IDEAS home Printed from https://ideas.repec.org/a/ibn/eerjnl/v11y2022i1p1.html

Advent of Renewable Energy Market– Understanding Critical Success Factors in PPA Model

Author

Listed:
  • Abhijeet Acharya

Abstract

Under the market reforms, the unbundling of energy systems has opened new areas for value creation at a competitive price, which was impossible in centralized energy markets dominated by utilities. The renewable energy market via Power Purchase Agreement (PPA) has emerged as a realistic business proposition within such reforms. In the last decade, the renewable energy market based on the PPA scheme has seen unprecedented growth in Europe and North America. The falling cost of renewable energy and exigency to achieve energy transition targets have created new opportunities for Independent Power Producers (IPP) via the PPA route. Alongside, the PPA improves bankability and ensures a long-term revenue stream for renewable energy projects in the subsidy-free environment. On the contrary, the complexity of PPA models, market risks, and intermittency of energy generation pose challenges to IPPs and buyers. Considering PPA is an evolving concept, this paper aims to contribute to the existing knowledge on PPAs by analyzing critical success factors in the PPA model. During analysis, the elements that emerged as critical success factors are 1) tariff design, 2) bankability to secure funds, 3) addressing intermittency, and 4) stakeholder engagement. With a focus on regional settings and emerging trends, this paper discussed the rationale for PPA model selection, risk management practices, and strategic partnerships for value creation. During analysis, we also observed that the PPA schemes are driven by local market configuration, demand patterns, and country-specific policies.

Suggested Citation

  • Abhijeet Acharya, 2022. "Advent of Renewable Energy Market– Understanding Critical Success Factors in PPA Model," Energy and Environment Research, Canadian Center of Science and Education, vol. 11(1), pages 1-1, June.
    • Handle: RePEc:ibn:eerjnl:v:11:y:2022:i:1:p:1
    as

