Power purchase agreements, or PPAs, enable investment in renewables in unsubsidised markets by providing revenue certainty to investors and lenders.
Yet, such agreements are also complex in their structure and pricing. Asset owners, buyers, and lenders need to constantly track and assess energy risks, valuation, and negotiation issues to protect a PPA’s value in volatile energy markets.
PexaQuote, a new SaaS offering by Pexapark AG, aims to help you with some of that heavy lifting. The platform offers greater price transparency, a clearer market overview, and reports on the latest price transactions so that you can negotiate better deals.
The software has been featured in the renewable energy toolkit from RE-Source and it’s being used in some of Bloomberg’s energy reports.
How does PexaQuote work?
PexaQuote’s fair value calculations are determined by the following variables:
Users can expect to get fair value calculations of PPA pricing across different countries in Europe, including Germany, Great Britain, Italy, and the Nordics. The latter for example, is divided into different price zones, and PexaQuote provides a fair value PPA price for each of these zones.
Type of technology
Is your PPA focused on solar, onshore wind, or offshore wind energy? PexaQuote takes these different technologies into consideration for its calculations.
The longer the tenor of a contract, the higher the risks involved as prices will change over the years. PexaQuote helps mitigate these risks by providing fair value on different PPA tenors. The user can also specify the start date of a contract to get a more accurate PPA price based on market conditions at that point in time.
Different PPA structures
The type of PPA structure that you choose will impact how the energy risks are distributed among different stakeholders. As these risks have different costs, this will change the fair value calculations and the price of the PPA. At a glance, they are:
- Pay as produced
A fixed price is paid for any volume of energy that is produced by the renewable energy source. For example, the energy produced by an onshore wind farm will fluctuate over the years, and the seller might not be able to provide a fixed quantity or volume. The risk of profile is then carried by the buyer.
- Annual baseload
A fixed price is paid for a predetermined fixed volume of energy. Here, the profile risk is transferred to the producer.
- Monthly baseload
The volume is fixed on a monthly basis. The volume produced is the same every day but total monthly volume varies from month to month. It is more closely aligned to the typical profile of a renewable energy resource. For example in Nordic countries, the volume of energy produced by a wind farm is normally higher in winter, where winds are stronger. In the summer months, the volume can be decreased as there is generally less wind.
Customised PPA pricing
With a click of a button, customers can request customised PPA pricing based on a specific renewable energy asset in a specific location.To help determine fair value pricing, the system will then ask for further information about the asset.
When a PPA is closing, its liquidity and price can change on a daily basis. Customised PPA pricing allows users to keep track of those changes and ensure that they get a fair value. For example, if a buyer changes an offer the day before the closing, PexaQuote will track this and determine if it is a fair change.
Request for prices anonymously
PexaQuote has partnerships with some large offtakers such as Engie, Vattenfall, RWE and Axpo, but also local players such as Holaluz and DXT Commodities. A seller of an asset looking for offtaker quotes can click on the «Get a Quote» button to submit an anonymous pricing request. The seller will then be connected to offtakers who are interested to provide quotes for specific projects.
Get a snapshot of the future
Curious about how much you can trade a certain amount of energy for in 2020, or 2021? PexaQuote’s Forward Curve function helps predict tradable quantities of energy for the future.
The renewable energy market in most countries is liquid in the first two to four years. It then becomes illiquid. This means that there are fewer buyers and sellers at the longer end of the forward curve. It becomes hard to predict volumes in the market for the long term, especially after a period of four years. Some estimations are necessary to predict what will happen to that forward curve. Will prices increase, stay relatively the same, or decrease? PexaQuote calibrates the forward curve so that you can get predictions, for example, up to 2029.
Keep tabs on the latest news with PPA Tracker
Pexapark’s team of analysts track all PPAs that have been published in the market. With PPA Tracker, users receive timely updates on new PPA announcements. These updates include useful details such as the PPA’s country of origin, names of buyers and sellers, the technology used, project size, and tenor.
Click here for more information, and a free demo of PexaQuote.