Power Purchase Agreements (PPA) Hedging

    Trading at EEX increases security and standardisation of Power Purchase Agreements (PPA) hedging and, as a result, provides the tools to actively support the energy transition in Europe. By hedging long-term price risk via our standard EEX power futures, we enable our members to hedge against the risk of future price changes up to six years ahead.

    Watch the latest panel discussion at ETEX 2020: “ARE PPAS PART OF YOUR OPTIMISATION STRATEGY?”

     

    PPAs are developing into a highly competitive marketplace for investors, developers, traders and users of renewable power:

    • What is the relationship between PPAs and the traditional markets?
    • How can the established power traders offer value to the PPA market?
    • What effect has COVID-19 had on PPAs?

    EEX Expert Viviana Ciancibello speaks with Daria Nochevnik (EFET), Natasha Luther-Jones (DLA PIPER),  Jorge Arenillas (Sonnedix)

     

     

     

     

    Notice: To activate the video, please click on the picture. Please note that after activation your data will be forwarded to YouTube.

     

     

     

    What are PPAs?

    PPAs are long-term contracts between a party generating and selling electricity and a party purchasing electricity. They are specific agreements under which electricity traded between the two parties comes from a renewable energy source, and a company buys the electricity in order to help meet their energy demand.  

    PPAs are usually necessary to finance renewable energy projects. As such, they are a key enabler of new Renewable Energy developments. Purchasers are attracted by lower prices and the ‘green credentials’ in having their power supply come from 100% renewable sources. PPAs are often fixed for long periods, up to 10 years or even more, to ensure revenue security for the developer.

    However, these long-term agreements bear certain risks. Most PPAs are financially settled, which means the price is fixed between the generator and the offtaker, but the actual power produced is sold on the Spot Market. This creates price risk.

    In order to mitigate price and counterparty risk and secure long-term cash flows, EEX already offers cleared cash-settled futures contracts up to 6 years ahead in all major European power markets. To enable members to hedge a greater portion of their PPA risk, EEX is currently investigating listing further calendar expiries.

    Power Purchase Agreements described by Viviana Ciancibello, Business Developer for European Power Derivatives

    Notice: To activate the video, please click on the picture. Please note that after activation your data will be forwarded to YouTube.

    Viviana Ciancibello

    Senior Business Developer

    +44 207 862 7561 viviana.ciancibello@eex.com

    Renewable Energy and PPAs

    Hedging with EEX Power Futures - Get further information in our presentation

    More

    Study

    Renewable Energy Price Risk Management at the Energy Exchange

    More

    EEX Featured in RE-Source PPA Risk Mitigation Report

    download