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Decoding renewable PPA prices in California's energy market

Author

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  • Peña, Juan Ignacio
  • Rodríguez, Rosa
  • Mayoral, Silvia

Abstract

This paper presents novel financial models for computing fixed prices in renewable Power Purchase Agreements (PPAs) in California's energy market. By leveraging closed-form valuation formulas and numerical copulas, the models account for expected electricity spot prices, production-price correlations, and distributional characteristics. Empirical tests on utility-scale solar and wind PPAs (2010–2019) show that these models outperform traditional cost-based approaches, offering a financially fair, transparent, and replicable pricing method. The study fills a critical research gap by formalizing PPA price estimation and providing robust benchmarks for market participants and regulators, thereby enhancing the financial viability and competitiveness of renewable energy investments. The baseline model is extended to consider multi-buyer PPA, price caps, load profiles, and storage.

Suggested Citation

  • Peña, Juan Ignacio & Rodríguez, Rosa & Mayoral, Silvia, 2026. "Decoding renewable PPA prices in California's energy market," Renewable Energy, Elsevier, vol. 261(C).
    • Handle: RePEc:eee:renene:v:261:y:2026:i:c:s0960148125028320
    DOI: 10.1016/j.renene.2025.125168
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    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

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