Services · 03
Market risk & PPA hedging
A virtual PPA is a long-dated fixed-for-floating swap on wholesale power; it settles against merchant prices every hour of its tenor. The headline strike says little about outcomes: shape, basis, and the covariance of generation and price drive settlement P&L, and they move against solar-heavy positions in exactly the hours the market is long solar. We quantify that exposure, then structure hedges against it.
What we do
The exposure quantified, then hedged.
Exposure diagnostic
Decompose realized and projected settlement P&L into its drivers: shape, the hours the asset generates versus the hours prices clear high; basis, the node-to-hub spread; volume, weather-driven production risk; and the generation/price covariance that concentrates losses in the hours every similar asset is also producing.
Hedge policy
Define what the program protects: budget certainty, earnings stability, or a floor on contract value. Set tenors, volumes, and the residual risk the treasury accepts, in coordination with your accounting advisors on hedge treatment.
Instrument selection
Fixed-for-floating swaps to firm price; collars to bound settlement outcomes at lower cost than a full swap; volume-firming structures that transfer production risk rather than price risk; basis swaps and FTRs/CRRs to manage basis risk; PJM and MISO capacity transfers to manage capacity shortfalls. Each is priced against the exposure it actually offsets.
Execution & counterparties
Competitive quotes from qualified counterparties; negotiated confirmations and credit terms; documentation coordinated with your counsel.
Monitoring & restructuring
Mark the position, reforecast the exposure as load and market conditions move, and restructure when the hedge no longer matches the risk it was built for.
Who it's for
Treasury and finance teams holding power exposure.
- Corporate buyers with existing VPPAs exposed to wholesale settlement volatility; the contract met the sustainability target, and the market exposure inside it now sits with treasury.
- Industrials on index-priced supply whose energy cost volatility flows straight into unit economics.
- Developers & capital providers carrying merchant tails or basis exposure that the project financing did not absorb.
Worked example
What a collar does to settlement outcomes.
The diagram shows net settlement to a VPPA buyer as a function of realized hub price. Unhedged, settlement is linear in price: every dollar the hub clears below the strike is paid out, without bound. A collar bounds both tails; a purchased floor caps the payout when prices fall, financed in whole or in part by a sold cap that gives up settlement upside above the cap strike. Between floor and cap the position is unchanged. The structure buys a known worst case, which a budget process can use.
Setting the strikes is where the work sits. We place them against the settlement distribution implied by the asset's shape and basis history. The principal has structured over 3 GWh of energy, capacity, and REC hedges.
Start with a 30-minute conversation.
30 minutes on the exposure you are carrying and what a hedge program would need to protect; settlement history is useful but not required.
Schedule a consultation