Renewable power purchase agreements (PPAs) have long been important enablers of renewable energy development. They are a means to providing the revenue certainty that project developers need to secure financing for capital-intensive wind and solar projects, and they also give renewable energy buyers access to the renewable energy they desire without upfront capital outlay or the need for development expertise. However, these agreements are complex long-term financial contracts and should be treated as such within any buyer’s broader business portfolio. In this first article of a two-part series on renewable PPA analytics, we illustrate how nuanced interactions between intermittent generation and electricity market prices can significantly impact PPA value. Without proper value tracking and active management, adverse market moves can erode PPA value over time and potentially require the buyer to make settlement payments each month to cover losses on the contract. In the second article of the series, to appear in the Winter 2018 edition of the GCARD, we will elaborate on the mechanics of risk mitigation strategies.
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