Power Purchase Agreement Value Calculator

Work out power purchase agreement value instantly with clear inputs, formula shown and shareable results.

About Power Purchase Agreement Value Calculator

A flat-price power purchase agreement is an annuity: annual volume times price, discounted over the term at the annuity factor (1 - (1+r)^-n) / r. The present value is materially below the headline contract total — a 15-year agreement at 8% discounts to about 8.6 times annual revenue rather than 15.

Formula

PPA present value

PV = annual revenue x (1 - (1 + r)^-n) / r

Worked example

With the default values below, Power Purchase Agreement Value Calculator returns Present Value Of The PPA of $2,465,129,862. Change any input above and every figure here is recalculated in your browser.

Inputs used

Contracted Annual Volumeminimum 0 MWh: 90,000 MWh
PPA Priceminimum 0 per MWh: 3,200 per MWh
Contract Termminimum 1 years: 15 years
Discount Rateaccepts 0.01–40 %: 8 %

Results

Present Value Of The PPA: $2,465,129,862
Annual Contracted Revenue: $288,000,000.00
Annuity Discount Factor: 8.55948
Undiscounted Contract Value: $4,320,000,000

Step by step

1Values used
2PPA present value
3Present Value Of The PPA= 2,465,129,862
4Annual Contracted Revenue= 288,000,000.00
5Annuity Discount Factor= 8.55948
6Undiscounted Contract Value= 4,320,000,000

Assumptions and limits

The result is derived only from the 4 inputs listed above. Anything not among them is not part of the calculation.
In particular, this calculator does not take inflation, tax or fees or charges into account.
Figures are rounded for display to 5 decimal places, so totals built from several rounded parts can differ slightly from the unrounded arithmetic.

How these calculators are built and tested is described on the Methodology page. If a figure looks wrong, please report it.

Frequently Asked Questions

What risks does a PPA leave with the generator?

Volume risk if the resource underperforms, curtailment risk, basis risk where settlement is at a different node, and counterparty credit risk over a long term.

Should the price be escalated?

Many PPAs include an annual escalator of 1-3% to preserve real value. Adding escalation raises present value materially and should be modelled explicitly rather than by adjusting the discount rate.