{"id":18583,"date":"2022-03-07T16:20:00","date_gmt":"2022-03-07T15:20:00","guid":{"rendered":"https:\/\/www.uni.lu\/fdef-en\/?post_type=news&#038;p=18583"},"modified":"2025-02-25T15:47:38","modified_gmt":"2025-02-25T14:47:38","slug":"pricing-of-renewable-power-purchase-agreements-for-energy-procurement","status":"publish","type":"news","link":"https:\/\/www.uni.lu\/fdef-en\/news\/pricing-of-renewable-power-purchase-agreements-for-energy-procurement\/","title":{"rendered":"Pricing of Renewable Power Purchase Agreements for Energy Procurement"},"content":{"rendered":"\n<section class=\"wp-block-unilux-blocks-free-section section\"><div class=\"container xl:max-w-screen-xl\">\n<p>Companies with large energy consumption are under pressure to reduce their carbon footprints. More than half of Fortune 500 companies have committed a fraction of their energy demand to be served by renewable energy sources. However, most companies cannot (or prefer not to) install renewable production on site, for example roof-top solar installations, but prefer to invest in renewable projects directly.&nbsp;<\/p>\n\n\n\n<p>The most common approach for direct investments are bilateral contracts referred to as renewable power purchase agreements (PPA). A PPA is a long-term supply agreement concluded directly between a power consumer and a power producer. This agreement regulates the supply of electricity with a potentially uncertain profile at a pre-defined price. The total energy contracted through PPAs increased by 40% in 2019, accounting for more than 10% of the overall annual newly installed renewable capacity worldwide.<\/p>\n\n\n\n<p>PPAs offer multiple advantages for sellers and buyers. They offer buyers a hedge against market price fluctations and improves their sustainability rating. Sellers benefit by securing cash flows for their investments far in advance thereby increasing their ability to raise money.&nbsp;<\/p>\n\n\n\n<p>A problem for companies who want to sign PPAs is that long-term agreement entails a long-term valuation problem, which is further complicated by the fact that high penetration of renewables in the future leads to cannibalization effects.&nbsp;<\/p>\n\n\n\n<p>This research project concerns the problem of pricing a renewable PPAs by developing a fundamental price model for electricity to calculate the captured price of a renewable power project. Large energy consumers can use this model to judge the risks and benefits associated with entering a PPA thereby making a more informed buying decision.<\/p>\n<\/div><\/section>\n","protected":false},"excerpt":{"rendered":"<p>Companies with large energy consumption are under pressure to reduce their carbon footprints. More than half of Fortune 500 companies have committed a fraction of their energy demand to be served by renewable energy sources. However, most companies cannot (or prefer not to) install renewable production on site, for example roof-top solar installations, but prefer to invest in renewable projects directly.\u00a0The most common approach for direct investments are bilateral contracts referred to as renewable power purchase agreements (PPA). A PPA is a long-term supply agreement concluded directly between a power consumer and a power producer. This agreement regulates the supply of electricity with a potentially uncertain profile at a pre-defined price. The total energy contracted through PPAs increased by 40% in 2019, accounting for more than 10% of the overall annual newly installed renewable capacity worldwide.PPAs offer multiple advantages for sellers and buyers. They offer buyers a hedge against market price fluctations and improves their sustainability rating. Sellers benefit by securing cash flows for their investments far in advance thereby increasing their ability to raise money.\u00a0A problem for companies who want to sign PPAs is that long-term agreement entails a long-term valuation problem, which is further complicated by the fact that high penetration of renewables in the future leads to cannibalization effects.\u00a0This research project concerns the problem of pricing a renewable PPAs by developing a fundamental price model for electricity to calculate the captured price of a renewable power project. Large energy consumers can use this model to judge the risks and benefits associated with entering a PPA thereby making a more informed buying decision.<\/p>\n","protected":false},"author":335,"featured_media":18584,"template":"","format":"standard","meta":{"featured_image_focal_point":[],"show_featured_caption":false,"ulux_newsletter_groups":"","uluxPostTitle":"","uluxPrePostTitle":"","_trash_the_other_posts":false,"_price":"","_stock":"","_tribe_ticket_header":"","_tribe_default_ticket_provider":"","_tribe_ticket_capacity":"0","_ticket_start_date":"","_ticket_end_date":"","_tribe_ticket_show_description":"","_tribe_ticket_show_not_going":false,"_tribe_ticket_use_global_stock":"","_tribe_ticket_global_stock_level":"","_global_stock_mode":"","_global_stock_cap":"","_tribe_rsvp_for_event":"","_tribe_ticket_going_count":"","_tribe_ticket_not_going_count":"","_tribe_tickets_list":"[]","_tribe_ticket_has_attendee_info_fields":false},"news-category":[4],"news-topic":[11],"organisation":[138],"authorship":[335],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v22.3 (Yoast SEO v22.3) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Pricing of Renewable Power Purchase Agreements for Energy Procurement - FDEF I Uni.lu<\/title>\n<meta name=\"description\" content=\"Companies with large energy consumption are under pressure to reduce their carbon footprints. More than half of Fortune 500 companies have committed a fraction of their energy demand to be served by renewable energy sources. However, most companies cannot (or prefer not to) install renewable production on site, for example roof-top solar installations, but prefer to invest in renewable projects directly.