Wind farm operators find path to hedge against low winds

Wind farm operators can’t predict the weather. But they can hedge it. Investment manager Nephila Holdings Ltd. and insurance giant Allianz SE have banded together to offer an insurance policy of sorts to wind farm developers known as a “proxy revenue swap.” It’s a technical way of saying they’re guaranteeing that revenue from a farm will fall within a certain range. While such hedges against the volatility of solar and wind power aren’t exactly new, they’re gaining traction as more renewable energy resources come online and developers seek to insure revenue to attract better financing. In the latest swap, Ares Management Corp. signed contracts with Allianz to hedge the output and revenue from three wind farms being upgraded in Texas, marking the first time such an arrangement has been used for a so-called repowering wind project.