IDEAS home Printed from https://ideas.repec.org/a/eee/eneeco/v98y2021ics0140988321001699.html
   My bibliography  Save this article

Rethinking solar PV contracts in a world of increasing curtailment risk

Author

Listed:
  • O'Shaughnessy, Eric
  • Cruce, Jesse
  • Xu, Kaifeng

Abstract

Curtailment of solar photovoltaics (PV) could increase significantly as PV composes greater shares of grid capacity. Curtailment risk—the possibility that future curtailment levels exceed projections—poses a challenge to PV project economics. PV industry stakeholders have begun to develop new contract structures that may address curtailment risk more optimally than conventional structures. Using a simplified theoretical framework and modeled results, we analyze PV project economics in the context of increasing curtailment risk under alternative contract structures with fixed and time-of-delivery payments. We show that both alternative structures tend to shift curtailment risk from generators to electricity buyers. Electricity buyers—particularly utilities—may be willing to bear that additional risk in order to reap higher and more diverse project values facilitated by fixed-payment and time-of-delivery contracts. Our results suggest that these alternative structures provide new ways to redistribute curtailment risk in the context of increasing PV curtailment.

Suggested Citation

  • O'Shaughnessy, Eric & Cruce, Jesse & Xu, Kaifeng, 2021. "Rethinking solar PV contracts in a world of increasing curtailment risk," Energy Economics, Elsevier, vol. 98(C).
    • Handle: RePEc:eee:eneeco:v:98:y:2021:i:c:s0140988321001699
    DOI: 10.1016/j.eneco.2021.105264
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0140988321001699
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.eneco.2021.105264?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Ioannou, Anastasia & Angus, Andrew & Brennan, Feargal, 2017. "Risk-based methods for sustainable energy system planning: A review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 74(C), pages 602-615.
    2. Lee, Cheuk Wing & Zhong, Jin, 2015. "Financing and risk management of renewable energy projects with a hybrid bond," Renewable Energy, Elsevier, vol. 75(C), pages 779-787.
    3. Gatzert, Nadine & Vogl, Nikolai, 2016. "Evaluating investments in renewable energy under policy risks," Energy Policy, Elsevier, vol. 95(C), pages 238-252.
    4. Sherif, S.A. & Barbir, Frano & Veziroglu, T.N., 2005. "Towards a Hydrogen Economy," The Electricity Journal, Elsevier, vol. 18(6), pages 62-76, July.
    5. Tomosk, Steve & Haysom, Joan E. & Wright, David, 2017. "Quantifying economic risk in photovoltaic power projects," Renewable Energy, Elsevier, vol. 109(C), pages 422-433.
    6. Bird, Lori & Lew, Debra & Milligan, Michael & Carlini, E. Maria & Estanqueiro, Ana & Flynn, Damian & Gomez-Lazaro, Emilio & Holttinen, Hannele & Menemenlis, Nickie & Orths, Antje & Eriksen, Peter Børr, 2016. "Wind and solar energy curtailment: A review of international experience," Renewable and Sustainable Energy Reviews, Elsevier, vol. 65(C), pages 577-586.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mostafa Esmaeili Shayan & Gholamhassan Najafi & Barat Ghobadian & Shiva Gorjian & Mohamed Mazlan & Mehdi Samami & Alireza Shabanzadeh, 2022. "Flexible Photovoltaic System on Non-Conventional Surfaces: A Techno-Economic Analysis," Sustainability, MDPI, vol. 14(6), pages 1-14, March.
    2. Davi-Arderius, Daniel & Jamasb, Tooraj, 2024. "Measuring a Paradox: Zero-negative Electricity Prices," Working Papers 13-2024, Copenhagen Business School, Department of Economics.
    3. Simshauser, Paul & Newbery, David, 2024. "Non-firm vs priority access: On the long run average and marginal costs of renewables in Australia," Energy Economics, Elsevier, vol. 136(C).
    4. Zhu, Qianming & Qi, Yinke & Huang, Diangui, 2023. "Numerical simulation of performance of traveling wave pump-turbine at different wave speeds in pumping mode," Renewable Energy, Elsevier, vol. 203(C), pages 485-494.
    5. Gallego, Camilo A., 2022. "Intertemporal effects of imperfect competition through forward contracts in wholesale electricity markets," Energy Economics, Elsevier, vol. 107(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sarah Hafner & Olivia James & Aled Jones, 2019. "A Scoping Review of Barriers to Investment in Climate Change Solutions," Sustainability, MDPI, vol. 11(11), pages 1-19, June.
    2. Abba, Z.Y.I. & Balta-Ozkan, N. & Hart, P., 2022. "A holistic risk management framework for renewable energy investments," Renewable and Sustainable Energy Reviews, Elsevier, vol. 160(C).
