Abstract:

The use of Power Purchase Agreements (PPAs) has been increasing around the world and 29,632 MW in 343 signed or planned PPAs for wind farms existed as of January 2014. The cost of energy is an increasingly important issue in the world as renewable energy resources are growing in demand. Performance-based energy contracts are designed to keep the price of energy as low as possible, while controlling the risk for both parties (i.e., the Buyer and the Seller). Price and risk are often balanced using complex PPAs. Since wind is not a constant supply source, to keep risk low, wind PPAs contain clauses that require the purchase and sale of energy to fall within reasonable limits. However, the existence of those limits also creates pressure on prices causing increases in the Levelized Cost of Energy (LCOE). Based on variation of performance parameters such as capacity factor (CF) and economic parameters such as the inflation rate, the power generator (the Seller) may find that the limitations on power purchasing given by the utility (the Buyer) are not favorable and will result in higher costs of energy than predicted. In this research, a new cost model is developed to evaluate the price of electricity from wind energy under a PPA contract that addresses those variations and uncertainties mentioned earlier. In particular, in this paper, the pricing and price schedule of a wind project under a PPA contract is studied.

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