The various options for the purchase of energy in the long term: from the self consumption to the PPA

AleaSoft, March 9, 2021. For the electrointensive industries, the large energy consumers, having a strategy for the purchase of energy is a must. The cost of the energy is the main component of their production costs, so they must analyse all the possibilities at their disposal to minimise the market prices risk. In an internal webinar of the AEGE with the participation of AleaSoft, all the options were analysed: from the self‑consumption to the futures markets and the PPA.

For the companies of the Association of Companies with High Energy Consumption (AEGE by its acronym in Spanish), the cost of the energy, particularly gas and electricity, is a subject of permanent interest. No wonder, the AEGE groups 76 industrial facilities that account for 9% of the electricity consumption in mainland Spain. For these industries, the cost of the energy supply represents a high percentage of their production process.

On Tuesday, March 9, AleaSoft held an internal webinar for the AEGE associates, on the long‑term vision of the energy markets, the PPA and the renewable energy auctions. The webinar brought together tens of members of the association and, on behalf of AleaSoft, Antonio Delgado Rigal, CEO of the company, and Oriol Saltó i Bauzà, Manager of Data Analysis and Modelling, participated.

During the webinar and the subsequent debate, the diversification as an energy supply strategy by the large consumers and the market prices risk management were analysed. For this, there are long‑term options such as the self‑consumption and self‑sufficiency or the PPA. For a robust power purchase strategy, it must be supported by reliable, science‑based forecasts that provide a vision of the markets across all horizons. For the long term, AleaSoft has reports for all European markets with thirty‑year hourly prices forecasts necessary to estimate long‑term costs.

AleaSoft - Energy buying strategySource: AleaSoft.

For the medium term and the operation in the futures markets, AleaSoft offers forecasting reports with stochasticity that provide probability distributions of the monthly, quarterly and annual averages of prices for the next three years. These forecasts offer a probabilistic metric necessary for the quantification in the risk management.

In a complementary way to the forecasts reports, the AleaApp Platform is a tool that compiles the data of the main variables of the energy markets, facilitating their visualisation and the analysis of their historical evolution.

PPA and renewable energy auctions

The relatively low prices that were obtained in the renewable energy auction of last January compared to the prices that are being offered for the PPA require understanding that they are two different products for the renewable energy producers and as such involve different levels of risks and requirements of guarantees that make their prices different. One of the keys, as mentioned in the webinar, is to see the PPA as a tool for the management of the long‑term energy cost risk rather than savings in that cost.

The participants in the webinar showed interest in the future vision of the AleaSoft‘s forecasts in aspects such as the cannibalisation of the market prices, the curtailments of the renewable energies and the price volatility.

In the words of Fernando Soto, General Director of the AEGE, “the PPA are risk management instruments that the electrointensive consumers are interested in hiring, in exchange for ensuring a competitive and stable electricity price. The recent renewable energy auctions designed by the MITECO revealed prices of great interest for these industries, which are a reference for the future signing of PPA with renewable energies. Contracting energy at term requires having an analysis of the estimation of the energy prices in the future with scientific methodologies and proven experience, such as that of AleaSoft, which it showed today in the seminar aimed at the electrointensive industries associated in AEGE”.

Information and analysis of the energy markets in Europe

The last public webinars organised by AleaSoft had the participation of speakers from important companies of the energy sector in Europe and at a global level such as Deloitte, Vector Renewables, PwC Spain and Engie. In these webinars topics ranging from the PPA, to the financing and the bankability of the renewable energy projects, the account audits and the due diligence, and the renewable energy auctions were covered. In all these aspects, the need to have long‑term prices forecasts with good quality, scientifically based and with hourly granularity of the prices in the thirty‑year horizon of the forecast was highlighted.

The next public webinar will focus on the “Prospects for the energy markets in Europe. Spring 2021”. The webinar will be held on March 18 and this time it will feature speakers from EY (Ernst & Young). During the webinar and the subsequent analysis table, the prospects for the markets in the spring 2021, the financing of renewable energy projects, the importance of the PPA, the main novelties in the regulation of the energy sector and the business opportunities abroad will be analysed.

At AleaSoft mid‑term European electricity markets prices forecasts reports are also available, which provide a vision of the prospects for the coming months and years, taking into account the most up‑to‑date scenarios for the evolution of the economy. In addition to the hourly forecasts for the next three years, a forecasting with stochasticity report and a monthly simulations report including 1000 prices simulations are available.

Source: AleaSoft Energy Forecasting.
 
Long term forecasting

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