Help CenterPPAs can be offered in one of two main structures: “unit contingent” or “fixed shape.” Sometimes unit contingent is called “as generated” or “as produced.” In a unit contingent PPA, the buyer agrees to purchase the seller’s energy whenever it is produced. In a fixed shape PPA, the seller promises to deliver a specific, pre-agreed shape regardless of whether or how much the underlying facility actually generates.
Valuing unit contingent PPAs presents a challenge because actual generation may differ substantially from the expected generation profile (see visualtion below). This is known as shape risk.
To calculate shape risk, we compare how much the given solar or wind shape would have earned over the past three years against what solar and wind facilities actually earned over the same time period (see example below).
This gives us a series of covariance factors for wind and solar. When we multiply these covariance factors by every hour in the 12x24, we convert what is essentially a fixed shape generation profile into a new generation profile with unit contingent granularity.