Efficient power purchase agreement structures for meeting corporate electricity needs with solar energy
Francisco Simões, Carla Henriques, Nuno Carvalho Figueiredo, Patrícia Pereira da Silva
Abstract
Corporate Power Purchase Agreements (CPPA) offer companies an effective way to meet electricity needs with renewable energy, reducing exposure to wholesale market price volatility. However, the risks associated with these contracts vary depending on their structure, specifically the combination of electricity profile and price structure. This study aims to identify the optimal solar CPPA type for companies with a 24/7 consumption profile and no renewable self-production, ensuring the best balance between financial performance and risk exposure. Four electricity profile structures (Pay-as-Produced, Fixed Hourly Profile, Monthly Baseload, and Annual Baseload) were analyzed, along with two price structures (Fixed Price and Variable Price). To evaluate the performance of the eight solar CPPA types considered, a Slacks-Based Measure Data Envelopment Analysis model was applied using three key indicators: Net Present Value, Contract Performance Deviation, and Volume Residual. The findings indicate that among solar CPPA, contracts with a monthly baseload profile and a variable price structure achieve the highest overall performance. In contrast, CPPA with a fixed hourly electricity profile exhibits the lowest performance, regardless of price structure. These insights provide valuable guidance for companies during CPPA negotiations, allowing them to make informed decisions aligned with their business strategy. • This article assesses the performance of CPPA with different designs. • Companies benefit from Baseload electricity profiles. • CPPA with Fixed-Hourly Profiles shows the lowest performance.