Removing the negative impact of the cannibalization effect on PPAs through accumulation

Power Purchase Agreements (PPAs) represent a key mechanism for mobilizing private investment into renewable energy projects and achieving long-term decarbonization goals. However, the increasing share of intermittent sources such as solar and wind has intensified the cannibalization effect, which lowers market prices during periods of high generation and reduces the economic attractiveness of pay-as-produced PPAs. This paper explores the integration of battery storage into PPA structures as a strategy to mitigate this effect by shifting delivery to higher-value periods and improving revenue stability for producers. Several contractual schemes are proposed and evaluated in terms of how they distribute financial risk between producers and off-takers. Recent declines in battery storage costs further enhance the feasibility of these approaches. The paper also outlines supporting regulatory measures, including minimum storage requirements for new projects, public guarantee mechanisms for PPA and mandatory hedging of traders through PPAs. While the potential of batteries to provide market and system flexibility is acknowledged, the focus remains on their role in enhancing the economic viability of PPAs in markets with high renewable penetration. • The cannibalization effect reduces the attractiveness of solar and wind power for inclusion in PPAs. • Integrating battery storage into PPAs mitigates the impact of the cannibalization effect. • This paper introduces novel schemes for incorporating storage into PPAs under different risk allocation models. • Policy measures can support PPA development and promote wider deployment of battery storage systems.