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Rethinking solar PV contracts in a world of increasing curtailment risk

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  • O'Shaughnessy, Eric
  • Cruce, Jesse
  • Xu, Kaifeng

Abstract

Curtailment of solar photovoltaics (PV) could increase significantly as PV composes greater shares of grid capacity. Curtailment risk—the possibility that future curtailment levels exceed projections—poses a challenge to PV project economics. PV industry stakeholders have begun to develop new contract structures that may address curtailment risk more optimally than conventional structures. Using a simplified theoretical framework and modeled results, we analyze PV project economics in the context of increasing curtailment risk under alternative contract structures with fixed and time-of-delivery payments. We show that both alternative structures tend to shift curtailment risk from generators to electricity buyers. Electricity buyers—particularly utilities—may be willing to bear that additional risk in order to reap higher and more diverse project values facilitated by fixed-payment and time-of-delivery contracts. Our results suggest that these alternative structures provide new ways to redistribute curtailment risk in the context of increasing PV curtailment.

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  • O'Shaughnessy, Eric & Cruce, Jesse & Xu, Kaifeng, 2021. "Rethinking solar PV contracts in a world of increasing curtailment risk," Energy Economics, Elsevier, vol. 98(C).
    • Handle: RePEc:eee:eneeco:v:98:y:2021:i:c:s0140988321001699
    DOI: 10.1016/j.eneco.2021.105264
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    References listed on IDEAS

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    Cited by:

    1. Mostafa Esmaeili Shayan & Gholamhassan Najafi & Barat Ghobadian & Shiva Gorjian & Mohamed Mazlan & Mehdi Samami & Alireza Shabanzadeh, 2022. "Flexible Photovoltaic System on Non-Conventional Surfaces: A Techno-Economic Analysis," Sustainability, MDPI, vol. 14(6), pages 1-14, March.
    2. Paul Simshauser & David Newbery, 2023. "Non-firm vs. priority access: on the long run average and marginal cost of renewables in Australia," Working Papers EPRG2322, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    3. Zhu, Qianming & Qi, Yinke & Huang, Diangui, 2023. "Numerical simulation of performance of traveling wave pump-turbine at different wave speeds in pumping mode," Renewable Energy, Elsevier, vol. 203(C), pages 485-494.
    4. Gallego, Camilo A., 2022. "Intertemporal effects of imperfect competition through forward contracts in wholesale electricity markets," Energy Economics, Elsevier, vol. 107(C).

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