\u00a0The most common approach for direct investments are bilateral contracts referred to as renewable power purchase agreements (PPA). A PPA is a long-term supply agreement concluded directly between a power consumer and a power producer. This agreement regulates the supply of electricity with a potentially uncertain profile at a pre-defined price. The total energy contracted through PPAs increased by 40% in 2019, accounting for more than 10% of the overall annual newly installed renewable capacity worldwide.PPAs offer multiple advantages for sellers and buyers. They offer buyers a hedge against market price fluctations and improves their sustainability rating. Sellers benefit by securing cash flows for their investments far in advance thereby increasing their ability to raise money.\u00a0A problem for companies who want to sign PPAs is that long-term agreement entails a long-term valuation problem, which is further complicated by the fact that high penetration of renewables in the future leads to cannibalization effects.\u00a0This research project concerns the problem of pricing a renewable PPAs by developing a fundamental price model for electricity to calculate the captured price of a renewable power project. Large energy consumers can use this model to judge the risks and benefits associated with entering a PPA thereby making a more informed buying decision.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.uni.lu\/fdef-en\/news\/pricing-of-renewable-power-purchase-agreements-for-energy-procurement\/\" \/>\n<meta property=\"og:locale\" content=\"en_GB\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Pricing of Renewable Power Purchase Agreements for Energy Procurement\" \/>\n<meta property=\"og:description\" content=\"Companies with large energy consumption are under pressure to reduce their carbon footprints. More than half of Fortune 500 companies have committed a fraction of their energy demand to be served by renewable energy sources. 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Sellers benefit by securing cash flows for their investments far in advance thereby increasing their ability to raise money.\u00a0A problem for companies who want to sign PPAs is that long-term agreement entails a long-term valuation problem, which is further complicated by the fact that high penetration of renewables in the future leads to cannibalization effects.\u00a0This research project concerns the problem of pricing a renewable PPAs by developing a fundamental price model for electricity to calculate the captured price of a renewable power project. Large energy consumers can use this model to judge the risks and benefits associated with entering a PPA thereby making a more informed buying decision.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.uni.lu\/fdef-en\/news\/pricing-of-renewable-power-purchase-agreements-for-energy-procurement\/\" \/>\n<meta property=\"og:site_name\" content=\"FDEF EN\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/uni.FDEF.lu\" \/>\n<meta property=\"article:modified_time\" content=\"2025-02-25T14:47:38+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.uni.lu\/wp-content\/uploads\/sites\/3\/2025\/02\/pricing_of_renewable_power_purchase_agreements_for_energy_procurement.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"800\" \/>\n\t<meta property=\"og:image:height\" content=\"600\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Estimated reading time\" \/>\n\t<meta name=\"twitter:data1\" content=\"2 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"NewsArticle\",\"@id\":\"https:\/\/www.uni.lu\/fdef-en\/news\/pricing-of-renewable-power-purchase-agreements-for-energy-procurement\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.uni.lu\/fdef-en\/news\/pricing-of-renewable-power-purchase-agreements-for-energy-procurement\/\"},\"author\":{\"name\":\"valentinadelgaudio\",\"@id\":\"https:\/\/www.uni.lu\/fdef-en\/#\/schema\/person\/0d4d61892313f40f3b9bb798f407531b\"},\"headline\":\"Pricing of Renewable Power Purchase Agreements for Energy Procurement\",\"datePublished\":\"2022-03-07T15:20:00+00:00\",\"dateModified\":\"2025-02-25T14:47:38+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/www.uni.lu\/fdef-en\/news\/pricing-of-renewable-power-purchase-agreements-for-energy-procurement\/\"},\"wordCount\":277,\"publisher\":{\"@id\":\"https:\/\/www.uni.lu\/fdef-en\/#organization\"},\"image\":{\"@id\":\"https:\/\/www.uni.lu\/fdef-en\/news\/pricing-of-renewable-power-purchase-agreements-for-energy-procurement\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/www.uni.lu\/wp-content\/uploads\/sites\/3\/2025\/02\/pricing_of_renewable_power_purchase_agreements_for_energy_procurement.jpg\",\"inLanguage\":\"en-GB\"},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.uni.lu\/fdef-en\/news\/pricing-of-renewable-power-purchase-agreements-for-energy-procurement\/\",\"url\":\"https:\/\/www.uni.lu\/fdef-en\/news\/pricing-of-renewable-power-purchase-agreements-for-energy-procurement\/\",\"name\":\"Pricing of Renewable Power Purchase Agreements for Energy Procurement - FDEF I Uni.lu\",\"isPartOf\":{\"@id\":\"https:\/\/www.uni.lu\/fdef-en\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\/\/www.uni.lu\/fdef-en\/news\/pricing-of-renewable-power-purchase-agreements-for-energy-procurement\/#primaryimage\"},\"image\":{\"@id\":\"https:\/\/www.uni.lu\/fdef-en\/news\/pricing-of-renewable-power-purchase-agreements-for-energy-procurement\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/www.uni.lu\/wp-content\/uploads\/sites\/3\/2025\/02\/pricing_of_renewable_power_purchase_agreements_for_energy_procurement.jpg\",\"datePublished\":\"2022-03-07T15:20:00+00:00\",\"dateModified\":\"2025-02-25T14:47:38+00:00\",\"description\":\"Companies with large energy consumption are under pressure to reduce their carbon footprints. 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Sellers benefit by securing cash flows for their investments far in advance thereby increasing their ability to raise money.\u00a0A problem for companies who want to sign PPAs is that long-term agreement entails a long-term valuation problem, which is further complicated by the fact that high penetration of renewables in the future leads to cannibalization effects.\u00a0This research project concerns the problem of pricing a renewable PPAs by developing a fundamental price model for electricity to calculate the captured price of a renewable power project. 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