Tranched Tokenised Revenue Streams as a Tool for Renewable Energy
Financiers and Electrical Offtakers
Abstract
Renewable energy generation is non-dispatchable and notably
unpredictable. Furthermore, a volatile electricity spot market means
vulnerability to both price and volumetric risk for generation firms. As
such, project financiers may be hesitant to invest in renewable energy
projects. Electrical offtakers purchase from the same spot market, and
thus also suffer its uncertainty. Ideas from the world of blockchain and
decentralised finance may present solutions for these cases. This paper
proposes tokenised revenue streams \textit{(RevToks)}
as a novel mechanism for the electricity industry. A RevTok allows the
owning party to directly claim a share of a specific generator’s revenue
stream. This is combined with tranching, a technique from finance where
priority on a revenue flow is divided based on seniority. Project
financiers hold this senior RevTok that entitles them to precedence on
generator incomes, ensuring loan repayments. A case study using
real-world generation, pricing, and consumption data is formulated. A
market simulation is performed in the form of optimisation problem to
establish an idea market equilibrium. Junior tranch RevToks can be
purchased by electrical offtakers to decrease their budget variance by
offsetting fluctuations in their monthly energy bill. The tranched
revenue profiles of generators are demonstrated visually. For offtakers,
monthly variance is universally decreased. The case study market
simulations shows evidence that tranched revenue sharing arrangements
show benefits for generators, financiers, and offtakers.