Help CenterRenewaFi’s PPA pricing model calculates the value of any PPA in ERCOT and compares that value to actual offers for similar PPAs from the RenewaFi marketplace.
To calculate PPA value, we multiply the expected hourly price of electricity by the expected hourly generation of the relevant facility over the lifetime of the contract, as depicted below. We then calibrate the outputs against offtaker pricing behavior on our marketplace.
For a description of how we calcualte expected hourly prices, see here.
To get the expected hourly generation of the relevant facility, we start with the facility’s shape, which describes how much and when it is expected to generate. Because a facility’s actual hourly generation can vary materially from its expected hourly generation, we consider the risk of over or under delivering to expectations. To quantify that risk, we look at actual, historical generation data from ERCOT to calculate and compare that to P50 generation profiles in order to understand shape risk and adjust PPA values accordingly. Finally, we adjust the shape for economic curtailment risk at the delivery point or factor in common ways parties choose to mitigate that risk.
The result is an objective estimate of the PPA’s value. We then compare that value to the average price of similar offers from our marketplace. The delta between these two figures represents a “green premium” – the extra money a buyer would need to spend above the expected value of the electricity and RECs to enter into the PPA.