- Conference Article
- 10.1109/aupec66173.2025.11219437
Financial Viability of PPA-Backed Generators Under Market Price Volatility: Evidence from the Queensland Electricity Market
- Sep 29, 2025
- Ruwini Gamarachchige + 3 more +3
As the Australian energy sector progresses toward its 2050 net-zero emissions target, Power Purchase Agreements (PPAs) have become a key instrument for providing price certainty in renewable energy investments. However, the financial viability of these contractual agreements under current market price volatility remains insufficiently examined. This study addresses this gap by quantitatively modelling PPA prices and settlement values for solar, wind, and coal technologies over the period 2022-2024, using both fixed and fixed-CPI indexed pricing schemes within the Queensland Electricity Market. A Net Present Value (NPV)-based approach, identified through the literature review, was employed to calculate break-even PPA prices by incorporating capital expenditure, operational costs, and mismatch costs. The results indicate that shorter contract durations significantly increase PPA prices and Levelized Cost of Energy (LCOE), particularly for capital-intensive technologies such as coal. The annual PPA settlement analysis further reveals that while solar and wind projects consistently experience negative settlements, coal projects are more likely to achieve positive settlements under conditions of suppressed spot market electricity prices. These findings highlight that conventional PPA structures may inadequately protect buyers in high-renewable electricity markets. The study concludes by emphasising the need for dynamic PPA pricing models and hybrid financial instruments to enable more effective risk-sharing between buyers and sellers, thereby supporting long-term financial sustainability.
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