Renewable energy is a fast-growing market with a rapidly rising number of participants and a substantial volume of activity. As subsidies are phased out, Power Purchase Agreements (PPAs) have filled the gap to become the dominant mechanism for hedging long-term revenues and enabling project finance – ushering the maturing industry into the next phase of its global growth.
However, the nature of these bespoke long-term offtake agreements means that renewable energy remains a relatively ‘illiquid’ and ‘opaque’ market as compared to the traditional commodity markets. Price transparency in the PPA market is low due to a comparatively low number of transactions, the bilateral nature of PPAs and lack of disclosure of transacted prices, alongside the wide array of deal structures and non-standard PPA contracts.
Furthermore, risks and opportunities in renewable energy continue to change as new technologies such as storage and green hydrogen are commercialised, contractual structures evolve and the regulatory environment shifts. These factors leave buyers, sellers and other stakeholders in need of more clarity on what constitutes a fair PPA price, and a clearer understanding of the value of renewable energy projects and portfolios.