UnderstandingPPAsandVPPAsHowTheseToolsWork,andHowtoEvaluatetheEconomicsofVPPAsUnderstandingRenewableEnergyAgreementsHowtoEvaluatetheFinancialandEnvironmentalImplicationsofPPAsandVPPAs2UnderstandingRenewableEnergyAgreementsEnelXINTRODUCTIONTheGrowingDemandforRenewableEnergyandPowerPurchaseAgreementsPART1UnderstandingPPAContractStructuresPART2UnderstandingVPPACashFlowsPART3ACaseStudyinVPPASelectionPART4BestPracticesinSolicitingProposalsCONCLUSIONKeyTakeawaysforAssessingValueandRiskinPPAsandVPPAsTableofContents34571214DISCLAIMERTRANSACTIONSINOVER-THE-COUNTERDERIVATIVES(OR“SWAPS”)HAVESIGNIFICANTRISKS,INCLUDING,BUTNOTLIMITEDTO,SUBSTANTIALRISKOFLOSS.YOUSHOULDREFRAINFROMENTERINGINTOANYSWAPTRANSACTIONUNLESSYOUHAVEFULLYUNDERSTOODTHETERMSANDRISKSOFTHETRANSACTION,INCLUDINGTHEEXTENTOFYOURPOTENTIALRISKOFLOSS.FORFURTHERINFORMATIONABOUTENELXNORTHAMERICA,PLEASEVISIT:GENERALINFORMATION:www.enelx.com/n-a/enLEGALINFORMATION:www.enelx.com/n-a/en/legal-statements3UnderstandingRenewableEnergyAgreementsEnelXTheGrowingDemandforRenewableEnergyandPowerPurchaseAgreementsAstheneedtoreduceemissionsgrowsforbothutilityandcorporatebuyers,renewableenergypowerpurchaseagreements(PPAs)andtherelatedvirtualpowerpurchaseagreements(VPPAs)arebecomingincreasinglypopular.Forcorporations,theseareamongthemostpowerfultoolsforreducingScope2greenhousegas(GHG)emissions.ButincreasingdemandhascreatedamorecompetitivelandscapeamongPPAbuyers,asdatafromBloombergNEFdemonstrates.Arecord-breaking20.1gigawattsofrenewableenergywascontractedgloballyin2019,up40%from2018.In2020,despitethemassivechallengesposedbythecoronaviruspandemic,thatnumberroseagainto23.7GW.Andit’snotjustaboutlargePPAsforcorporategiantsandutilities—smallandmid-sizedPPAshavealsoexpe-riencedsustainedgrowth.PPAsunder100MWdoubledbetween2017and2019,accordingtoBloombergNEFdata,andthetrendisexpectedtocontinueincomingyearsasmoreandmoreorganizationsadoptincreasinglyambitioussustainabilitygoalsandseekoutnewtoolstoreachthem.PPAs—whetherphysicalorvirtual—arevitaltomeetsustainabilitytargets.Asanindependentrenewableenergyadvisor,EnelXhaspreparedthisguideto:>introducereaderstothesetwotypesofagreements;>explaintheRFPprocessforacquiringtheseagreements;and>walkreadersthroughacasestudythatintroducesthebasicsofeconomicevaluationsforVPPAs.INTRO051015202520102011201220132014201520162017201820192020GlobalCorporatePPAVolumes(GW)2010-2020Source:BloombergNEFGW252015105020122020201920182017201620152014201323.720.14UnderstandingRenewableEnergyAgreementsEnelXPhysicalPPAVirtualPPAEnergySettlementBuyerreceivesandtakestitletophysicalenergy,responsibleforcoordinatingdeliveryandschedulingNone(strictlyfinancial)FinancialSettlementBuyeragreestofixedprice(includingRECs)throughsupplierordirectlytosellerContract-for-differencessettleddirectlywithsellerGeographicFlexibilityLimitedtoprojectsresidingwithinregionalgridfootprintMoreflexibility–projectscanresidewithintheUSProjectLinkageStrong–directmatchofprojectproductionwithcustomerfacilityusageNotasstrong–nophysicaldeliveryUnderstandingPPAContractStructuresApowerpurchaseagreement(PPA)isacontractbetweenabuyerandsellerofelectricity.APPAdefinestermslikepricepermegawatthour(MWh)andpenaltiesforunderperformancewhileoutliningthelogisticsofdeliveryandfinancialsettlement.Historically,PPAsweretypicallytoolsforbuyerslikeutilitiesandoccasionallymajorenergyusers,butthathasquicklychangedinrecentyearsasbusinessesandorganizationsofallindustrieshaveadoptedthePPAstructure.RenewableenergyPPAsaretypicallystructuredinoneoftwoways:physicalPPAsorvirtual(sometimesknownasfinancial)PPAs.WithaphysicalPPA,theprojectmustbelocatedeitheron-siteorwithinthesameregionofthebuyer’sutilitygrid.Thebuyercontractswithadeveloperforpurchaseofphysicalpowerandassociatedrenewableenergycredits,alsoknownasRECs,“amarket-basedinstrumentthatrepresentsthepropertyrightstoenvironmental,socialandothernon-powerattributesofrenewableenergygeneration.”RECsareusedtoproverenewableelectricityuseclaims,and,asamarket-basedinstrument,canbesoldandexchangedinordertoclaimrenewableenergyuseforcarbonaccounting.VirtualPPAs(alsoknownasVPPAs,financialPPAsandsyntheticPPAs)areavariationonthetypicalPPAstructure,andarearapidlygrowingtoolindecreasingemissions.InthecaseofavirtualPPA,thebuyerneverreceivesthephysicalelectricitygeneratedbytheprojectundercontract—instead,theVPPAispurelyafinancialtransaction,oracontract-for-differences,withthebuyerexchangingafixed-pricecashflowforavariable-pricedcashflowandtheassociatedRECs.Whilebothcontractstructureshelpbuyersachievesignificantemissionreductions,therearedifferencesinthegeographicflexibility,accountingimplications,andprojectlinkage,asdetailedinthechartbelow.PART1DeveloperBuyerRECsMWhPowerMarketAPowerMarketBDeveloperBuyerMWhRECsMWh5UnderstandingRenewableEnergyAgreementsEnelX$UnderstandingVPPACashFlowsOnceaVPPAissigned,thebuyeranddevelopermustupholdtheirendsoftheagreement.Thechartbelowoutlinesthestepsinvolvedoncetheprojectisbuiltandenergystartsflowingintothegrid,andthissectionelaboratesonsomeofthemorecomplexaspectsofaVPPA.EnergypriceElectricityRECsVPPAcontractSettlementPART2$$$$EnergyCustomerRenewableEnergyGeneratorElectricityMarketAElectricityMarketBRenewableenergygeneratorsellscustomer’snullpowerintowholesalemarketandreceivesmarketprice$.Generatorreceivesfixedpriceforenergy/RECsthroughsettlementwithcustomer,basedontheVPPAcontractterms.Generatorandcustomerexchangesettlement$basedonthedifferencebetweenwholesaleenergypriceandthefixedpriceoutlinedinVPPAcontract.Customerpurchaseselectricityfromtheirlocalutility/electricitymarketasusual$.2311236UnderstandingRenewableEnergyAgreementsEnelXRECReceiptandRetirementAspartofthesettlementtransfer,therenewableenergycertificates(RECs)arealsotransferredtothecustomer.TheEPAdefinesaRECasa“market-basedinstrumentthatrepresentsthepropertyrightstotheenvironmental,socialandothernon-powerattributesofrenewableelectricitygeneration.”ThevalueofthereceivedRECsdependsonthemarkettheprojectisinandthetypeofRECstobereceivedbythebuyer(eithervoluntaryorcompliance)1.VariationinRECvalueshouldbeconsideredwhenevaluatingtheeconomicsofaVPPA.MonthlySettlementVPPAsincludeastrikeprice—thepriceperMWhthebuyeragreestopaytheprojectowner—whichismarkedagainstaspecificwholesalemarketdeliverypoint.ThedifferencebetweenthesetwopricesismultipliedbytheMWgeneratedthatmonthtogetthemonthlysettlementvalue.Theorangelineonthegraphrepresentsa$35/MWhstrikepriceforaVPPA.