Too few originators properly reflect the value of $0 price floors in their PPAs.

$0 price floors can be added to PPAs to protect the offtaker from economic curtailment risk, which refers to instances in which the price of electricity is negative.

There are two main types of $0 price floors:

➡ Adjusted Settlement <$0
The buyer decreases the PPA payment 'dollar-for-dollar' when the hub price is negative. For example, if the PPA is $40 and the hub price is -$2, the buyer pays $38. Because the buyer and seller share the economic curtailment risk, a moderate premium should be added to the PPA price.

➡ No Settlement < $0
The buyer does not pay when the hub price is negative. Because the seller alone bears the economic curtailment risk, a significant premium should be added to the PPA price.

The chart below shows the value of these terms for a 10-year solar PPA at West Hub as of June 30, 2024.

With RenewaFi's Price Tracker, you can calculate the value of both types of $0 price floors for any ERCOT PPA.

Note: The analysis below does not reflect ERCOT’s latest load projections.