Beyond economic dispatch: Modeling renewable purchase agreements in production cost models

Power purchase agreements (PPAs) for renewable projects typically include price premiums, guaranteed offtake, and firm energy. These contracts are often poorly represented in production cost models, potentially misrepresenting system operations dominated by renewable electricity. To address this gap, we first review existing PPA modeling strategies and then propose a holistic strategy that also supports the integration of storage systems. Using the Thai power system as a case study, we show that our strategy produces realistic energy costs and dispatch decisions, while remaining computationally tractable. The proposed modeling strategy also avoids producing localized line congestion near must-take units. We then employ our approach to evaluate a promising policy scenario, namely switching existing solar PPAs to contracts requiring evening energy delivery from integrated storage. The evaluation shows that the new policy would lead to a 0.5% reduction in the total system cost; more importantly, it would cut solar cost and curtailment by 61% and 25%, respectively. Also, energy loss due to inefficient storage systems would be made up by generation from fossil-fuel units. Our approach is implemented in PowNet, an open-source framework that allows researchers to incorporate contracts in power system analysis.