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A Levelized Cost of Energy (LCOE) Model for Wind Farms That Includes Power
Purchase Agreement (PPA) Energy Delivery Limits

Conference Paper · June 2016

DOI: 10.1115/POWER2016-59608

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 Proceedings of the ASME 2016 Power Conference
PowerEnergy2016
June 26 - 30, 2016, Charlotte, North Carolina, USA

Power Energy 2016-59608

A Levelized Cost of Energy (LCOE) Model for Wind

Farms that Includes Power Purchase Agreement (PPA)
Energy Delivery Limits

Maira Bruck, Navid Goudarzi, Peter Sandborn

Center for Advanced Life Cycle Engineering (CALCE), Department of Mechanical Engineering Department,
University of Maryland, College Park, MD USA 20742

ABSTRACT energy Seller can use to negotiate delivery penalties

The cost of energy is an increasingly important
issue in the world as renewable energy resources are
growing in demand. Performance-based energy
contracts are designed to keep the price of energy as
low as possible while controlling the risk for both
parties (i.e., the Buyer and the Seller). Price and risk
are often balanced using complex Power Purchase
Agreements (PPAs). Since wind is not a constant
supply source, to keep risk low, wind PPAs contain
clauses that require the purchase and sale of energy
to fall within reasonable limits. However, the
existence of those limits also creates pressure on
prices causing increases in the Levelized Cost of
Energy (LCOE). Depending on the variation in
capacity factor (CF), the power generator (the
Seller) may find that the limitations on power
purchasing given by the utility (the Buyer) are not
favorable and will result in higher costs of energy
than predicted. Existing cost models do not take
into account energy purchase limitations or
variations in energy production when calculating an
LCOE. A new cost model is developed to evaluate
the price of electricity from wind energy under a
PPA contract. This study develops a method that an
within their PPA. This model has been tested on a
controlled wind farm and with real wind farm data.
The results show that LCOE depends on the
limitations on energy purchase within a PPA
contract as well as the expected performance
characteristics associated with wind farms.
NOMENCLATURE
CBI – Capacity-based incentive
CF – Capacity factor
COE – Cost of energy
CRF – Capital recovery factor
D - Depreciation
E – Quantity of generated energy
F – Fuel cost
I – Initial investment
IBI – Investment-based incentive
ITC – Investment tax credit
LCOE – Levelized cost of energy
Maxlim – Threshold for maximum penalty
Minlim – Threshold for minimum penalty
NREL – National Renewable Energy Laboratory
OM – Operation and maintenance
Pexp – Expected power production

