Weather Risk Transfer Solutions for Wind Power

This document is a guide detailing innovative weather risk transfer solutions tailored for various industry sectors, specifically focusing on wind power generation protection. It outlines the challenges faced by businesses due to abnormal deviations in wind power generation, particularly during seasons of low wind output. The guide presents a use case involving a wind energy producer in Germany, illustrating how low wind production can lead to reduced revenues while high wind scenarios may result in overperformance. A solution is proposed, which includes defining a suitable weather index based on a third-party wind power production index and designing a derivative structure that provides payouts when wind speeds fall below a predetermined threshold. The document includes an example of a costless swap on wind power generation, detailing the index, strike, risk period, and payout calculations. It emphasizes the importance of bespoke weather-contingent risk management solutions for businesses exposed to weather-related risks.