(Pleasenotethatthisnumberisstrictlyforexamplepurposes;strikepricesvarywidelyfromprojecttoprojectbasedonavarietyoffactors.)VPPAsoftensettleagainsthourlygridpowerprices—whenthosepricesareabovethestrikeprice,thesellercreditsthebuyer.Whenthepricesarebelowthestrikeprice,thebuyermustpaytheseller.ThesepaymentsrepresentthefinancialsettlementofVPPAs,whichgenerallyoccurmonthly.Sellercreditsbuyerwhenrealtimepowersettlesabovestrikeprice.Example:›Strikeprice:$35/MWh›Realtime:$40/MWh(market)›Sellercreditsbuyer$5/MWh$35/MWhstrikepriceSellerdebitsbuyerwhenrealtimepowersettlesbelowstrikeprice.Example:›Strikeprice:$35/MWh›Realtime:$30/MWh(market)›Sellerdebitsbuyer$5/MWh1ThecomplianceRECmarketiscreatedasaresultoflegislationlikerenewableportfoliostandards(RPS)incertainregions;complianceRECsareoftenmoreexpensivebecausetheyhavestrictercriteriaattachedtothem.Incontrast,thevoluntaryRECmarketistypicallyforcorporationsorindividualslookingtoachievesustainabilitygoalsbeyondRPSmandates.Settlement=(Wholesalerate–Strikeprice)xMWExampleContractforDifferences(CFD)1234567891011121314157UnderstandingRenewableEnergyAgreementsEnelXORSites23kMWh/yrCASites68kMWh/yrCOSites8kMWh/yrMISites22kMWh/yrNCSites15kMWh/yrNYSites4kMWh/yrERCOTNorthLoadZoneILSites87kMWh/yrACaseStudyinVPPASelectionAnanonymizedcasestudyofarecentcustomersolicitationcanhelptoillustratethedecision-makingprocessandforecastinginvolvedinaVPPA.Thecustomerhassitesacrosssevenstatesinmultiplewholesaleenergymarkets.TosignificantlyreduceScope2emissionswithintheUS,theydecidedtopooltheirannualUS-basedelectricloadofapproximately227,000MWhperyear,andseekaVPPAthatcouldeffectivelymatchalloftheirUS-basedelectricityconsumption.(Notethatnoneofthat227,000MWhwaspreviouslycoveredbyutilitygreentarifforotherformsofrenewableenergysupplyagreements.)ThecustomerexploredavarietyofdifferentprojectoptionsfortheirVPPA.OneoftheseoptionswasinERCOTNorthLoadZone—inthissection,wewilldiscussasimplifiedversionoftheforwardmarketassessmentweconductedinanalyzingthischoiceeconomically.TheImportanceofESGConsiderationsThiscasestudyspecificallyfocusesoneconomicassessmentofprojects,butit’scrucialtonotethatthereareavarietyofimportantfactorsbeyondjustpricethatcustomersconsiderinchoosingaVPPA.Manyplacepriorityonprojectexecutionriskorthereputationoftheowner/operator,andoneparticularareaofincreasingconcernisESG(environmental,socialandgovernance).Manyenergyprojectsarenowjudgedonmorethanjustprice—projectscouldfaceaddedscrutinyfromstakeholdersiftheydon’tincludeandplaceemphasisonESGconsiderationslikeminimizingenvironmentaldisturbance,carbonimpactoftechnologyinvolved,oremphasizingdiversity.CustomerscommittedtoESGmayalsoprefertochooseprojectsthataren’tthelowestpricedoptioniftheyintegrateenvironmentalstewardshipintothewaytheyarebuiltandrun,orsupporttheeconomicandsocialdevelopmentofcommunitieswheretheyoperate.InPart4wediscussfactorsinvolvedintheRFPprocess;forbusinessesthathavestrongESGpreferences,it’scrucialthatthesefactorsbeintegratedintothatprocess.BusinessesshoulddiscussESGconcernsearlyintheprocess,andincludequalitativeconsiderationswithinscoringandevaluationmodels,notjustquantitative.Otherwise,iftheRFPgivesnoconsiderationsbeyondprice,developerswillnotpitchonotherbenefitsandthosedevelopersplacingsignificantattentiononESGimpactsmaybedissuadedfromparticipating.Ifaprojectischosensolelyonprice,thismayoftenleadtoacustomerselectingaprojectthatisnotrightfortheirneeds.PART38UnderstandingRenewableEnergyAgreementsEnelXNPV,ForecastingCashFlowsandComparingProjectsInthiscasestudyexample,theERCOTNorthLoadZoneproject’sstrikepricewas$21.29/MWh,butthestrikepriceofaprojectisnotsufficienttounderstandaproject’struevalue.Instead,aproject’snetpresentvalue(NPV)isusedtoevaluatepotentialagreementsbycalculatingthepresentvalueofaPPA’sexpectedcashflows.CalculatingNPVinvolvesawidevarietyofforecastingforbothregionalenergypricesandRECprices,aswellasqualitativeconsiderationsaroundthetimingoftheproject,thetypeofRECsproduced,thelocation-specificdynamics,andmore.AndlookingbeyondNPV,customersmustcarefullyassesstherisksinvolvedintakingonalong-termpricehedgewithinaparticularregion.Togetabetterunderstanding,thiscasestudydemonstratessomeoftheforecastinginvolvedinthiscustomer’sprocess.Forwardmarketassessmentsareusedtoforecastmonth-lysettlementvaluesbyestimatingwholesaleenergycostsattheproject’sdeliverypoint.Forexample,thechartbelowshowsthreedifferentforwardpricingscenarios,basedondifferentpossiblepathsthatfuturepricesmighttakeintheERCOTNorthLoadZone.Thesethreeprojec-tionsareworkingunderthreedifferentassumptions:>The“baseline”projectionisbuiltontheassumptionthatthisregionwillsuccessfullyreducethegenerationscarcitythatleadstohighsummerprices.>The“high-price”projectionshowsthepotentialimpactofthecontinuationofmultiplebullishpricingtrends.>The“low-price”projectionisevenmoreconservativethanbaseline,usingaveragehistoricalprices(2015-2020)asthebasisforprojections,addingweighttoweakeryears.Thislow-priceforecastisintendedasaworst-casescenario—rememberthatintheVPPA,buyersarecreditedwhenpricesareabovethestrikeprice,andmustpaywhenitisbelowthestrikeprice.ForwardMarketPricingAssessmentERCOTNorthLoadZone9UnderstandingRenewableEnergyAgreementsEnelXProjectDeveloperProjectNameProjectTerm(Years)CODYearStrikePrice($/MWh)SettlementPointTechNameplateCapacity(MW)BidCapacity(MW)PVRECRankSolarDeveloper22GreenfieldSolar122024$21.29ERCOTNorthLoadZoneSolar200100$9.251SolarDeveloper13RockyHillSolar102023$20.25ERCOTNorthHubSolar7575$8.562SolarDeveloper5LoneSolar122024$22.25ERCOTNorthLoadZoneSolar25050$7.983SolarDeveloper5GreenLakeSolar122024$22.68ERCOTNorthLoadZoneSolar100100$7.254SolarDeveloper18CraterSolar122023$22.87ERCOTNorthLoadZoneSolar5050$7.155SolarDeveloper5ClearviewSolar152023$20.98ERCOTNorthHubSolar125125$6.206SolarDeveloper3SkywaySolar152023$26.02ERCOTNorthLoadZoneSolar+Storage15075$6.127SolarDeveloper9MountainPass2152024$21.23ERCOTNorthHubSolar100100$5.998SolarDeveloper10ValleyFieldSolar122023$21.85ERCOTNorthHubSolar15050$5.879SolarDeveloper27CreekviewSolar1102024$23.80ERCOTNorthHubSolar7525$5.4510SolarDeveloper12FountainIsleSolar122024$26.55ERCOTNorthLoadZoneSolar+Storage5050$4.1511SolarDeveloper17GreenPastures1102023$27.87ERCOTNorthLoadZoneSolar100100$4.0512SolarDeveloper3ElDoradoSolar102023$25.98ERCOTNorthHubSolar100100$3.9813Usingthesemodeledforwardmarketprices,wecanthencalculatethenetpresentvalueofprojectproposalsusingawidearrayofpotentialsettlementoutcomes.Fromhere,theprojectiscomparedtootherproposalsbasedonNPVperMWh.Thetablebelowgenerallydemonstrateshowaprojectwouldbeassessed.TheNPViscalculatedbasedonfactorsincludingtechnologytypeandexpectedoutput,termlength,settlementpoint,forecastedwholesalemarketprices,andtheprojects’fixednetlevelizedenergycostorstrikeprice.TheNPVofeachprojectrepresentsthedifferencebetweenthepresentvalueofexpectedcashinflowsfromtheVPPAoveritstermandthepresentvalueofcashoutflowsoverthatsameperiodoftime.Toaccountforvariationsinprojectsizes,thoseNPVvaluesarethendividedbyforecastedproductiontodetermineaperMWhNPVforthepurposeofrankingprojectsofvaryingoffercapacities.BecausethecustomerestablishedVPPAtargetcapacitywas100MW,andthemosteconomicprojectbeingofferedisrightat100MW,thiscustomerultimatelyselectedthattop-rankedERCOTNorthLoadZoneprojectandexecutedasingleVPPAwithasingledeveloperforasingleproject.PPAValueAssessmentProjectproposalsrankedbasedonNPVperMWhLoweststrikepricedoesnotalwaysrepresentthemosteconomicoptionUnderstandingRenewableEnergyAgreementsEnelX10TobetterunderstandtheeconomicsofthissignedVPPAandVPPAsgenerally,it’shelpfultolookbackathowthisVPPAwouldhavetranslatedtocreditsorchargestotheofftakerinrecenthistory.Todoso,wetakethestrikepriceandcalculatethedifferenceagainstmonthlyaveragedon-peakspotpricesandmultiplyitbytheexpectedmonthlygenerationoutputoftheproject.ThisprovidesacrudewaytoevaluatemonthlycashflowsresultingfromaVPPAinthismarket,andtoexaminetherangeofoutcomestogetabetterunderstandingofpossiblevolatilityincashflows.Inthetablebelow,greenisapositivecashflowtotheofftaker,whileorangeisacharge,withdarkershadesofeachcolorcorrespondingtoagreatervalue.Youcanseethefullrangeofoutcomes—inFebruary2016,thechargeishighestatnearly$60k,whileinAugust2019,thecreditislargestat$3.6million.Thepatternhereisinsomewaysintuitive—becausethisisasolarprojectinTexas,duringcoolermonthsdemandgoesdown,andsodoprices,whiletheoppositeistrueinsummer.201520162017201820192020JanFebMarAprMayJunJulAugSepOctNovDecAnnualIllustrativeProjectCashFlowsHighestchargeLowestcharge11UnderstandingRenewableEnergyAgreementsEnelXThetablebelowshowsatamoregranularlevelhowthehoursofasingledayinAugust2019contributedto$3millioninpositiverevenueinasinglemonth.