1 Copyright © 2016 by ASME

PBC – Performance-based contract
PBI – Production-based incentive
Pen – Total penalty cost
PL – Production loss
PN – Minimum penalty cost
PPA – Power purchase agreement
PTC – Production tax credit
PVOM – Present value of O&M costs
r – Weighted average cost of capital
R – Royalties or land rents
SAM – System Advisory Model
T – Tax levy
TC – Tax credit
TLCC – Total life-cycle cost
INTRODUCTION
In many states within the United States there are
portfolio standards set by the states to increase the
sale and consumption of renewable sources of
energy [1]. While renewable energies such as wind
energy have acquired a great momentum around the
world [2], the cost of energy (COE) becomes a
major concern for the public and utilities as states
push requirements to obtain power from more
renewable energy sources. COE is the actual cost to
buy energy while LCOE is the cost to generate the
energy. The LCOE is a commonly accepted
calculation of the Total Life-Cycle Cost (TLCC) for
each unit of energy produced in the given lifetime
of a project [3].
LCOE is commonly used within energy
contracts to determine a fair price for energy. The
fair price is then used to set the contract price and
the price schedule of a PPA. The cost of energy for
each unit of energy determined in the PPA is
negotiated around the standard LCOE accounting
for the possible risks that could raise the actual
LCOE. In a normal energy contract and in PPAs, the
LCOE is calculated over the period of the contract
and energy is purchased as it arrives to the agreed
upon point of delivery. However, PPAs are used to
share and reduce the risks of added costs. Those
risks should be, but are not, accounted for within
LCOE models.
In addition to the increase in the use of
renewable energy sources, there is an increase in the
2 Copyright © 2016 by ASME
use of PPAs for all sources of energy. PPAs are
Performance-Based Contracts (PBCs) that aim to
create a “fair” agreement for the purchase and sale
of energy between a utility (the Buyer) and a
generator (the Seller). The use of PPAs has been
increasing around the world and there existed a total
of 29,632 MW in 343 signed or planned PPAs for
wind farms in January 2014 [4]. PPAs use an LCOE
calculation to determine a fair price of energy, much
like a standard retail energy contract. However,
Buyers in a PPA can create terms that limit the
purchase of energy annually and therefore affect the
actual LCOE.
Normally, LCOE models include all the costs
associated with a project. They address the capital
costs, operational costs over the lifetime of the
project, the energy produced, and the weighted
average cost of capital (WACC). The National
Renewable Energy Laboratory (NREL) and others
have developed and used LCOE models that
typically consider all of these parameters [5-7]. The
terms of the PPA are important because they create
costs that affect the actual LCOE. However, current
LCOE models do not include the effects of PPAs on
the cost of wind farms. It is important that the
LCOE in a PPA reflects all the costs in a project or
the project may fail. If the LCOE does not reflect
the break-even cost, the Seller risks the project’s
failure and the Buyer risks the loss in profit from
not providing enough supply of energy to the end-
use consumers. A more accurately calculated LCOE
can prevent the failure of a wind farm.
In this study, the LCOE model has been
modified to address the PPA annual energy delivery
limits, also known as penalties. Although the
application of penalties as just another cost appears
to be straightforward, the penalties are more
complex to analyze when uncertainties are
introduced. The effect of penalties on the LCOE can
vary depending on the CF as well as the limits on
the purchase of energy. Determining the best limits
in a PPA depends on the needs of the Buyer in
conjunction with a desire for a COE that reflects the
actual LCOE for the Seller within the contract. This
study develops a method that provides a tool to the
Seller to negotiate penalties within their PPA.
PPA AND LCOE
PPAs define the terms for the entire project’s
construction, operation and maintenance (O&M),
insurance, the interconnection and grid, government
involvement in the project, and any other third party
involvement in the project [8]. Each of these
relationships affects the cost of the wind farm.
Figure 1 shows the basic relationship formed by a
PPA between the Buyer and the Seller. Normally,
PPAs are viewed as just the relationship between
the utility and the generator. This study considers all
of the responsibilities involved in a PPA,
specifically energy delivery.
During the negotiation of the PPA, the length of
the agreement, the PPA price and the price schedule
are determined [9]. All the costs involved are
reviewed to calculate the LCOE for the whole
project. The LCOE is then used to determine a fair
value for each unit of energy. During the process,
both parties review all the terms within the contract
and use the costs created from these terms in their
LCOE models. Although the PPA covers the costs
and reviews contractual terms to determine the
LCOE, the models used do not consider the penalty
on annual energy delivery as a cost. The purpose of
creating annual energy delivery requirements is to
be fair to the Buyer who takes on risk in acquiring
negative profits by joining a new contract.
However, the costs involved in these penalties are
also a risk that could increase the LCOE without
increasing the COE or the PPA price. Thus, causing
a loss in profit for the Seller. The effect of penalties
must be considered within the LCOE to ensure the
fairness in the contract.
Although wind farms have energy that is bought
and paid for monthly, the actual revenue is
calculated at the end of the year. At the end of each
year, the Seller’s account is reviewed for penalty
costs and the over purchase of energy to rectify the
account balance. It is important to note that the
LCOE model needs to review the annual CF and not
the monthly CF and energy generation to determine
the actual LCOE of a wind farm due to the PPA
billing conditions stated above.
3 Copyright © 2016 by ASME
PPA
Buyer Seller
O&M
Responsibilities
Construction
Energy Delivery
Figure 1 – Relationship between the Seller and the
Buyer through PPA
LEVELIZED COST OF ENERGY (LCOE)
The levelized cost of energy, also known the
levelized cost of electricity, or the levelized energy
cost, is an economic assessment of the average total
cost to build and operate a power-generating system
over its lifetime divided by the total power
generated of the system over that lifetime. LCOE is
often used as an alternative for the average price
that the power generating system must receive in a
market to break even over its lifetime. It is a first-
order economic assessment of the cost
competitiveness of an electricity-generating system
that incorporates all costs over its lifetime
accounting for initial investment, O&M cost, cost of
fuel, and cost of capital.
The definition of LCOE is the cost that, if
assigned to every unit of energy produced by the
system over the analysis period, will equal the total
life-cycle cost (TLCC) when discounted back to the
base year [1, 3],
𝐸𝐸𝑖𝑖 𝐿𝐿𝐿𝐿𝐿𝐿𝐸𝐸
∑𝑛𝑛𝑖𝑖=1 = 𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 (1)
(1+𝑟𝑟)𝑖𝑖
where discrete compounding is assumed, Ei is the
amount of energy produced in year i, r is the
WACC, and n is the number of years over which the
LCOE is calculated. TLCC in this model can also be
expressed as [10],

𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 = 𝐼𝐼 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃
where I is the initial investment, and the Present
Value of the O&M costs (PVOM) is given by [10],
𝐿𝐿𝑂𝑂
𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃 = ∑𝑛𝑛𝑖𝑖=1 (1+𝑟𝑟)𝑖𝑖 𝑖𝑖
where OMi is the O&M costs in year i. The initial
investment is an initial cost only accounted for in
the first year, making the LCOE of the first year a
higher and unrepresentative cost for the system
[10].
Since LCOE is by definition constant once
calculated, it can be factored out of the summation
and the model is rewritten in Equation 4 as,
𝑇𝑇𝐿𝐿𝐿𝐿𝐿𝐿
𝑇𝑇𝑇𝑇𝑃𝑃𝐿𝐿 = ∑𝑛𝑛𝑖𝑖=1 𝐸𝐸𝑖𝑖
( )
(1+𝑟𝑟)𝑖𝑖
Although the denominator of Equation 4 appears to
be discounting the energy (and some authors
characterize it as such), the discounting is actually a
result of the algebra carried through from Equation
1 in which revenues were discounted (energy is not
discounted, only cost can be discounted).
Based on the derivation of LCOE, the LCOE
model must incorporate all financial parameters that
contribute to the TLCC. Most existing models do
not address all cost parameters within PPAs and
therefore PPAs need an updated model that
addresses all costs.
EXISTING LCOE MODELS
A few common LCOE models currently exist
and are used to determine fair prices for wind
energy. NREL uses SAM (System Advisor Model)
to compute the LCOE using wind farm data for
PPAs [6]. Equation 5 shows the LCOE model used
in SAM
𝐶𝐶𝐶𝐶𝐸𝐸𝑖𝑖
∑𝑛𝑛
𝑇𝑇𝑇𝑇𝑃𝑃𝐿𝐿 =
𝑖𝑖=0(1+𝑟𝑟)𝑖𝑖
𝐸𝐸𝑖𝑖
∑𝑛𝑛
𝑡𝑡=1(1+𝑟𝑟)𝑖𝑖
where COEi is the cost to generate energy and each
(2) parameter is given in the ith year. In the financial
section of the SAM model, the LCOE is calculated
based on expected cash flows for O&M and capital
expenditures.
Although cash flow is important to determining
the actual money spent and costs involved in a wind
(3)
farm project, SAM does not recognize the
implementation of penalties or tax credits in its
wind LCOE model [6].
Similar to SAM, the most commonly used
LCOE models do not include tax credits, production
losses, or penalties. Some LCOE models, such as
Equation 6,
𝐼𝐼𝑖𝑖 +𝐶𝐶𝑂𝑂𝑖𝑖 +𝐹𝐹𝑖𝑖 −𝑃𝑃𝑃𝑃𝐶𝐶𝑖𝑖 −𝐷𝐷𝑖𝑖 −𝑃𝑃𝑖𝑖 +𝑅𝑅𝑖𝑖
∑𝑛𝑛
𝑖𝑖=1
𝑇𝑇𝑇𝑇𝑃𝑃𝐿𝐿 =
𝑖𝑖
(1+𝑟𝑟)
(6)
𝐸𝐸𝑖𝑖
∑𝑛𝑛
𝑖𝑖=1 (1+𝑟𝑟)𝑖𝑖
(4)
where F is the fuel cost, PTC is the production tax
credit, D is the depreciation, T is the tax levy, and R
is the royalties, recognize that the tax credits reduce
costs but, they do not recognize PPA penalties as a
cost [7]. Other models, such as Equation 7,
𝐿𝐿𝐶𝐶𝐶𝐶
𝑇𝑇𝑇𝑇𝑃𝑃𝐿𝐿 = 𝐸𝐸
(𝐼𝐼 + 𝑃𝑃𝑃𝑃) (7)
where CRF is the capital recovery factor, consider
the LCOE as a direct project cost and not the sum of
TLCC of wind farms, which should include tax
credits and PPA penalty costs in the TLCC [5]. PPAs
typically do consider tax credits as a part of LCOE
as seen in the Delmarva-Bluewater PPA [11] and
explicitly in Equation 6. However within PPAs, the
cost of penalties is not considered in the life-cycle
cost.
A NEW LCOE MODEL/METHODOLOGY
Current LCOE models do not consider all cost
parameters in a wind farm managed via a PPA.
PPAs may define a maximum annual energy
delivery quantity, a minimum annual energy
(5) delivery quantity, both of these limits, or neither.
The terms generally follow the rule that after the
maximum delivery is reached, energy will no longer
4 Copyright © 2016 by ASME

