Industry Analysis
Nov 7, 2023

Understanding Term Risk

How does the length of a PPA affect offtaker pricing?

The longer the term of a PPA, the more uncertainty an offtaker has. That's usually called "term risk." Because offtakers need to price that risk in, they tend to apply a discount to longer term PPAs.

When comparing 3-year to 10-year unit contingent solar PPAs at North hub on RenewaFi, the discount was about $4.

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