Spotlight on Hydro: How can your PPA help you capitalise on market movements?

Head of Smart Generation, Angus Widdowson, explains how independents can capitalise on volatile market movements with the right PPA and how trading technology advancement is opening up even more opportunities for renewable independent generators.  

SmartestEnergy has been shaping the energy landscape for 20 years, having launched as a PPA (Power Purchase Agreements) business in 2001We have been supporting independent generators and helping them get the most value from the wholesale market via their PPAs and more recently, tap into new market opportunities - i.e. Balancing Mechanism and Optional Downward Flexibility Management (ODFM). 

The impact of more renewable generation on the grid 

Last year, the impacts of COVID-19 accelerated a market shift with the need to manage unforeseen demand destruction in the initial lockdown period – when energy demand dropped ~20% overnight – and significant peaks in intermittent renewable generation that needed to be managed. Essentially, what we saw last year was a glimpse into the future - as the deployment of renewable generation technology continues to increase over the next 10-20 years the system must become more flexible and we aim to provide independents with the tools they need to become more nimble so they can capture value and tap into new revenue streams.  

We've recently seen record prices in the short-term energy markets and volatility in seasonal power prices, providing independent generators increased opportunities to capitalise on market movements. Seasonal prices for Winter 21 reached £60+/MWh in February, presenting value opportunities for generators on a flexible PPA contract structure.  

Getting the most from your PPA 

When reviewing your hedging strategy, we encourage generators to consider increasing their interaction with the wholesale market so they can respond to price fluctuations and maximise revenues for their project(s). Speed of transaction is also key to capturing value and with online trading technology, such as our SmartFlex platform, giving independents a direct access to the market, generators can track and react to prices daily or set trigger alerts to ensure they don't miss market opportunities.  

One of the benefits of hydropower remains its ability to produce more predictable seasonal outputs, when compared to other weather dependant generators, which is something we’ve always valued as an off-taker 

What’s next? 

In our next State of the Market Report launching later this year, it will be interesting to see the impact Covid-19 has had on the deployment of new renewable projects. In last year's report, Simon Hamlyn of the British Hydro Association (BHA) commented, "the FIT extension will enable at least 70 BHA members’ hydropower projects, totalling c40MW, to continue to be deployed, as the UK strives to achieve their net-zero 2050 target". We look forward to helping hydropower project owners establish new revenue streams and maximise the value of their PPA through technology, to expand revenue opportunities in a post-subsidy environment.  

With many enhancements to our SmartFlex platform in the pipeline for this year, we will continue to work with independents to ensure they are maximising the returns from their project, with direct and instant online access to the wholesale market