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Valuation of floating price contract formulae for financial renewable PPAs

Presented by: 
Gauthier de Maere d'Aertyrcke Tractebel Engie
Thursday 21st March 2019 - 12:00 to 12:45
INI Seminar Room 1
We propose a valuation methodology based on risk measure to compute the risk premium to cover new structure of financial renewable PPA, where as opposed to traditional unit contingent PPA, a part of merchant risk remains in the hand of the asset developer. Those new contract structures are currently emerging  on the market:  Offtaker are increasingly showing interest to share the market risk, as in systems with high RES share, the PPA might become a very poor hedge of their electricity bill (due to RES cannibalization effect). We specifically focus on contract formulae based on floating price, where the financial transfer to the Offtaker is not based on the price captured by the renewable asset but rather on a floating price, defined as the average of spot prices over a predefined time duration (e.g. yearly, monthly or daily basis).  We then assess several risk mitigation strategies to lower the risk premium, namely physical (well balanced portfolio of wind, PV and battery) and/or financial (power derivatives trading).
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Presentation Material: 
University of Cambridge Research Councils UK
    Clay Mathematics Institute London Mathematical Society NM Rothschild and Sons