is purchased by the Buyer, or the energy will be
sold at a reduced price [12]. This is considered a
cost for the Seller as they lose some value of the
energy that is produced after the maximum delivery
quantity is reached. Similarly, there is a direct cost
in the minimum energy delivery defined in the PPA,
as every unit of under-produced energy must be
paid back at the agreed upon COE. The minimum
delivery penalty is modeled after the PacifiCorp
draft PPA, which included the liquidated damages
from output shortfall [13]. The COE in a PPA is
generally calculated from the LCOE that does not
consider delivery penalties as a cost. For this
reason, the cost calculated from penalties in the new
model uses the calculated LCOE for each individual
wind farm under a PPA without penalties as the
COE.
The new model starts with an existing LCOE
model (Equation 6) and includes the delivery
penalties and tax credits. The cost for under-
delivering energy (PN), is the difference between
the energy that was generated and delivered (E) and
the threshold for the minimum penalty (Minlim)
based on expected energy production (Pexp),
�𝑂𝑂𝑖𝑖𝑛𝑛𝑙𝑙𝑖𝑖𝑙𝑙 𝑃𝑃𝑒𝑒𝑒𝑒𝑒𝑒 −𝐸𝐸𝑖𝑖 �𝐿𝐿𝐿𝐿𝐸𝐸𝑖𝑖
𝑃𝑃𝑃𝑃 = ∑𝑛𝑛𝑖𝑖=1
(1+𝑟𝑟)𝑖𝑖
In Equation 8, Minlim is smallest fraction of
expected energy production that the Buyer requires.
Similarly, the production loss (PL) is the difference
between the energy that was generated (E) and the
threshold for the maximum penalty (Maxlim) based
on the Pexp,
�𝐸𝐸𝑖𝑖 −𝑂𝑂𝑀𝑀𝑀𝑀𝑙𝑙𝑖𝑖𝑙𝑙 𝑃𝑃𝑒𝑒𝑒𝑒𝑒𝑒 �𝐿𝐿𝐿𝐿𝐸𝐸𝑖𝑖
𝑃𝑃𝑇𝑇 = ∑𝑛𝑛𝑖𝑖=1
(1+𝑟𝑟)𝑖𝑖
In Equation 9, Maxlim is the largest fraction of
expected energy production that the Buyer is
willing to purchase. PN is only applied during the
years that actual energy production is less than the
quantity of energy determined by MinlimPexp. PL is
only applied when the energy produced exceeds the
amount of energy determined by MaxlimPexp.
The LCOE model including all the unaccounted
for cost variables that exist in PPAs is given by,
(𝐼𝐼𝑖𝑖 + 𝐶𝐶𝑂𝑂𝑖𝑖 + 𝐹𝐹𝑖𝑖 − 𝑃𝑃𝐶𝐶𝑖𝑖 + 𝑃𝑃𝑒𝑒𝑛𝑛𝑖𝑖 )
∑𝑛𝑛
𝑖𝑖=1 𝑖𝑖
(1+𝑟𝑟)
𝑇𝑇𝑇𝑇𝑃𝑃𝐿𝐿 = 𝐸𝐸𝑖𝑖 (10)
∑𝑛𝑛
𝑖𝑖=1 (1+𝑟𝑟)𝑖𝑖
PL and PN are only applied to the total penalty cost
(Pen) when the calculated cost is more than $0.
The Pen is the sum of the production loss and the
penalty cost,
𝑃𝑃𝑃𝑃𝑃𝑃 = 𝑃𝑃𝑃𝑃 + 𝑃𝑃𝑇𝑇 (11)
and the tax credit (TC) is given by,
𝑇𝑇𝑇𝑇𝑖𝑖 = 𝐼𝐼𝐼𝐼𝐼𝐼𝑖𝑖 + 𝑃𝑃𝐼𝐼𝐼𝐼𝑖𝑖 + 𝑇𝑇𝐼𝐼𝐼𝐼𝑖𝑖 + 𝐼𝐼𝑇𝑇𝑇𝑇𝑖𝑖 + 𝑃𝑃𝑇𝑇𝑇𝑇𝑖𝑖 + 𝐷𝐷𝑖𝑖 (12)
where all types of tax credit that can be applied to a
wind farm are included (see nomenclature for
specific tax credit contributions). Both of the Pen
and the TC depend on the condition imposed by the
PPA.
MODEL VERIFICATION TESTS
A controlled study of wind farms was conducted
to explore the effect of the CF on the LCOE. The
various LCOEs were calculated based on four types
of PPAs. In one PPA, no penalties were used. The
(8) second PPA has just a maximum delivery penalty
while the third has just a minimum delivery penalty.
The final type of PPA has both penalties. The COE
for each wind farm is different as the LCOE will not
be the same for each wind farm producing energy
with different CFs and rated power. Each LCOE
was calculated for a duration of 3 years. The
following data was used,
• I = $1500 per installed kW [13]
(9) • OM = $0.01 per kWh produced [13]
• F = $0 [6]
• TC = $0.05 per kWh sold [14]
• r = 0.089 per year [15]
• COE = Calculated LCOE from a PPA
without penalties [16]
Pexp in this case and all of those that follow in
