues if they come up.

And to provide those portfolio-wide insights is really important so you’re preventing surprises and best prepared for the future.

With that in mind, important to note: our platform, while some of the information is redacted, tracks actuals performance—that’s what you’re seeing in the solid lines—into a dynamic near-term forecast, into best available estimates, into your longer-term forecast.

And you can do that not only at an asset level but rolling it up to a regional and even global level so that you can see all of your renewable energy portfolio in one centralized spot rather than disparate spreadsheets.

We can allow you to work all in one currency and export the data so you can make some nifty presentations from it as well.

This is our overview page for Portfolio Insights. Something that’s really cool is that we understand you’re budgeting and rebudgeting, and maybe you have next year’s budget and interim checkpoints. With the compare tool in Portfolio Insights, you’re able to take one forecast, name it, and say, “Hey, I did my Q2 quarterly business report off of this. How does that compare to today’s forecast? What’s happening in the market? Are the deviations a result of generation changes as the machine learning model is optimized, or changes in the price forecast?”

We allow you to quickly pull in historical forecasts and compare them to the most recent so that you can answer those questions without spreadsheet headache—any spreadsheet headache.

And then of course, understanding actual historical performance and doing so all in one place. Whether across your portfolio, at a regional or business-unit budgetary level, or at the asset level, we can slice and dice the actual historical performance of your assets.

In doing so, we can also roll in the different errors that are more likely than not going to happen when one analyst at a developer is putting together a report at the end of the month and sending it to a number of stakeholders.

We mentioned the invoice validation piece. The Arya platform gives you those errors flagged all in one spot.

Here are actually a couple of screenshots of real errors. These are from different projects, but in the first one, you have a pretty classic price error. It happens quite regularly—the timestamp is just off an hour. So the generation is not actually aligned with the price it should be getting. That can amount to deviations in what your net spend will be.

You can export this, have us send it to the developer and communicate on your behalf, or if you already have a relationship with them, do it yourself.

The second error here is a solar asset that simply wasn’t performing. Availability at solar is usually measured at the inverter level, but when we’re looking at actual performance and seeing that there was sun and there should have been production, we can quickly identify that by seeing how our model generation compares to the actual reported generation or integrated telemetry data that we can pipe in from the project.

And last but not least, it seems simple, but from what we’re hearing—not so much in some clients, but broadly—having all of the invoices in one spot. Again, toggling from a global to a regional to an asset level, you have a link to the actual invoice and the data that was sent by the developer, plus the key metrics across those invoices.

Whether it’s the generation-weighted price you received, what that means for the implied REC value on an invoice-by-invoice monthly basis, the capacity factors of the plant—key metrics that help inform decision-making and reporting across your asset portfolio.

So with that, if you want to actually see the Arya platform, I think this is actually a link to our website. If you want to get to know Verse a little bit more, jump in there. You can request a demo and we’d be happy to walk you through some live scenarios on the platform and show you how it works.

Amber:
Thank you, Sam and Shehzad. That was amazing. I’m really impressed by how strong the analogy is between PPA tracking and Love is Blind. That was great.

We are getting a few questions coming in.

The first is: What are some of the most common mistakes you find when validating invoices?

Shehzad:
I’ll start with a few that Sam already mentioned. Daylight savings time is a key one. Others are often, especially early on once the contract comes online, pointing to the wrong node—instead of the trading hub, or instead of the individual node, it’s pointing to a trading hub or vice versa. That can be common because different structures exist on different PPAs.

Those are kind of the big ones. Then sometimes missing intervals is pretty common as well, or missing generation.

Sam:
Something cool that we’re doing is using machine learning to optimize a model generation for an asset.

It’s pretty common to pull in ISO data and make sure the pricing is correct—that’s table stakes. You should be doing that. If you’re not, our system can do it for you. You can build spreadsheets and figure that out.

But what I think fewer companies are doing, and what I’ve been told fewer companies are doing, is validating the actual performance of the asset. Using that model generation, comparing it with actual generation, and looking for sustained events where there may be a deviation.

That’s something very cool that the platform is doing that I don’t think a lot of companies are thinking about.

Amber:
That’s great. Thanks, Sam. Thanks, Shehzad.

Here’s a question about accruals: How is this different than using the 8760 data for accruals?

Sam, you’ve lived and breathed this one. I’ll let you take it.

Sam:
Yeah, I mean, 8760s are great. Full name: P50 8760. You’re looking at that 50th percentile, thinking about a kind of 10-year average of weather and how your equipment would perform.

Using a 10-year average—I don’t know about you, but it was like 85 degrees here this weekend and now it’s in the 40s. I’m in Colorado. Weather hasn’t been average in the last few years, and that impacts your asset performance.

So when you’re thinking about the 8760 and that average case, if there’s more wind, it’s going to be wrong. If there’s less sun, it’s going to be wrong compared to that average year.

The 8760 is really important for thinking about a 15-year timeline or the tenure of the contract, but it is less actionable in the shorter term.

On the accruals basis—and I think that was the basis of the question, Amber, sorry, I was just rambling there and getting excited about the model generation approach—on the accruals front, it’s just going to be wrong because we don’t live in the P50.

