Common Contracts
1 similar Power Purchase contracts
Power Purchase Agreements with Renewables: Optimal Timing and DesignPower Purchase • November 21st, 2022
Abstract—In this paper, we design a power purchase agreement (PPA) where the firm agrees to make a certain transfer payment to the renewable generator, and the generator invests that payment to build new renewable energy facilities. The firm will then have access to all electricity generation from the new facilities for a long-term period. The firm may dynamically decide when to start the PPA on an ongoing basis, based on the evolving market conditions, and the transfer payment (amount of investment) is also specified by the firm. The firm’s objective is to maximize its long-term discounted benefit (total savings) from signing the PPA. We mathematically formulate the firm’s decision problem as an optimal stopping problem and provide analytical solutions. We also provide insights on how the firm’s investment capacity and expected saving change with respect to different problem parameters.
