Off-site PPA as a tool to protect against electricity price spikes: developing a framework for risk assessment and mitigation.

11/30/2023

This dissertation was developed in collaboration with E&C Consultants, an international energy procurement consultancy, to gain a deeper understanding of the impact of the energy crisis on Power Purchase Agreements (PPAs). Electricity price spikes occurred as early as 2021, initially driven by low gas storage levels, a post-pandemic economic rebound and then exacerbated by the Russian invasion of Ukraine. The situation had a range of consequences, from rising inflation, increasing energy poverty, food insecurity, and recession. PPAs are a well-known tool to protect energy consumers from price spikes, while at the same time contributing to sustainable technologies. PPAs are long-term bilateral contracts for the purchase and sale of electricity, usually generated from renewable sources. Volatility in the energy market in 2022 negatively affected the PPA market, causing a rise in prices by up to 10-15% only in the first quarter of 2022 and development of new trends. The primary goal of this Master's Thesis is to assess how the risk associated with PPAs has evolved between 2020 and 2023. It aims to examine whether, after the events in 2022, PPAs remain a robust solution that protects the off-taker from energy price spikes, ensures greater energy budget stability, and enables savings. To achieve this, the probability of PPA prices being higher than market prices is evaluated. Furthermore, this Thesis intends to gain a thorough understanding of each risk related to PPAs and the best strategies for mitigating it, in order to maximize the protection of the off-taker.

Authors in the community:

• 

  K

  Karolina Anna Kapral

  ist1105633

Supervisors of this institution:

• 

  R

  Rui Manuel Gameiro de Castro

  ist12375

mechanical-engineering - Mechanical engineering

por - Portuguese

Instituto Superior Técnico