According to PV-magazine, Corporations that lock in a fixed purchase price for solar power, offset by sale of the power at varying wholesale rates, could face “significant financial downside,” referring to the Rocky Mountain Institute (RMI). It is due to the more solar on the grid, which could drive down wholesale prices.
About three-quarters of corporate off-site renewables procurements involve a long-term power purchase agreement (PPA). It is though offset by the sale of power at varying wholesale rates, i.e. these corporates both buy and sell solar power at different time span. These agreements are known as virtual or financial PPAs, to distinguish them from on-site, behind-the-meter PPAs. The price risk arises from the mismatch between paying a fixed price for solar electricity over 10-20 years, and receiving an offsetting but continually varying wholesale price for the solar electricity sold onto the grid. This arrangement is illustrated in the RMI graphic above.
Price risk is primarily driven by the dynamics of supply and demand. As more solar is added to the grid, the wholesale market price of electricity will fall during peak solar generation hours, unless there is a corresponding increase in demand during those hours.
Suggested by RMI, price risk could be mitigated by a financial hedge or combining solar power with energy storage systems.
The RMI document mentions four other types of risk beyond price risk: Basis risk, Shape risk, Volume risk and Operational risk.
——————–***——————– Source:tinyurl.com/yy8hu95b Photo: RMI, PV-magazine …………………………………….
‘All rights to go to the author of the news & image as mentioned above’
Location: Oslo, Norway
Date: Mar 20, 2019 @ 14:51
Instagram Post Source: instagram.com/solar_edition
Media Type: image
Disclaimer: ‘all rights go to the author of the news and image mentioned above’, Solar Edition do not own the content and is distributing the information only for non-profit and educational reasons as a Solar Power Influencer.