this section is calculated using a CF of 0.4 as
current wind projects are expected to be producing
capacity at this rate. The CF used in Pexp is the
5 Copyright © 2016 by ASME
expected average CF for energy production in a
windfarm, however we assume that wind farms will
not always produce at this expected CF. Therefore,
Ei will be calculated from the real annual CF. The
differences in Pexp and Ei, which is then used to
calculated penalties, show the differences in what
energy was expected from the farm versus the
energy that was actually produced.
Within the first LCOE verification test, the
annual energy production is calculated using a CF Figure 2 - CF of 0.16 with 5% variation. Maxlim = 0.75.
of 0.16 that varied annually by 5% around the initial
CF value. The threshold for the minimum penalty
limit (Minlim) was increased from 0.1 of expected
energy production to 0.50 and the threshold for the
maximum delivery penalty limit (Maxlim) was fixed
at 0.75 of expected energy production. Figure 2
shows a comparison of the different LCOEs as the
Minlim was increased. This LCOE results shows that
there is a significant cost increase as the minimum
limit on energy purchase is increased. There is no
difference in the LCOE between a PPA that has just
a minimum delivery penalty and a PPA that has no
penalties because with a Maxlim of 0.75 and CF of Figure 3 - CF of 0.16 with 5% variation. Minlim = 0.52.
0.16, the wind farm never produced above the
maximum limit on energy purchase and the PL is The same changes in the Maxlim and Minlim were
never applied. Hence, the PPA with just a minimum run again, except the CF was increased to 0.35 with
delivery penalty has the same LCOE as a PPA with 10% variation around the CF. Results from
both penalties when the CF is low because only the changing the Minlim are shown in Figure 4 and the
PN is applied. results from changing the Maxlim are illustrated in
A second test was run to observe the effect on Figure 5. Once again, as the threshold for the
the given farm with the same CF as the Maxlim was minimum annual delivery limit was increased, the
increased from 0.65 to 0.85 and the Minlim was fixed LCOE also increased. However, in this study there
at 0.52. The results given in Figure 3 show that is production loss generated from the wind farm and
once again there is a large difference between the the LCOE from a PPA with just a maximum penalty
PPA with just a maximum penalty and, the PPA with shows a higher LCOE than a PPA without penalties.
just a minimum penalty and the PPA with both The results show that changing the Minlim also
penalties. However, there was no change in the changes the LCOE and the preferred type of PPA.
LCOE caused by increasing the Maxlim. The results As seen in Figure 5, changing the threshold for the
show that with a wind farm that has such a low CF, maximum annual energy delivery limit also affects
the Maxlim makes little difference while the Minim the LCOE. As the limit is increased, the cost is
can significantly change the actual LCOE of the decreased for a PPA with just a maximum penalty
wind farm. and the LCOE shrinks to be closer to the LCOE of a
PPA with just a minimum penalty. From these
results, it is evident that a high limit on the
maximum energy purchase will reduce the
difference in LCOEs between the PPA options when
the CF of a wind farm is high.

