Production risk - the risk that the system doesn’t produce as much electricity as predicted. This is typically managed through warranties on system equipment and performance guarantees.
Some solar finance options incorporate guarantees of production levels. Such guarantees can impact on the cost of the system.
For example, under a power purchase agreement (PPA) you only pay for the energy produced. The PPA provider takes on production risk and associated maintenance costs. This means that a PPA may cost more than other options, but it has a lower risk.
Consumption risk - the risk that you don’t use as much electricity as planned. This is generally taken on by the business that uses the electricity. To manage this risk, before deciding on the size of your solar system:
- Understand your energy usage patterns.
- Implement energy efficiency measures.
Saving surplus energy by using battery storage is another way to manage this risk.