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Theyre writing long term contracts for power production which provide a fixed price for the resource developers and by consequence provide them with a fixed cos
by mwytock 10y ago
Theyre writing long term contracts for power production which provide a fixed price for the resource developers and by consequence provide them with a fixed cost.
Typically, these types of contracts, providing price certainty, are required to build develop new renewable assets.
- sailfast 10y agoThis. Price doesn't fluctuate for the purposes of this article because they've bought a minimum amount of electricity for a fixed price over time. (not because price of wind power never fluctuates) Similar pegged pricing can be achieved if you trade futures to hedge your price but typically this is only achievable year to year and difficult to do with electricity as it can come from so many different sources and hedging against them all may be difficult. Perhaps there's a megawatt future out there? EDIT: Yup - regionally-based electricity price hedge. Cool! http://www.cmegroup.com/trading/energy/#electricity http://www.cmegroup.com/trading/energy/#electricity
- tedsanders 10y agoThis is the correct answer. Price hedging is a typical feature of corporate PPAs (power purchase agreements). The aim is to reduce risk for both parties. All the other answers here are speculating without knowing how corporate energy procurement works.