Decoding renewable PPA prices in California's energy market

This paper presents novel financial models for computing fixed prices in renewable Power Purchase Agreements (PPAs) in California's energy market. By leveraging closed-form valuation formulas and numerical copulas, the models account for expected electricity spot prices, production-price correlations, and distributional characteristics. Empirical tests on utility-scale solar and wind PPAs (2010–2019) show that these models outperform traditional cost-based approaches, offering a financially fair, transparent, and replicable pricing method. The study fills a critical research gap by formalizing PPA price estimation and providing robust benchmarks for market participants and regulators, thereby enhancing the financial viability and competitiveness of renewable energy investments. The baseline model is extended to consider multi-buyer PPA, price caps, load profiles, and storage.