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PPA Advanced: Managing Market Risks for Wind and Solar

How can I assess and manage the risk of an increasing PPA portfolio?

The era of Power Purchase Agreements (PPAs) for wind and solar has begun. You have collected a fair bit of experience with PPAs but further questions have come up: How can I evaluate market risks? How do future power market developments in Europe affect my risk exposure? Which contract structures are exposed to which risks? Are there significant differences between markets? How can I best manage this with increasing PPA volumes in my portfolio?


What are your benefits?

After this training you will be able to:

- Describe market risks in each of the most relevant PPA markets,

- Identify and handle risks in the context of PPAs,

- Evaluate the development of market risks for the next ten years, and

- Develop strategies in order to mitigate market risks along the value chain.

Agenda

Session 1: Analysis of PPA markets and structures in Europe

  • Types of PPAs in the most relevant PPA markets in Europe

  • Exercise I: mapping and categorising PPA risks

  • Pay-as-Produced, Pay-as-Nominated, baseload, virtual: What are prices, what are risks

Session 2: PPA demand

  • Different types of PPA buyers and their needs (case study)

  • Regulatory framework for more demand in PPAs and GoOs

  • Current landscape of hedge products in Europe (trading volume at the exchange vs. real consumption)

  • Different shades of green: What do corporates want and why?

  • Accounting pitfalls for corporates: virtual vs. physical PPAs

  • Exercise II: summarising PPA risks for corporate buyers

Session 3: PPA risks in the fair value approach - I

  • Deriving the “correct” base parity ratio (capture rate) and related weather risks

  • Shape risk consisting of price risk, volume risk and profile risk, incl. case study on a baseload solar PPA

  • Counterpositions at the derivatives market: stack-n-roll hedge

  • Case of virtual cross-border PPAs: risks and hedging

Session 4: PPA risks in the fair value approach - II

  • Assess balancing risks: analysis on spot market trade and balancing group management

  • GoOs: historic and future price and market development

  • Residual risks for PPAs

Session 5: Understanding the drivers of market risks

  • Understanding market price risk: commodities, fiscality, weather, and climate change

  • Overview: profile and shape risk in different European markets

  • Fusion of fundamental models and statistics: Energy Brainpool’s swarm scenario approach

Session 6: risk management 2.0 – portfolio optimisation

  • Modern portfolio theory and its use for PPAs

  • Influence on types of risk through diversification

Case Study: Impact of portfolio strategies on residual risks (for supplier companies)

Speakers

Matthis Brinkhaus

Senior Expert

Matthis Brinkhaus studied Industrial Engineering (B. Eng.) with a focus on energy technology and product management at the University of Applied Sciences Ansbach and Industrial Engineering (M. Sc.) with a focus on energy and resource management at the Technical University Berlin. In his master thesis he focused on the control energy system of the Indian power grid. Matthis Brinkhaus began his professional career as a Project Manager and Trainer at an international provider of education and training in renewable energies and energy efficiency. He then worked as an Analyst for a project planner for wind turbines. Since August 2019, he is responsible for the development and realisation of trainings and simulation games on the electricity and energy industry at Energy Brainpool GmbH & Co. KG. In addition, he is involved in projects for the transformation of the energy industry. He is an expert for renewable energies in the areas of financing, grid integration and at the interface to the electricity market. As a certified trainer Matthis Brinkhaus is conducting seminars for exchange traders in consultation with the European Energy Exchange (EEX AG) and the European Power Exchange (EPEX SPOT SE).

Target group

  • Specialists and managers from project developers, operators of renewable energy plants, energy suppliers, aggregators, traders, or industry

  • Employees of the energy industry from the areas of energy trading, sales, purchasing, procurement, portfolio and risk management

Exemplary Use Case

You are a professional in the energy industry and have frequently dealt with PPAs and their risks. Due to increasing volumes, risk measurement and management are becoming more and more important for you.

As a plant operator, financier, energy supplier or industrial bulk consumer, you want to gain an in-depth understanding which market risks your PPAs entail and particularly how they can be managed, e. g. by hedging or diversification of geographies and technologies. You would like to go beyond an analysis of historical data and have some insight into fundamental risk modelling, taking into account future power market developments across Europe.