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.
- 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.
- 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.
- 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.
- 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.
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