An ever-changing market: Delving into the heart of power purchase agreements

Cross-border VPPAs expose corporates to Basis Risk, causing settlement price gaps and weakening confidence in these hedging tools, contributing to a 35% drop in European PPA signings in 2025 amid complex market conditions. The market is shifting toward more structured, domestic, and hybrid PPAs, supported by BESS and modern IPPs, to better manage risk and realign buyers, sellers, and lenders.The so-called Basis Risk associated with cross-border virtual power purchase agreements (VPPAs) emerged from analysis carried out by Finergreen in March 2024, when many corporate offtakers were reported signing ...

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