    3. Angelopoulos, Dimitrios & Doukas, Haris & Psarras, John & Stamtsis, Giorgos, 2017. "Risk-based analysis and policy implications for renewable energy investments in Greece," Energy Policy, Elsevier, vol. 105(C), pages 512-523.
    4. Àlex Alonso-Travesset & Diederik Coppitters & Helena Martín & Jordi de la Hoz, 2023. "Economic and Regulatory Uncertainty in Renewable Energy System Design: A Review," Energies, MDPI, vol. 16(2), pages 1-30, January.
    5. Forouli, Aikaterini & Gkonis, Nikolaos & Nikas, Alexandros & Siskos, Eleftherios & Doukas, Haris & Tourkolias, Christos, 2019. "Energy efficiency promotion in Greece in light of risk: Evaluating policies as portfolio assets," Energy, Elsevier, vol. 170(C), pages 818-831.
    6. Natalia Nehrebecka & Aneta Dzik-Walczak, 2019. "Collateral and Bank Credit - a Puzzle," European Journal of Economics and Business Studies Articles, Revistia Research and Publishing, vol. 5, September.
    7. Bogdan Klepacki & Barbara Kusto & Piotr Bórawski & Aneta Bełdycka-Bórawska & Konrad Michalski & Aleksandra Perkowska & Tomasz Rokicki, 2021. "Investments in Renewable Energy Sources in Basic Units of Local Government in Rural Areas," Energies, MDPI, vol. 14(11), pages 1-17, May.
    8. Menyeh, Bridget Okyerebea, 2021. "Financing electricity access in Africa: A choice experiment study of household investor preferences for renewable energy investments in Ghana," Renewable and Sustainable Energy Reviews, Elsevier, vol. 146(C).
    9. Mac Clay, Pablo & Börner, Jan & Sellare, Jorge, 2023. "Institutional and macroeconomic stability mediate the effect of auctions on renewable energy capacity," Energy Policy, Elsevier, vol. 180(C).
    10. Kyriakopoulos, Grigorios L. & Arabatzis, Garyfallos & Tsialis, Panagiotis & Ioannou, Konstantinos, 2018. "Electricity consumption and RES plants in Greece: Typologies of regional units," Renewable Energy, Elsevier, vol. 127(C), pages 134-144.
    11. Mubbashir Ali & Jussi Ekström & Matti Lehtonen, 2018. "Sizing Hydrogen Energy Storage in Consideration of Demand Response in Highly Renewable Generation Power Systems," Energies, MDPI, vol. 11(5), pages 1-11, May.
    12. Yang, Yuting, 2022. "Electricity interconnection with intermittent renewables," Journal of Environmental Economics and Management, Elsevier, vol. 113(C).
    13. Guerra, K. & Haro, P. & Gutiérrez, R.E. & Gómez-Barea, A., 2022. "Facing the high share of variable renewable energy in the power system: Flexibility and stability requirements," Applied Energy, Elsevier, vol. 310(C).
    14. Cai, Yanpeng & Cai, Jianying & Xu, Linyu & Tan, Qian & Xu, Qiao, 2019. "Integrated risk analysis of water-energy nexus systems based on systems dynamics, orthogonal design and copula analysis," Renewable and Sustainable Energy Reviews, Elsevier, vol. 99(C), pages 125-137.
    15. Andrey Korotayev & Leonid Grinin & Leonid Issaev & Alisa Shishkina & Evgeny Ivanov & Kira Meshcherina, 2017. "World Order Transformation and Sociopolitical Destabilization," HSE Working papers WP BRP 29/IR/2017, National Research University Higher School of Economics.
    16. Abadie, Luis Mª & Chamorro, José M., 2023. "Investment in wind-based hydrogen production under economic and physical uncertainties," Applied Energy, Elsevier, vol. 337(C).
    17. Rao, A. Gangoli & van den Oudenalder, F.S.C. & Klein, S.A., 2019. "Natural gas displacement by wind curtailment utilization in combined-cycle power plants," Energy, Elsevier, vol. 168(C), pages 477-491.
    18. Cui, Qi & He, Ling & Han, Guoyi & Chen, Hao & Cao, Juanjuan, 2020. "Review on climate and water resource implications of reducing renewable power curtailment in China: A nexus perspective," Applied Energy, Elsevier, vol. 267(C).
    19. Alassi, Abdulrahman & Bañales, Santiago & Ellabban, Omar & Adam, Grain & MacIver, Callum, 2019. "HVDC Transmission: Technology Review, Market Trends and Future Outlook," Renewable and Sustainable Energy Reviews, Elsevier, vol. 112(C), pages 530-554.
    20. Marcin Rabe & Dalia Streimikiene & Yuriy Bilan, 2019. "The Concept of Risk and Possibilities of Application of Mathematical Methods in Supporting Decision Making for Sustainable Energy Development," Sustainability, MDPI, vol. 11(4), pages 1-24, February.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:eneeco:v:98:y:2021:i:c:s0140988321001699. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/eneco .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.