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Independent generators turning to active participation in energy market

Energy generators are calling out for additional support in selling their power more effectively, according to a survey by SmartestEnergy, which found that as much as 8.3% higher revenues could be achieved from more active participation in the energy market.

The company, which purchases energy from over 600 independent generators, claims most generators now believe an active hedging strategy is needed to maximise returns in this changed market.

Steep cuts to renewables subsidies combined with changes to the embedded benefits regime, which will see Triad reduced over 90%, and a projected fall in wholesale energy prices as a proportion of overall revenues means independent generators are facing a tough financial landscape, SmartestEnergy says.

As a result, they are seeking every opportunity to optimise their revenues and are seeking to take a more active approach in selling their power in an attempt to maximise their chance of getting the best prices.

A recent survey carried out by the energy company found that 77% of generators believe they could achieve better returns by actively hedging their energy. However, a larger proportion (87%) acknowledged difficulties in deciding when to hedge, with only 13% watching the market comfortably enough to make hedging decisions.

The majority of respondents (85%) acknowledge they would require additional support to sell their power more actively and SmartestEnergy is setting out to meet this need.

Iain Robertson, vice president, renewables, said: “Independent generators are playing a vital role in helping the UK keep the lights on and cut carbon emissions at minimal cost, but making smaller-scale projects stack up financially has become increasingly challenging as subsidies are cut, additional income streams come under threat and markets see ever-greater volatility.

“Independents know that they can benefit from a more active hedging strategy but most lack the experience and resources to do this. We have responded by developing an industry-first product designed to help generators make the most of their assets and support continuing growth in the sector.”

The company’s ManagedPPA sees SmartestEnergy traders monitor the market on behalf of each generator, working to agreed guidelines.When prices rise 10% above an agreed reference price it will trigger a sale but a fall of only 5% is needed to trigger a sale.

They operate a two-year, four-season hedging strategy. In the nearest two seasons each time a trigger is hit 50% of remaining capacity is sold. However, in the two later seasons only 25% is sold at each trigger point in order to maximise the opportunity to benefit from future price growth.