Rethinking renewable energy power purchase agreements: curtailing renewable energy curtailment
This brief examines the issue of curtailment for technical and commercial reasons and its impact on stakeholders; must-run status for renewable power; and the prospective role of granting compensation for grid unavailability and instability. The government and regulators could address the risk of curtailment through regulation and contractual structures. This brief identifies the evolution of PPAs so far and considers the impacts of these steps and points out the drawbacks of the solutions being implemented. The brief recommends that risk be allocated to the party best able to control and manage it. It discusses how to structure compensation if the risk is not adequately contained, such that neither the developer nor the offtaker is unfairly impacted. This brief aims to solve one piece of the puzzle of curtailment risk – identify remedies to the power purchase agreement (PPA) by re-examining the contractual structure entered into between the renewable energy generator and the offtaker.