(Notethatthisisnotatypicalmonth,butinsteadthemostextremeexamplefromthehistoricallookback.)Whenreal-timepricesspikedto$9,000/MWh,thenetprojectrevenuewouldhaveapproached$800kforthatsinglehoursincethestrikepricewasonly$21.29/MWhandtheprojectwasexpectedtogenerateover90MWh.August15,2019Example:Snapshotof5on-peakhoursHourlyMarketValue($/MWh)—StrikePrice($/MWh)xHourlyGeneration(MW)=HourlyNetRevenue($)1PMCT$1,087.64$21.2997.58$104,054.432PMCT$4,877.74$21.2997.99$475,883.543PMCT$8,874.87$21.2994.55$837,105.994PMCT$9,000.00$21.2992.25$828,286.005PMCT$3,575.69$21.2991.75$326116.20ProjectOutcomeIntheend,thecustomerchosethesingle100MWPPAinERCOTNorththatwemodeled.Thatsingle100MWPPAproducesmorethanenoughRECstomatchallofthecustomer’sUS-basedScope2emissions.TheremainingsurplusannualRECproductioncaneitherbesoldtomarketorheldontoincaseofanunanticipatedincreaseinelectricityusage.Theannualpositivecashflowsfortheprojectareforecastedtobebetween$1mmand$7mm,andthatrevenuecanbeusedtocoverotherexpenditures,whetherenergyorotherwise.WiththissingleVPPA,thecustomerisforecasttoreceiveenoughRECsforeachyearofthe12-yearVPPAtermtomatchallforecastedScope2electricityconsumptionacrossallsitesintheUnitedStates.AndbecauseintheearlieryearsofthisVPPAthecustomerwillreceiveRECsbeyondtheirexpectedusagetotal,thesesurplusRECscaneitherbeheldasabufferincaseofincreasedelectricconsumption,orre-soldtothemarket.ORSites23kMWh/yrCASites68kMWh/yrCOSites8kMWh/yrMISites22kMWh/yrNCSites15kMWh/yrNYSites4kMWh/yrILSites87kMWh/yr+68kRECs/yr+23kRECs/yr+8kRECs/yr+87kRECs/yr+22kRECs/yr+4kRECs/yr+15kRECs/yrERCOTNorthLoadZone~237kMWh/yrproduction;~227kRECsoffsetannualUSscope2emissions;~10ksurplusRECs;~$1mmto~$7mmannualprojectcashflowsUnderstandingRenewableEnergyAgreementsEnelXBestPracticesinSolicitingProposalsThePPAandVPPAselectionprocessentailsfarmorethantheeconomicassessment.Anefficientsolicitationprocessiscrucialtofindingthebestpossibleproject,butrequiresgreatattentiontodetailtoensureasuccessfuloutcome.Thefollowingarejustsomeoftheconsiderationstotakeintoaccountinthesolicitationprocess.Phase1:Strategy,RFPDevelopment,andESGConsiderationsIndevelopinganRFP,specialcaremustbepaidtostakeholderalignment,opportunityassessments,andstrategy.PPAsaretypicallypartofabroad,ambitiousstrategicrenewableenergyplan.Toensuresuccessinthis,partiesshouldengageallstakeholdersindevelopingasetofsustainabilityandrenewableenergygoals.InconstructingaPPARFP,acleartimelineandworkplanshouldbeassembled.SpecificationsofsoughtPPAs,orRFPproducts,shouldbewelldefinedandfairlyprescriptivetoleadtothetenderingofproposalsthatconformtoanorganization’sspecificrequirementsandallowforapples-to-applescomparisonsofproposals.Aswementionedinthecasestudyofpart3,projectsarenowjudgedonmorethanjustprice.Manybusiness-eshavestrongESGpreferences,andtheseshouldbeintegratedintotheRFPprocess.Qualitativeconsider-ationsshouldbeincludedwithinscoringandevaluationmodels,notjustquantitative.IftheRFPisfocusedsolelyonprice,customersmayendupselectingaprojectthatisnotrightfortheirneeds.OncetheRFPisdrafted,arobustlistofdevelopersshouldbeassembledtoengagewithintheRFPprocessandadefinedsetofselectionandevaluationcriteriashouldbedevelopedtosupportthescreeningandrankingoftenderedproposals.PART41213UnderstandingRenewableEnergyAgreementsEnelXPhase3:ContractExecutionandIntegrationOnceanawardselectionhasbeendetermined,thebuyeranddeveloperwillbeginestablishingthedefinitivetermsofagreements.Thisistypicallya6-to-8monthprocess,dependingonresourceavailability.Onceprojectsreachcommercialoperations,buyersshouldmanageRECstoensureproperreceipt,certification,trackingandretirement.Phase2:Go-to-marketandPPASelectionHere,theRFPisissuedtorenewabledeveloperswithintargetmarkets,andcompetitivebidsareconducted.Theissuingpartyshouldactivelyengagedevelopersandcollectrelevantprerequisiteparticipationrequirementsthatcouldbeusedtoassessdeveloperandprojectrisks.OncedevelopershavebeenscreenedandwhittleddownthroughRFPstages,afinalshortlistshouldbeestablished.Thesedevelopersshouldbeinvitedtosubmitexecutableproposals.Itisveryimportanttostriketherightbalancebetweenqualityandquantitywithrespecttotenderedproposals—aimtoreceiveproposalsfromthoroughlyvetteddevelopersandprojectsthatconformtoRFPrequirementsandnottosimplyacceptproposalsfromaboundlessfieldofdevelopers.Onceproposalshavebeentendered,partiesshouldanalyzeandassessthemagainstRFPrequirements,quantifyingrisksandcostsassociatedwitharangeofpossibleforwardmarketscenarios.Collectdataandengagestakeholders>DiscussanddefineRFPcriteria>Developoperatingplanandstrategy>EngageandinvolvestakeholdersDefineaprojectthatmeetsyourgoals>CreateRFPscheduleandworkplan>AssembleRFPdocument(s)>Developtargetcounterpartylist,issuancestrategyTakeyourprojecttomarket>IssueRFPtopre-selectedbidders>Conductcounterpartyoutreach/origination>Aggregateandaddressdeveloperquestions>CollectbidsthroughAuctionPlatform(sealedoropen)>Ensurebidscontainallrelevant/requireddata>Scoresubmittedbidsagainstpre-determinedcriteriatoassemblerank-orderofbidsbasedonfinalscoresCompetitiveSolicitationRFPIssuanceRFPDevelopmentPre-RFPConsultation14UnderstandingRenewableEnergyAgreementsEnelXKeyTakeawaysforAssessingValueandRiskinPPAsandVPPAsAscorporationsofallsizesbegintoexplorePPAsandVPPAs,gainingadeeperunderstandingofthevalueandriskofthesetoolsisessentialforevaluatingcontracts.Herearethreekeytakeawaysforreaders:CONCLUSION1ItiscriticaltoestablishclearandactionableorganizationobjectivesandrequirementsforPPAs.Havingtheseestablishedisoneofthefundamentalprerequisitestodevelopingago-to-marketstrategy.EnsuringalignmentamongallstakeholdersbeforemovingintoRFPdevelopmentwillsavetimeandresultinamoreeffectiveoutcome.2Thestrikepriceisonlythebeginningofunderstandingaproject’svalue.TherelationshipbetweenstrikeandsettlementpriceandthecalculatedNPVsofaprojectaremuchmoreimportantthantheVPPA’sfixedenergypricealone.3It’simportanttouseriskmitigationstrategiesandlookatawidearrayofmarketforecastswhenmakingdecisionsaboutPPAs,sincetheseprojectsbearalotofrisk.PPAsaretypicallylong-termcommitmentsbeingmadeintraditionallyfluidenergymarkets.Inmodelingoutforwardmarketpricingtrends,itisveryimportanttolookatawidearrayofmarketforecastsandclearlymodelhowcollapsesinmarketpriceswouldimpacttheeconomicsofconsideredPPAs.PPAsandVPPAsarepowerfultoolsforhelpingtocutgreenhousegasemissions.EnelXoffersavarietyofrenewableenergyadvisoryservicestoensurecorporationsmaximizethevalueoftheirPPA.FormoreinformationonPPAs,VPPAs,andrenewableenergy,pleasecontactus.15UnderstandingRenewableEnergyAgreementsEnelXwww.enelx.com/northamericaP21010©EnelXNorthAmerica,Inc.Allrightsreserved.
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