    Download full text from publisher

    File URL: https://ccsenet.org/journal/index.php/eer/article/download/0/0/44764/47793
    Download Restriction: no
    File URL: https://ccsenet.org/journal/index.php/eer/article/view/0/44764
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Bruck, Maira & Sandborn, Peter & Goudarzi, Navid, 2018. "A Levelized Cost of Energy (LCOE) model for wind farms that include Power Purchase Agreements (PPAs)," Renewable Energy, Elsevier, vol. 122(C), pages 131-139.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Alizadeh Zolbin, Mahboubeh & Tahouni, Nassim & Panjeshahi, M. Hassan, 2022. "Total site integration considering wind /solar energy with supply/demand variation," Energy, Elsevier, vol. 252(C).
    2. A. Cesar Y. Acevedo Arenas & Yecid A. Muñoz Maldonado & Johann F. Petit Suárez & Duban H. Morales Sánchez & Daniel F. Ramírez Contreras, 2024. "Towards a Standardized LCOE Calculation for Informed Decision-Making in Energy Policy and Investment: Application to the Colombian Context," International Journal of Energy Economics and Policy, Econjournals, vol. 14(6), pages 523-541, November.
    3. Tantau Adrian & Niculescu Elena, 2022. "The role of Power Purchase Agreements for the promotion of green energy and the transition to a zero carbon economy," Proceedings of the International Conference on Business Excellence, Sciendo, vol. 16(1), pages 1237-1245, August.
    4. Flottmann, Jonty H. & Akimov, Alexandr & Simshauser, Paul, 2022. "Firming merchant renewable generators in Australia’s National Electricity Market," Economic Analysis and Policy, Elsevier, vol. 74(C), pages 262-276.
    5. Alessio Trivella & Danial Mohseni-Taheri & Selvaprabu Nadarajah, 2023. "Meeting Corporate Renewable Power Targets," Management Science, INFORMS, vol. 69(1), pages 491-512, January.
    6. Mendicino, Luca & Menniti, Daniele & Pinnarelli, Anna & Sorrentino, Nicola, 2019. "Corporate power purchase agreement: Formulation of the related levelized cost of energy and its application to a real life case study," Applied Energy, Elsevier, vol. 253(C), pages 1-1.
    7. Christopher Kath & Weronika Nitka & Tomasz Serafin & Tomasz Weron & Przemyslaw Zaleski & Rafal Weron, 2019. "Balancing RES generation: Profitability of an energy trader," HSC Research Reports HSC/19/07, Hugo Steinhaus Center, Wroclaw University of Science and Technology.
    8. Talaat, M. & Farahat, M.A. & Elkholy, M.H., 2019. "Renewable power integration: Experimental and simulation study to investigate the ability of integrating wave, solar and wind energies," Energy, Elsevier, vol. 170(C), pages 668-682.
    9. Romano, Elliot & Trutnevyte, Evelina, 2026. "Local energy communities in rural Switzerland: national scalability under different incentives schemes and economic scenarios," Renewable Energy, Elsevier, vol. 256(PH).
    10. Matteo Fermeglia & Paolo Bevilacqua & Claudia Cafaro & Paolo Ceci & Antonio Fardelli, 2020. "Legal Pathways to Coal Phase-Out in Italy in 2025," Energies, MDPI, vol. 13(21), pages 1-22, October.
    11. Joanna Wyrobek & Łukasz Popławski & Maria Dzikuć, 2021. "Analysis of Financial Problems of Wind Farms in Poland," Energies, MDPI, vol. 14(5), pages 1-28, February.
    12. Yang, Ju-Ying & Dodge, Jennifer, 2024. "Local energy transitions as process: How contract management problems stymie a city's sustainable transition to renewable energy," Energy Policy, Elsevier, vol. 184(C).
    13. Szymon Słotwiński, 2022. "The Significance of the “Power Purchase Agreement” for the Development of Local Energy Markets in the Theoretical Perspective of Polish Legal Conditions," Energies, MDPI, vol. 15(18), pages 1-14, September.
    14. Pombo-Romero, Julio & Rúas-Barrosa, Oliver & Vázquez, Carlos, 2024. "Assessing the value and risk of renewable PPAs," Energy Economics, Elsevier, vol. 139(C).
    15. Yangping Zhou & Zhengwei Gu & Yujie Dong & Fangzhou Xu & Zuoyi Zhang, 2021. "Combining Dual Fluidized Bed and High-Temperature Gas-Cooled Reactor for Co-Producing Hydrogen and Synthetic Natural Gas by Biomass Gasification," Energies, MDPI, vol. 14(18), pages 1-21, September.
    16. Winikoff, Justin B. & Maguire, Karen, 2024. "The Role of Commercial Energy Payments in Agricultural Producer Income," Economic Information Bulletin 342468, United States Department of Agriculture, Economic Research Service.
    17. Barbón, A. & Fernández-Rubiera, J.A. & Martínez-Valledor, L. & Pérez-Fernández, A. & Bayón, L., 2021. "Design and construction of a solar tracking system for small-scale linear Fresnel reflector with three movements," Applied Energy, Elsevier, vol. 285(C).
    18. Zhao, Zhen-Yu & Chen, Yu-Long & Li, Heng, 2019. "What affects the development of renewable energy power generation projects in China: ISM analysis," Renewable Energy, Elsevier, vol. 131(C), pages 506-517.
    19. Ismail Kamdar & Shahid Ali & Juntakan Taweekun & Hafiz Muhammad Ali, 2021. "Wind Farm Site Selection Using WAsP Tool for Application in the Tropical Region," Sustainability, MDPI, vol. 13(24), pages 1-25, December.
    20. Qorbanian, Roozbeh & Löhndorf, Nils & Wozabal, David, 2025. "Valuation of power purchase agreements for corporate renewable energy procurement," European Journal of Operational Research, Elsevier, vol. 326(3), pages 530-543.

    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ibn:eerjnl:v:11:y:2022:i:1:p:1. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Canadian Center of Science and Education (email available below). General contact details of provider: https://edirc.repec.org/data/cepflch.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.