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MarketScale Interview: Powering Up the Renewable Energy Market with AI Document Analysis

Jan 17, 2021 Business News Document Understanding

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Interview Transcript:

Daniel: Hey everyone this is Daniel Litwin, the voice of B2B, coming at you from the MarketScale Studio. We’re joined today on the line by Kristina Peterson. She’s the SVP of Power and Renewables at ThoughtTrace. ThoughtTrace is an AI-powered Document Understanding and Contract Analysis company. Today we’re sitting down with Kristina to ask the question why the Power and Renewables industry should be leveraging document analytics, AI technology specifically, to streamline their processes, cut costs, and offer more accurate contract reading. Christina, great to have you on. How are you doing today?

Kristina: Thank you so much, Daniel. Great to be with you.   

Daniel: Yeah, pleasure getting to chat and source your insights on all this. So let’s start with a little context to set up why document analysis is becoming an important part of the industry. The US Energy Information Administration is projecting that renewables will collectively increase to about 49% of global electricity generation by 2050. So, with major investments on the horizon for wind and solar and many already behind us – many major oil companies already locking in those investments – obviously that brings a slew of legal and compliance needs as well. So, can you break down how these investments are creating new needs for Document Understanding? 

Kristina: So, that’s a great question. The industry of wind and solar, which I’m going to loosely call Renewables in this country, of course, there are other technologies as well that can fall into that category. But for the most part, it’s relatively new. The earliest wind farms in this country were built 35 years ago; the earliest utility-scale solar projects were built 14 years ago. So, as an industry, it’s relatively new. The cost curves for both wind and solar have come down dramatically in a very short period of time. The reduction in the cost curves on solar are even more steep.  And with that, there’s:

  • New development projects
  • Once the projects are developed, they go into construction
  • Once they come out of construction, they have to be handed off to someone who’s going to do asset management 

Part of all of that is:

  • The financing of all these projects, 
  • Everything related to development financing,
  • Construction financing,
  • and long-term permanent debt and equity financing, and tax equity financing. 

Those are all part of every single project whether it’s a small rooftop solar project. Why is all this important? It’s important because all of the documents surrounding all of these transactions are very complex. There’s information in each of those documents that is really hard to extract. What are your obligations in terms of making credit support payments? Meaning Letters of credit or bonds during the construction phase, after the construction phase, in order to maintain your financing. Other examples would be if you’re actually buying – there’s a lot of horse-trading going on right now between people developing big portfolios and all they want to do is develop it. Then they want to flip it to somebody else. And somebody else who has a really cheap cost of capital buys it, runs with it, and goes and builds it out and owns and operates it long term. So whenever you have any kind of merger and acquisition due diligence there is an enormous amount of data and documentation as well as financial information to plow through. And, the ThoughtTrace platform is a way of going through that enormous amount of data in a much faster time. It’s a supervised model. So that means that we’re training it to be specifically useful within the Renewables industry. There is language that is very specific to wind turbine projects, and very specific language to solar. And we are customizing our software so that it meets the needs of the users out of the box for these different applications like I just talked about. Does that answer your question?

Daniel: Yes, yes – absolutely. So, you mentioned in there that there’s a lot of critical data being gleaned from this influx of documents. Can you break down how that data is informing day-to-day operations, asset management, and transactions for renewable energy and why it’s important to be making actionable decisions off said data?

Kristina: So that’s a good question and what I will do is talk about post-completion – after a project has been turned on and interconnected to the grid in some way, either at a substation or distribution-level interconnect, once it’s actually generating electricity, somebody has to manage that asset. There are 3000 electric utilities in this country. There is a very big web of regulatory requirements and policies depending on where that particular project is. It is very complicated to keep track of your health and safety requirements, your regulatory requirements in that particular location. And so, with every different power cool –  in Texas you have ERCOT (Electricity Reliability Council of Texas) that has very specialized rules of how you interconnect with that power market. And so, keeping track of the bonds that you need to post, the obligations in terms of what are your penalties if you don’t produce the power that you promised you were going to produce under a particular agreement. There’s big liquidated damages potential class for you not performing in the way that you want. And there are usually multiple clauses buried in all of these documents in language that might not say “liquidated damages.” We read contextually within those documents for meaning rather than exact words. And so that is really important because otherwise, your alternative is to have human beings plowing through these documents. And I can tell you that it takes much more time to review a single Power Purchase Agreement by hand – of course, everybody can do it – but it just costs a lot more money, takes a lot more time, with a lot more risk of missing something. So that’s where ThoughtTrace really moves the needle in terms of efficiency and costs reduction.  

Daniel: Let’s get a little more specific on AI as part of this solution. It’s part of what ThoughtTrace pushes as a key aspect of your solution, so I”m curious how does having AI-powered technology make data analysis and actions around said data analysis for the slew of documents more useful and efficient?

Kristina: It helps you rule things out. So for instance, I’ll give you another good example. If you’re doing an M&A transaction where you’re gotten access to a virtual data room and you and your company know there are about 40 things that really move the needle in terms of financial valuation. Those are the ones you want to pull out. You want to see: is it there, is it not there? what is it if it’s there, what is it if it’s not there? So pulling those out quickly and being able to analyze what’s important to you, makes you be able to act faster in the marketplace, to turn things around faster, or like I said before, on the asset management example I used once a project is actually operating, at a later date you may want to sell that project and you want to be able to quickly put information into data room that can help you market your project or your portfolio. 

Daniel: No definitely it does, thank you. Always grounding into some examples is the best way to get through that for sure. So last main question for you – how do you see efficient and holistic document usage impacting the future of investments and just general success of Renewable Energy projects going into 2021? 

Kristina: There are three things that are most important. It’s managing risk, it’s reducing costs, and increasing revenue. So those are the three things that are most important. If you miss one major obligation within one of these power purchase agreements or interconnection agreements. you could be liable for a very stiff penalty. That could be $700,000 – a million dollars – it depends on the size of the project. Just missing that – it’s quite normal for a human to miss it – but this helps you avoid that happening. By avoiding a penalty – a liquidated damage cost – the software pays for itself. Increasing revenue… everything is getting better and we are getting closer to optimization, and with optimization from a technical perspective, you can also optimize from an operational perspective in terms of streamlining your processes to do billing, streamlining your processes to make payments to whatever authorities you need to make payments to. You can increase your revenue by basically optimizing the operational aspect. And those who don’t will be left behind. The IT infrastructure within which these companies are operating is so important. Everything is moved to the cloud. Everything has moved to a distributed model within the cloud. It’s integrating that information and being able to extract that information a better way and surface the things that are important – that’s where contract analytics comes into play, and that’s where ThoughtTrace is really one of the top companies in that industry particularly because it’s focused on renewables. 

Daniel: Kristina Peterson, SVP of Power and Renewables for ThoughtTrace. Thank you so much for joining us and giving us your thoughts on this timely topic. As we wrap up here if folks want to find out more about ThoughtTrace or get in touch, how do they do so? 

Kristina: Please give me a call. Connect with us on ThoughtTrace.com, we can do a demo, we can certainly set up a test drive for you. I’m happy to answer any questions. 

Daniel: Thanks again, Kristina. We’ll chat again soon. 

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