We recently updated our methodology to better calculate the effect of cannibalization on the value of PPAs.

Cannibalization occurs when strong generation from intermittent resources like solar and wind drives the hourly price of electricity down. When calculating the value of a given solar or wind PPA, for example, it is necessary to understand when other solar and wind farms will be simultaneously producing at high levels and thus “cannibalizing” the expected revenue of the project in question.

Based on feedback from the market, we determined that our calculation for the cannibalization effect could be improved. Previously, we calculated the cannibalization effect by comparing the historical hourly revenue of solar and wind against the historical hourly price of electricity. This calculation aggregated generation by season systemwide across ERCOT.  

On Wednesday, February 26, 2025, we deployed an updated calculation that compares the historical hourly revenue of a solar and wind asset against the historical hourly revenue of such an asset operating at an otherwise expected generation profile. In addition, we now aggregate the hourly generation data by month (rather than season) and by hub (rather than systemwide across ERCOT).  

This change had a more significant impact on our wind valuations than our solar ones. As a result, solar prices did not change much, but you may see wind valuations that decreased by approximately $4/MWh (on average).  

We are constantly working with the market to calibrate our pricing methodology so that it reflects market sentiment, and, in some cases, updates can materially impact certain offtake valuations.