Re/insurance group Paratus Holdings has announced a new strategic partnership with Low Carbon, an independent power producer (IPP), to implement energy price risk insurance across Low Carbon’s renewable energy portfolio.
The deal marks a commercial transaction between the two companies, centered on Paratus’ insurance solution designed to protect against adverse power price movements.
The partnership will support Low Carbon’s revenue protection strategy through Paratus’ proprietary energy price insurance policy, which is intended to complement existing Power Purchase Agreements (PPAs) and route-to-market structures.
The product aims to stabilize revenue streams for renewable power producers by providing financial protection against fluctuations in energy markets.
Gus Majed (pictured above), group CEO and founder of Paratus, said the company is focused on expanding its reach across Europe and the US by forming strategic partnerships intended to reinforce long-term industry resilience.
Renewable energy projects are susceptible to various risks, including price volatility due to factors like weather variability, regulatory changes, and market demand shifts.
Specialized insurance products, like weather derivatives and parametric insurance, provide payouts based on specific weather events or conditions, offering protection against revenue losses from reduced energy production due to unfavorable weather.
Volume risk, or the uncertainty in the amount of energy produced or sold, is also a significant concern for renewable energy producers. Insurance products tailored to cover volume risk help stabilize revenues by compensating for discrepancies between projected and actual energy production.
In some regions, mechanisms like contracts for difference (CfDs) are employed to provide price stability for renewable energy producers. Under a CfD, producers receive a fixed price for their energy, with adjustments made to account for market price fluctuations, ensuring predictable revenue streams.
Marco Verspuij, head of power management at Low Carbon, said that Paratus’ offering addresses key market risks by helping to manage price volatility and secure long-term revenue certainty.
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