RenewaFi Report: More Pronounced ‘Duck Curve’ in ERCOT Drives Increasing Skepticism of Long-Term PPAs
RenewaFi’s 2023 ERCOT PPA Report features insights from 800+ bids and offers.
Despite the challenging economic climate, RenewaFi market participants matched on PPAs with terms ranging from 5 to 20 years.
A more pronounced ‘duck curve’ in ERCOT pushed offtakers toward increasingly shorter-term PPAs over the course of 2023, according to a new report from RenewaFi, the marketplace for ERCOT renewables. The median term of the 670 offers posted to RenewaFi in 2023 was 12 years, while the median term of the 138 bids was 7 years.
Despite offtakers’ preference for shorter-term PPAs, however, RenewaFi market participants matched on PPAs with terms ranging from 5 to 20 years, with the median term being 10 years. In 2023, RenewaFi facilitated seven matches with an additional match currently pending.
Noam Yaffe, Founder and CEO, said, “2023 was a year of change for the ERCOT PPA market. The ‘duck curve,’ long a characteristic of the CAISO power market, took a much more pronounced shape in ERCOT than in prior years, which likely contributed to the market significantly reducing its valuation of on-peak forward contracts beyond 2029. These trends create an opportunity for energy arbitrage, which will help fuel the growth in storage capacity.”
RenewaFi is adding several storage structures to its marketplace on Monday, January 22nd. These structures will include blocks, tolls, and floor + share agreements.
The report covers PPA trends at each of the major ERCOT hubs in 2023. It includes the following sections:
Reference PPA Price Trends
Using RenewaFi’s proprietary PPA valuation methodology called “SWRV” (Shape Weighted RenewaFi Value), this section breaks down a market-based approach to understanding how ERCOT PPA values changed in 2023. Examples of questions answered include:
- Visualizing the duck curve: how did LMPs change in 2023 compared to 2020?
- How do changes in forward contracts reflect traders’ sentiment?
- How did the value of standard solar and wind PPAs change at each hub in 2023?
- How did different term lengths impact PPA values in 2023?
- How did different CODs impact PPA values in 2023?
Marketplace Insights
Based on 800+ bids and offers posted by 255+ originators from 95+ firms, this section covers where buyers and sellers came to agreement as well as where they did not. For the later cases, it explains where they differed. Examples of questions answered include:
- Where did RenewaFi market participants match and at what prices?
- Where were RenewaFi market participants most frequently negotiating on potential matches?
- How did offer prices trend throughout the year?
- What were the most competitive bids?
- How did bids and offers differ in terms of length and capacity?
- Where did prices overlap by technology and hub?
- How did different CODs and term lengths affect the bid-offer spread?
- How did additionality affect the bid-offer spread?
Product-Specific Insights
Combining RenewaFi’s SWRV methodology and its marketplace data, this section provides unique snapshots into the market for specific products in ERCOT, such as North Hub solar or West Hub wind. Examples of questions answered include:
- How did sellers’ price their offers over the course of 2023?
- What were the market values of those offers?
- When were offers ‘in the money’ to offtakers?
- Where did offtakers bid?
- Where did market participants match
About RenewaFi
RenewaFi is the marketplace for ERCOT renewables. Originators on RenewaFi browse, post, and counter indicative bids and offers – all anonymously. When they agree on terms, they chat and eventually match to reveal their identities and pursue bilateral negotiations. Along the way, they get access to pricing tools that help them make better decisions by providing a clear view of what to expect from the market.
