Exploring structures of power purchase agreements towards supplying 24x7 variable renewable electricity

Power purchase agreements govern a significant fraction of the transactions from independent renewable energy projects. As the costs of wind, solar and storage have plummeted in recent years and accelerated the growth of renewables towards decarbonization, the nature of wind and solar-based power purchase agreements is also evolving from traditional energy contract to power contract that supplies on-demand renewable electricity. The work presents a linear optimization model to examine how an optimal design and tariff will change as renewable energy contracts begin supplying firm renewable electricity for a few hours a day to 24 × 7. The findings indicated that oversizing and curtailing under energy contracts was a cheaper alternative to storage for attaining a highly renewable system (up to 80% as per the present study). Hybrid systems produced the cheapest electricity followed by wind and solar, respectively. Further, solar-only systems required substantial storage capcity to capture peak-hour production due to the inherent daytime generation limitation, while overbuilding was cheaper for wind-dominated systems to achieve high levels of penetration. The research supports developing project-level contracts for purchasing firm renewable energy and also highlights the importance of integrating micro-models with the existing dispatch and capacity expansion models deployed large-scale to examine the generation-mix and cost implications of the energy transition.