Despite providing the most sustainable sources of electricity known to man, renewable energy is still a sector that struggles with its reputation.
It’s not that the world doesn’t understand the advantages of wind and solar in comparison to fossil fuels and nuclear. But the clean, forward-thinking image of renewable energy all too often works against it, by attracting a disproportionate level of scrutiny and creating unrealistic expectations that can easily be shattered when things don’t quite go according to plan.
This applies in equal measure to the promises the renewable energy sector is seen to be making – on the one hand, the promise to provide a long-term, sustainable supply of low carbon electricity to the benefit of mankind and the environment, and on the other, the promise of ongoing commercial success, with the advantages this brings for employees, investors and consumers.
There are numerous threats to the ability of the sector to fulfill one or the other of these promises - but both are put in jeopardy by the emerging issue of resource volatility. Furthermore, the short-term financial problems that resource-related underperformance can create are likely to be far outweighed by the lasting reputational damage the industry will face if it is seen to break them.
Recently we looked at the increasingly high-profile issue of weather risk and outlined the communications challenges faced by a range of stakeholders across the wind sector in managing these impacts.
Maintaining the image and reputation of wind energy is not just the responsibility of trade bodies and associations like GWEC, WindEurope and AWEA – but a collective challenge shared by all of the individual players throughout the sector. As such, the wind energy sector features at the top of our list.
That said, when it comes to the issue of weather risk and inspiring confidence in future performance, some of these players may have a more complex task on their hands than others. Following recent unanticipated resource-related impacts on production and financial performance in established wind energy markets, some firms will inevitably need to acknowledge and take responsibility for shortfalls in the way weather risk has been managed to date.
Specifically, from our list, increased scrutiny is going to be placed on the wind energy generator, the asset manager and the resource analyst.
While none of these parties can individually be held accountable for the complex combination of factors and meteorological phenomena that lead to financial underperformance, they are arguably most at risk of reputational damage when it does occur – and need to think carefully about the way they talk about the issue.
For the wind energy generator, whether utility, independent power producer or portfolio owner, transparency is really the only option available. With the legal responsibility to provide full disclosure of financial results to investors, there’s no lawful way to hide revenue shortfalls, and with low wind speeds now commonly being cited in financial results as an accepted cause of underperformance, there’s arguably no need either.
However limiting the discussion to a footnote in the quarterly results won’t do these firms any favours, since it’s likely that this will just invite further questions from investors. Taking a proactive approach to communicating the steps being taken to mitigate weather risks – whether via hedging mechanisms or diversification strategies – is the best way to demonstrate that the challenge is being addressed.
Furthermore, at Tamarindo, we think that there are still untapped opportunities for savvy owners and operators of wind farms to really take ownership of this issue. To date, very few leading operators have spoken in any great depth about their weather risk management – and those that do can take advantage to make a clear statement that they are pioneering new approaches on behalf of their shareholders and investor base.
Don’t make excuses
The resource analyst and asset manager have similar opportunities to ‘own’ the low wind topic, but, in doing so, they must be careful not to undermine the value and reputation of their own services. After all, the resource analyst may have provided the initial assessments and data that formed a basis for long-term financial projections, which may not have been met. Likewise, the asset manager has a responsibility to stay on top of all performance-related risks and their position may be threatened if it seems that they have failed to do so.
For these players, the trick is to maintain a solid focus on communicating how the quality of performance data and analysis approaches is constantly improving – and, in turn, how they are at the forefront of these improvements. Rather than attempting to make excuses for perceived shortfalls in the methods and models that have been used to date – or trying to point the finger at another party – reiterating the value of experience and lessons learnt in driving innovation and positive change is a much more solid communications strategy.
When it comes to matters of reputation, attack is often the best form of defence. That’s not to say ‘try and shift the blame onto somebody else’ – quite the opposite. Take a confident communications approach that turns a negative into a positive and demonstrates that you are worthy of the trust of your clients, the industry at large and, in turn, all of those who are closely following the sector.
Ready for a chat?
If this has gotten you thinking – you have some questions – or you want to talk to us about what happens next, then please drop us a line. We’d love to hear from you.Get in touch