September 1, 2020 — Customer Stories
New approaches to data transparency mark a turning point for institutional portfolio management
Increasing the pace of digitalisation will be key to the long-term success of investors in renewables. In this article, we look at trends in smart portfolio management in the investment world, and how our client Glennmont Partners is playing a leading role.
It’s a good time to be a developer in the renewable energy sector.
Rising public and investor demand for ESG (environmental, social and corporate governance) investing, along with a remarkable resilience to the market instability caused by Covid-19, have contributed to a significant influx of infrastructure investors into the renewable energy space.
The market is becoming increasingly crowded, with longstanding renewables funds now having to compete with the likes of BP and RWE, as traditional utilities and oil and gas majors get their hand in the cookie jar.
More demand, more projects, more assets to manage. Simple right?
But before we sit back, relax and congratulate ourselves on a job well done, let’s not forget that it’s not exactly been smooth sailing for the renewables sector either.
Whilst we’ve not seen anything quite as dramatic as the collapse in oil prices and traditional infrastructure asset class revenues, high price volatility, negative power prices and asset curtailment have certainly put a dampener on the market in the last few months. Though this may now feel like water under the bridge as the renewables market has largely recovered from these challenges, renewables owners and investors are not so forgetful.
Accelerating digitalisation is key to the long-term success of the renewable energy and renewables funds and other investors seem to have woken up to the reality of this viewpoint.
Boardrooms are rapidly getting onboard with the idea, and we’re seeing greater investment in systems which provide greater transparency on asset performance.
But what does data transparency have to do with the improving investor confidence I hear you ask? Our conversations with infrastructure investors have revealed three main drivers: business case certainty, growing complexity and power price risk.
Demonstrating a project’s business case should be a given in any industry, but high levels of market uncertainty have led to an increased focus on providing investors with enough confidence to keep investing.
In order to address this uncertainty, investors are now able to access performance monitoring data through asset management platforms to ensure that projects are performing optimally is now the biggest thing in renewables fashion.
We’re also seeing a trend amongst investors towards building the biggest portfolio possible. But increased asset diversity in large portfolios has raised the risk of ‘data dead-ends’. Integrating assets and their corresponding data collection systems is now highly complex and, to inform divestment and investment strategies, full portfolio oversight is essential.
Market outlook towards price risks has also shifted, with prior opinions believing that power prices were becoming more predictable - as can be seen from renewables owners increasingly opting for more merchant-led project financing.
But Covid-19 has emphatically defied expectations and successfully proved that power prices can still become highly volatile at any moment. Wonderful!
This has proved to renewables owners by smarter forecasting, asset and electricity price data is essential to protect their projects from low power prices.
Fortunately, it is easier to access performance data now than it ever has been, as technological innovation has increased the ease at which data can be collected and transferred. Demand for software capable of sophisticated analysis of internal performance data and external market factors has subsequently increased – with one recent example being Glennmont Partners.
As we’ve seen, driving investor confidence is key for operators and asset managers, and what better way to communicate the success of your projects than through your reporting?
This month, we’ve announced that Glennmont - one of the largest renewables fund managers in Europe with over 1GW in its portfolio and a huge €850m fund which closed last year - has integrated our monitoring platform with its financial and commercial management systems. This will feed data directly into its detailed monthly reports and provide full performance oversight of its renewables portfolio straight to its investor base.
Glennmont’s strategy is smart, simple and effective, and one which we expect to see other renewables owners take up in future. With projects comprising a diverse range of asset classes – including onshore and offshore wind, solar and biomass – and investors across multiple markets, its reporting process could be hugely complex. But, by implementing asset management systems that can encompass technical, financial and commercial aspects of project operations, this will hugely simplify the reporting process.
Ultimately, of course, it’s all about the investors. Profits and growth are king, and our platform can help investors to generate consistently higher returns by identifying issues leading to asset downtime and losses.
With greater insights into assets’ technical performance, Glennmont’s enhanced understanding will enable it to identify value-add and value-protection projects that match the profile of its portfolio.
The success of the green transition is closely tied to the growth in digitalisation, and we’ve loved watching the exponential demand for digital systems in recent months. The renewable energy sector’s digital transformation journey is by no means complete, but we can be sure that we are on the right track.