Power purchase agreements for plus energy neighbourhoods: Financial risk mitigation through predictive modelling and bargaining theory

This paper introduces a continuous 24/7 power purchase agreement (PPA) designed for contracting photovoltaic (PV) generation within sustainable plus energy neighbourhoods (SPENs) or local energy communities, aiming to ensure a stable economic revenue stream for community stakeholders. The PPA involves the sale of solar PV generation, auctioned at a fixed strike price, to an external off-taker. Employing statistical prediction tools such as long short-term memory and auto-regressive modelling, the proposed framework allows hour-to-hour power delivery commitments between seller and buyer, accurately estimating the agreed-upon volume of renewable energy to be exchanged. A fixed PPA price is negotiated utilizing Nash Bargaining Theory, aiming to optimize revenue for the SPEN while minimizing procurement costs for the buyer, thus achieving an economic equilibrium that mitigates the long-term price risk prevalent in wholesale energy markets. Additionally, the proposed methodology includes utilization of a battery energy storage system (BESS) to store excess power or address supply–demand contractual disparities during periods of low PV generation. Simulation results obtained under varying climatic conditions and energy market dynamics across different countries, demonstrate that the proposed PPA framework, by combining risk assessment strategies and statistical learning methods, can effectively reduce associated financial risks while maximizing payoff for the community.