Renewable PPAs find favour among corporates

A small but growing number of companies are using renewable energy power purchase agreements to lock in cheap forward electricity prices. But it may take some time before going green becomes a sound risk management strategy for all firms, writes Alexander Osipovich

Volatile energy costs are a huge headache for companies trying to craft long-term investment plans. Who knows what could happen to the price of oil, gas or electricity 10 or 20 years from now? By hedging with derivatives or using fixed-price supply contracts, firms can guarantee some degree of price stability. Nonetheless, it is difficult to hedge energy costs more than several years into the future, due to the limited liquidity found in derivatives markets beyond that time horizon.

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