Green sourcing and PPA valuation

Green sourcing and PPA valuation

The cost of renewable energy is falling, and many companies are focusing on green energy procurement as part of their sustainability strategy. Today, green power is procured through green power tariffs, guarantees of origin, power purchase agreements (PPAs), or through direct investment or ownership in renewable energy asstes.

We help industrial companies determine the fair market value of renewable energy, quantify market risks, and optimize PPAs and other procurement options in a procurement portfolio.

Diverse contract structures and difficult assessment of fair value

The possible forms of a PPA are diverse and have a fundamental impact on the risk profile and risk distribution of the PPA. The market value of a PPA is highly dependent on the expected development of the energy markets. At the same time, due to the generation profile of a renewable asset, only a portion of the electricity demand can be provided in a green manner. By combining different technologies, locations and contract structures, the share can be increased, risks minimized and average energy procurement costs optimized.

PPAs are an attractive market-based instrument for decarbonization

PPAs offer the opportunity to secure the supply of renewable energy over the long term. The purchase prices are below the expected market price due to profile value and risk discounts. PPAs are particularly attractive for companies with a high weighted average cost of capital, even if land for renewable energy is readily available.

Path to Zero combines the necessary expertise and the right tooling

Our team has been working with fundamental electricity market models since 2015, and has built up a broad database for the European electricity market. We use these models to forecast the development of the European electricity markets, which enables us to evaluate different PPA structures. Using our software solution decide, we optimize PPA and RE portfolios to find the right balance between capex, opex, risk and emissions.

➔ Back to advisory

Key references
  • Cement: We developed a multi-market sourcing strategy for a cement plant to maximize flexibility in the production system, minimize production costs, and reduce CO2 emissions.
  • Paper: For a paper mill, we conducted an integrated optimization of the procurement portfolio (different PPA structures, short- and medium-term procurement via standard products) and in-house generation (CHP, PV and wind).
  • Ceramic: For a company in the ceramics industry, we developed a cross-plant strategy for the procurement and generation of energy from renewable sources.
Publications

Dekarbonisierung der Papierindustrie – Schlüsseltechnologien,
Transformationsstrategien und praktische Case-Study
M Bohlayer, A Bürger
Path to Zero GmbH, 2024

Energy-intense production-inventory planning with participation
in sequential energy markets
M Bohlayer, M Fleschutz, M Braun, G Zöttl
Applied Energy 258, 113954, 2020

Demand side management and the participation in consecutive energy markets –
a multistage stochastic optimization approach
M Bohlayer, M Fleschutz, M Braun, G Zöttl
15th International Conference on the European Energy Market (EEM), 2018

Speak to our experts

Please fill out the contact form and we will get back to you shortly.