Risks & Mitigation

The resilience and credibility of the Suno Protocol rely on proactively identifying the risks that can affect both (i) pWatt‑level investments—single clean‑energy assets tokenized by individual pWatt tokens—and (ii) uWatt‑level exposure, which bundles many pWatts inside the Reserve. The following pages outline the key risk categories and the concrete measures embedded in the Protocol, its governance process and its operating partnerships to mitigate them.

1. pWatt‑Level Risks (single‑project exposure)

Risk Category	What Could Happen	Mitigation Approach
Infrastructure / O&M	Force‑majeure events (storms, floods, fires), equipment malfunction, third‑party damage or theft can reduce or halt production.	Comprehensive all‑risk insurance. Preventive & corrective O&M contracts with experienced operators. Corrective‑maintenance provision (~3 % of revenue) held in escrow to fund future repairs.
Revenue / Off‑taker	The buyer of the energy (utility or corporate PPA counter‑party) can default or pay late, interrupting cash flow.	Credit assessment during origination. Step‑in & assignment rights in PPAs. Option to sell power on the regulated market if a buyer fails.
Regulatory / Policy	Tariff revisions, new grid charges or curtailment rules can erode project income.	Jurisdiction screening: prioritise markets with stable renewable‑energy frameworks. Indexation clauses in PPAs where available. Continuous policy monitoring and advocacy via local partners.
Construction & Commissioning	Delays or cost overruns before COD reduce returns.	Fixed‑price EPC contracts with liquidated‑damages clauses. Milestone‑based fund disbursement. Performance guarantees on output (kWh).
Concentration (single‑asset)	Each pWatt is tied to one project, so an investor faces project‑specific volatility.	Transparency: risk is clearly disclosed up‑front. Liquidity path: holders may later swap into uWatts to diversify. As Suno grows, a larger catalogue of pWatts will let investors self‑diversify across many assets.
Force Majeure	Earthquakes, war, government seizure can render the plant inoperative.	Force‑majeure insurance where available. Geographic spread of future projects enables optional diversification at the portfolio (uWatt) level.

2. uWatt‑Level Risks (exposure to the Reserve)

Risk Category	What Could Happen	Mitigation Approach
Liquidity	Limited trading depth on DEXes could widen spreads and delay exits.	Protocol‑funded liquidity incentives for liquidity providers. Dynamic reward curves that favour deeper pools. Cross‑chain listings and CEX integrations as the market matures.
Reserve Performance	Under‑production or outages in several projects lowers Reserve income, impacting uWatt yields and reference price.	Diversification across many projects, technologies and geographies. Continuous technical monitoring + enforced O&M service level agreements (SLAs). Depreciation‑compensation buffer (10‑13 % of income) reinvested into new pWatts.
Reference‑Price Tracking	Market price of uWatts may deviate from the on‑chain reference price derived from Reserve cash flows.	Arbitrage incentives: Reserve can use retained earnings to buy back uWatts below reference price. Transparent on‑chain valuation feed for traders.
Smart‑Contract / Oracle	Bugs or oracle failures could freeze funds or misroute rewards.	Multiple independent audits + ongoing bug‑bounty programme. Modular upgrade path with timelocked governance.
Governance	Malicious or apathetic voting could approve poor assets or misallocate funds.	Token‑weighted voting with quorum & timelocks. Reputation score for project operators. Emergency veto powers held by a multisig of reputable community members.
Concentration (early stage Reserve)	At launch, the Reserve holds only a limited number of projects, limiting diversification.	Pipeline of vetted projects ready for on‑boarding. Governance mandate to expand across regions and technologies. Concentration limits that relax progressively as asset count grows.

Los uWatts transforman el riesgo de un solo activo en una exposición diversificada a un portafolio. La combinación de gobernanza en cadena, incentivos de liquidez, reinversión continua y parámetros técnicos prudentes —como proyecciones de rentabilidad conservadoras y cronogramas de depreciación— ayuda a mantener el precio de mercado alineado con el precio de referencia, respaldado por flujos de caja del mundo real.