The model generation is considering real-time weather vectors. It’s considering the asset’s historical performance and learning from that to come up with a more accurate way of thinking about how intra-month that asset has performed and what that means for the invoice that is to come.

Shehzad:
I’ll just add here that a lot of people are really surprised when they see that, using the 8760, they’re not getting nearly as much revenue as expected.

A lot of that has to do with when prices are high, it usually corresponds to when their asset isn’t performing. A low-wind period might have very high prices, and vice versa: “Wow, I produced a lot,” but prices collapsed because a lot of wind was blowing at the same time.

So using that normal-weather 8760 really misses both of those impacts and tends to overestimate revenue. Then, of course, when you show up with the actual revenues at the end of the month, it’s very different from what you would have assumed just using the prices with the 8760.

Amber:
Great. Thank you for that.

Another question here is: Who is a typical user of your software? I assume they’re meaning Portfolio Insights.

Sam:
Yeah, I’ll start with that. That’s actually the beautiful thing about software—it doesn’t have to be just one user.

Of course, if you’re a sustainability program manager and you set the targets, went to market, procured, and signed the PPA, that can be one group within an organization. Then there could potentially be a handoff to finance.

In some organizations this lives in treasury, in others it’s a procurement team, maybe a specialized procurement team. So we’re working with a lot of different personas within an organization.

What I found cool about coming from the consulting world and seeing where software actually plays a part is the equal access to information. With a consultant, you may be relying on that relationship and living in your email or in spreadsheets or in Teams or Slack.

Ultimately, the cool thing about a platform is anyone can have access to it and see the information that’s relevant to them—whether it’s planning and preparing for different scenarios, budgeting, or accruals. Different groups or stakeholders within an organization can access the information.

Shehzad:
I’ll also add that one clear advantage of having this kind of software is that I’ve seen cases where there’s a spreadsheet that’s central to a lot of business function, and someone inadvertently deletes something, and then all of a sudden that value is gone forever for the entire organization.

That’s obviously not a good outcome when you’re dealing with power purchase agreements and those dollars.

Amber:
That sounds like a nightmare—version-control nightmare. Great points.

A couple more questions here before we wrap up. Here’s a good one:

What is the biggest driver of variance between forecasts and actuals?

Shehzad:
That is a good one. I’ll start on this one.

Probably the biggest thing is the price. Going back to the accruals use case, the price can be quite different from expectations because on a forecasted basis everything kind of gets smoothed out a little bit. But hour by hour, it can move quite a bit based on system conditions, outages, and transmission.

So market price—particularly if the project settles at an individual node and not a more smoothed-out trading hub—can be quite all over the place.

While generation, like in the earlier wind example, can be a big driver, we find that power prices are usually the bigger driver unless there’s something really extreme going on with generation.

Sam:
Couldn’t have said it better myself. I’ll leave the response at that.

Amber:
All right, we’ve got one more question here. It’s from someone who says:

I understand the tool can give me insights into what I can expect going forward and how that view has changed over time, but how or what can I actually do to manage the uncertainty in the outcomes?

Shehzad:
That’s a good one. This is the classic “so what?”

You show something to management and say, “Great, I’ve got this data, it tells me what’s happening,” and then leadership says, “Why is this bouncing around all the time?” Then there’s kind of the lightbulb moment of: well, energy markets are volatile.

To that “so what,” there are a few different things. One element here—and this was actually a function of my role at Google—was building out a risk management framework to look at, okay, given this uncertainty, how does my company or organization feel about that uncertainty?

Then going out to market and maybe talking to a retailer or a bank to help unload or offset some of that risk. These are typically insurance-type markets, so it’s not that you’re going to necessarily be able to time the market and save money and reduce risk at the same time. But there are markets out there—energy markets are very liquid. There are commodity brokers and retailers that can help you buy standard products to avoid some of the biggest sources of uncertainty.

There are also more bespoke custom products that can be specific to your asset. Those take a little more time to do, but oftentimes you can do those as well—typically in shorter tenors, maybe five years or less—to manage some of that risk.

Sam:
Great insight there.

The only thing I would add is going back to the presentation: batteries as a therapist.

We’re seeing more and more impact from higher penetration of renewables and intermittency of generation. If I’m thinking about a front-of-the-meter battery—if I’m long or short in a market—is there a role for that in my portfolio?

That’s something Verse is actually uniquely positioned to answer for you. The answer may be no, but it also very well could be yes: a battery can help smooth some of that virtual power purchase agreement volatility from a portfolio perspective.

Our co-founders, Matt and Sed, came from the battery world where they were supporting the sell side with an auto-bidder—dispatching renewable assets and batteries into wholesale markets using real-time data and understanding the arbitrage and ancillary services opportunities for batteries as well.

So that would be the only thing I’d add to Mr. Risk Management’s response.

Amber:
Fantastic. Well, I think with that, we are going to wrap it up.

Thank you so much, Sam and Shehzad, for the amazing presentation and insights on today’s webinar, and thank you to all the attendees who tuned in.

Just as a reminder, this webinar has been recorded and it will be live on verse.inc—just give us a day to get it up on our website.

Thank you again.

Shehzad / Sam:
Thank you all. Have a great day.
Thanks, Amber.