Work

Decoding renewable PPA prices in California's energy market

Year: 2026

Type: article

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.

Source: Renewable Energy

DOI: 10.1016/j.renene.2025.125168

Authors: Juan Ignacio Peña, Rosa Rodríguez, Silvia Mayoral

Institution: Universidad Carlos III de Madrid

Language: English

Topic: Capital Investment and Risk Analysis

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDGs: Affordable and clean energy, Climate action

Open Access status: hybrid

Estimated APC paid: $4,460