What to verify independently before signing a power purchase agreement. This checklist covers the analytical work you can do alongside your broker or advisor.
gridIQ is an analytical tool, not a broker or financial adviser. This checklist is for independent due diligence alongside professional advisory. Always engage qualified legal and commercial advice before executing a PPA.
Run the proposed strike price against actual historical dispatch prices for the relevant region. A strike that looks competitive against last year’s average may underperform during a high-price quarter or overperform during a mild one. Seasonal decomposition matters: test summer, autumn, winter and spring separately. Look at the distribution of settlement outcomes, not just the mean.
PPAs settle against the generator’s output shape, not flat baseload. A solar PPA delivers energy concentrated in midday hours when prices may be lower. A wind PPA delivers more erratically. Map the generator’s historical output profile against spot prices to see how the shape affects effective value.
The marginal loss factor adjusts the energy value based on the generator’s distance from the regional reference node. An MLF below 1.0 means every MWh generated is worth less at the reference node. MLFs change annually and can shift materially with new transmission projects or generation connections nearby. Check the DUID’s MLF history and any known upcoming changes.
Renewable generators can be curtailed by AEMO due to system security constraints, economic curtailment (negative prices), or network limitations. Check the generator’s historical curtailment rate and the constraint binding frequency in its region. A generator behind a congested connection point may have a materially different output profile than its nameplate suggests.
The PPA strike price is only one component of your delivered cost. DNSP network tariffs (demand charges, ToU energy rates, fixed charges), AEMO market fees, LRET/SRES obligations and retailer margins all contribute. Model the full delivered cost including network charges to understand the true landed price, not just the contract rate.
Fixed-price PPAs carry inflation risk for the seller and cost risk for the buyer if markets move. CPI-indexed structures share the risk but compound over a 7-10 year term. Escalation corridors and cap-and-floor structures add complexity. Model the term-over-term cost trajectory under different CPI scenarios.
Some PPAs bundle Large-scale Generation Certificates. Unbundled LGCs have their own market value that fluctuates. Understand whether the strike includes or excludes LGC value, how certificates are surrendered and whether there’s a true-up mechanism if the generator underdelivers certificates.
gridIQ PPA Pro includes the backtest engine (fixed, indexed, CfD, cap-and-floor, hybrid composite), MLF lookup, curtailment analysis, DNSP network tariff cost stack and IRSR auction spreads. Use it alongside your broker or advisor to verify the numbers independently.
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