6 Copyright © 2016 by ASME

 on the different annual energy delivery
requirements and if penalties were applied.
Within this model the Maxlim was set at 0.75 of
expected energy production as calculated for the
best approach to a long term PPA [20]. The Minlim
was set at 0.52 of expected annual energy
production as seen in the Delmarva-Bluewater PPA
[4]. The results show that in most data sets, just
Figure 4 - CF of 0.36 with 10% variation. Maxlim = having a maximum penalty produced LCOEs
0.75. closest to the LCOEs with no penalties and LCOEs
with both penalties or those with just minimum
penalties produced higher LCOEs. Based on the
results from the controlled study, it can be assumed
that the different clusters of LCOEs are caused by
the differences in CF. Lower CFs cause larger
differences between a PPA with just a maximum
penalty and a PPA with just a minimum penalty as
produced by wind farm datasets 1 and 2. While
datasets 4 and 7 show closer clusters of LCOE due
to higher CFs that less frequently fall below the
threshold for the minimum annual energy delivery
limit, but more frequently have production loss by
producing energy above the maximum annual
Figure 5 - CF of 0.36 with 10% variation. Minlim = energy delivery limit.
0.52.
Table 1 - Wind farm dataset details [17].
WIND FARM CASE STUDY Wind Farm
Year Location (Number
A simulation was run to determine the resulting Dataset/ Manufacturer/
Built of Turbines)
LCOEs from the four PPA options tested in the Rated Power
1 - Vestas (2 MW) 2002 Germany (17)
previous section in real wind farms. Real data was
collected from 7 different wind farms in which, the 2 - Enercon (2 MW) 2005 Germany (24)
farms used varied in number of turbines, 3 - Siemens (2.3 MW) 2010 Denmark (11)
manufacturer, year built, rated power and country 4 - Enercon (2 MW) 2010 Germany (10)
(Germany or Denmark) as seen in Table 1 [18]. To 5 - Vestas (3 MW) 2010 Denmark (18)
simplify the differences in costs across the wind 6 - Vestas (3 MW) 2007 Germany (5)
farms, the same cost variable values used in the 7 - Siemens (3.6 MW) 2006 Germany (7)
model verification tests were used. The only
difference in costs used from the model verification
tests and the wind farm case study is that the wind
farm case study uses a fixed COE for each farm at
$0.25, based on NREL’s highest expected COE
[19]. These wind farms compared the four different
PPA types with a fixed Maxlim of 0.75 and a Minlim
of 0.52 The LCOE of each turbine was calculated
from the sum of LCOE costs at the end of 5 years.
Figure 6 shows the differences in the LCOEs based

7 Copyright © 2016 by ASME

 Turbine
Sustainability”.
REFERENCES
[1]
[2]
Figure 6 - LCOE for PPA comparison.
CONCLUSION
The mechanisms that PPAs use to reduce the [3]
risk of additional, unforeseen costs create a paradox
of increased costs for the Seller in the contract.
Maximum and minimum annual energy delivery
quantities increase the actual LCOE for wind farms.
The proposed LCOE model accounts for the [4]
typically unaccounted costs from penalties within
PPAs and projects the actual LCOE cost.
Depending on the contractual terms agreed upon for [5]
annual energy, the Seller can project LCOEs from
expected future costs and the projected CF to help
determine the best options for penalty limitations.
Ranges in penalties will be determined by the
Buyer’s need to reduce risk of over-paying for
energy production or under-delivering to the [6]
market. The Seller can utilize the new model to
determine the best PPA type and penalties given the
limitations set by the Seller and the desired LCOE.
Without a correctly calculated LCOE, the project [7]
could fail, negatively affecting both the Seller and
the Buyer as the Buyer is expecting to meet
consumer needs using the Seller’s generated energy.
Through this model, PPAs will come close to their
goal of creating a fair contract.
[8]
ACKNOWLEDGEMENTS
Funding for this work was provided by Exelon
for the advancement of Maryland's offshore wind
energy and jointly administered by MEA and
MHEC, as part of “Maryland Offshore Wind Farm
Integrated Research (MOWFIR): Wind Resources,
8 Copyright © 2016 by ASME
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