Power Purchase Agreements (PPA) Hedging

The market for Power Purchase Agreements (PPAs) has grown in recent years together with the evolution towards subsidy-free renewable energy. Due to the long-term nature of PPAs, counterparties are taking on substantial risk, resulting in increased need for financial risk management. Trading at EEX increases security and standardisation of PPA hedging and provides the tools to actively support the energy transition in Europe. By hedging long-term price risk via our standard EEX power futures, we enable our members to hedge against the risk of future price changes.

The standard configuration for EEX power futures is for Base year contracts up to 6 calendar years ahead. In addition, EEX also offers tradable yearly Base maturities for German, Italian and Spanish Power Futures from six to ten calendar years, which will also be available for Dutch and French Power Futures from 25 November 2024. This enhancement enables customers to hedge their price exposure up to 10 years in advance, facilitating PPA hedging on the exchange and promoting the integration of renewable energy into the power market. Counterparties hedging on exchange also benefit from counterparty risk management by our clearing house, ECC. Support to price and manage the risks of structured PPA trades is available with the valuation and risk management tools of Lacima, part of EEX group.

Lacima

With PPAs now comprising substantial portfolios, the ability to price structured PPA trades and manage the risk for portfolios of energy trades including PPAs along with more traditional assets and standard hedge instruments, is front and centre for market participants. With its award-winning valuation and risk management solutions, Lacima - as part of EEX Group - has a range of tools to address these market needs.

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