How to easily compare PPA offers using 6 Key Metrics?

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In this post, we'll discuss 6 key metrics to help you easily compare PPA offers.

By leveraging our PPA Evaluation Tool, you can easily analyse 5 of these 6 key metrics and make more informed and strategic decisions in selecting the right PPA offer for your organization.

1. Price

• The price is the first indicator when comparing PPAs.
• Comparing various PPA according to the price is however not as linear as it seems. 
• It can vary strongly according to the 5 factors described in the following sections.
• One important metric to consider is for example the Quotation date. 

2. Quotation Date

• The Quotation date is the reference date at which a PPA price was given.
• Since future electricity price expectations (Futures) vary greatly across time, the Quotation date pins down the Futures values to a specific date. 
• This allows for a transparent approach when comparing PPA offers throughout a prolonged time period.

3. Structure

• The PPA structure will define what kind of volume and price-related risks will be borne by either the electricity generator or offtaker.
• Structures where higher risks are borne by the electricity generator usually have higher PPA prices, compared to structures in which the offtaker is bearing the same risks.

4. Duration

• The duration in which an offtaker commits to bear a risk will have a significant impact on the PPA price, since price and volume risks are higher throughout longer periods.

5. Start Date

• Electricity markets often have a backwardation trend, meaning that short-term products are more liquid and trade at higher prices than long-term products. 
• PPAs that are closed further in the future therefore often suffer from lower prices. 

6. Bankability

• The liquidity of an offtaker is often a good indication to describe its bankability.
• It defines the ability of the offtaker to fulfill its PPA obligations and is therefore another crucial factor when comparing PPA offers.

Reach out to us for a quick tour of our Tool & advisory regarding the best practices for comparing PPA offers.

About Synertics

Synertics provides advisory services and develops digital data-driven solutions for the energy industry with the purpose of driving productivity and transferring knowledge.