Posted on: 26/03/2018
With the market changing quickly, many generators are increasingly looking at how to take a more active approach to selling their power. Stephen McInally, Business Development Manager, explains how our Price Trigger PPA Revenue Model can help generators understand their options.
The energy landscape is changing rapidly, with an increasingly decarbonised mix, more frequent periods of price volatility, and new subsidy support on hold until at least 2025. On top of this, the embedded benefits which have boosted the business case for many generation projects are being steadily reduced.
These changes are driving generators to focus on the revenue stream they can control – how much they sell their power for.
Many of the generators we work with have traditionally opted for the ‘once-a-year’ price fix, often because they don’t have the experience or resource to monitor the market on an ongoing basis.
However, new Power Purchase Agreement (PPA) options coming into the market can provide an alternative – giving generators access to a more active, structured hedging strategy without the need to closely monitor the market themselves.
For example, our innovative ManagedPPA uses triggers to give generators the ability to extend their hedging horizon out for a longer period to spread the risk they are open to in the market.
Volatility creates opportunities
We’ve seen an upward trend in seasonal prices over the past couple of years, with baseload prices ranging from £36/MWh in January 2016 to £46/MWh in February 2018.
The main driver of this has been the shutdown of many coal power stations, with the Government pledging to phase out unabated coal by 2025. This has increased gas imports, with fluctuating exchange rates influencing power prices.
Generators on fixed PPAs have limited opportunity to take advantage of these seasonal price movements. Many will find this frustrating, but simply don’t have the time or resource to closely monitor the market.
Our ManagedPPA product provides an alternative, using time and price triggers to hedge blocks of power around a seasonal reference price - without the pressure of continuous decision-making usually associated with more active hedging strategies.
Have a look at our short video explaining how the ManagedPPA could work for you:
Test our revenue model
To help generators understand whether the ManagedPPA could work for them, we have developed a Price Trigger PPA Revenue Model. We simply enter in the details of your recent price fixes and we can compare against the prices you would have achieved on ManagedPPA.
We’ll be demonstrating the model at our drop-in session at the Scottish Renewables Annual Conference in Edinburgh this week. Please email firstname.lastname@example.org if you would like to book a session.
Alternatively, please contact us to arrange a time for test out the model on your project.