Encavis AG (ECV.DE), wind and solar park operator, and Independent Power Producers (IPPs) has completed a 2-year organizational transformation to support its future growth in the merchant renewable energy market.
Working with Pexapark, a provider of software and advisory services for a post-subsidy renewable energy world, Encavis to undertake an upgrade of its operating system, building in new in-house capabilities for Power Purchase Agreement (PPA) Origination, Energy Portfolio Management, and Energy Risk Management.
These new functions will enable effective energy sales, active management of energy risks, and thorough risk reporting – all of which are fundamental aspects of operating in the post-subsidy market environment. They will be essential in supporting plans to double the size of Encavis’ operational portfolio to 3.4GW by 2025.
“We are seeing a paradigm shift in the renewable energy market,” said Dr. Dierk Paskert, CEO of Encavis. “While acquiring and operating single assets has served us well in subsidized markets, economies of scale are critical to staying competitive in the merchant environment, where the way energy is traded has completely changed. In practice, this means we need to build and actively manage large, diversified portfolios to maintain the margins our investors are looking for.”
“To do that effectively, we – along with our peers in the industry – must fundamentally rethink our operating system. It is time to invest in the capabilities that will help us navigate, and ultimately benefit from, this transition.”
The organizational transformation at Encavis has been undertaken in four phases and spans its front-, middle- and back-office functions. These changes have been designed to give Encavis full transparency of the new risk exposure it faces in merchant markets, alongside the tools to mitigate and intelligently manage that exposure on a portfolio-wide basis to realize opportunities and increase opportunities profitability.
New teams created in the structural reorganization include a PPA Origination team – a dedicated energy sales department responsible for sourcing and structuring PPAs – and an Energy Portfolio Management team focused on managing merchant energy production that is not bound in long-term contracts. These teams are backed up by an Energy Risk Management function, built from scratch, that uses quantitative analysis expertise to assess changing long-term exposure to market risks and set limits for new deals being signed.
Pexapark has acted as an independent guide throughout the upgrade project, bringing its extensive energy trading and quantitative analysis expertise to the table. This has helped Encavis build its in-house competency in these new areas and challenge its assumptions about the best organizational structure to support the growing IPP as it scales. Pexapark will continue to support Encavis by providing ongoing advisory services and access to advanced software tools that directly support the optimal construction and management of growing portfolios and strengthen daily risk management practices.
Source: Encavis AG