Contractual & Financial Definitions

European Term	American Term	Definition
Levelised Cost of Electricity (LCOE)	Levelised Cost of Electricity (LCOE)	Levelized cost of energy (LCOE) is the average net present cost of electricity for a generating plant over its lifetime. It’s used as a comparative cost value for different energy technologies, and their investment attractiveness. Find out how LCOE can impact the price of your PPA by reading our What Should You Consider When Pricing a PPA? report.
Federal Energy Regulatory Commission (FERC)	Federal Energy Regulatory Commission (FERC)	FERC is an independent U.S. federal agency responsible for regulating interstate electricity transmission, wholesale electricity markets, natural gas pipelines, and hydroelectric projects.
Feed-in Tariffs (FiTs)	Production Tax Credits (PTC) or Renewable Energy Credits (RECs)	FiTs are subsidy schemes whereby a fixed amount, independent of the wholesale market price, is paid for the electricity produced from renewable energy sources and fed into the grid at any time. FITs are long-term contracts awarded to renewable energy producers as a way to encourage the buildout of renewable energy installations. In mature markets, FiTs – which operated on a first come first serve basis – have been replaced with competitive auction schemes.
Fixed Hourly Profile	Shaped PPA (or sometimes "Fixed Shape PPA")	Refers to a contractual arrangement where a fixed quantity of energy is delivered or settled for each hour of the day, independent of actual production from the renewable asset. This profile is typically agreed upon in advance between the seller and the buyer.
Floating Price PPA	Market-Price PPA	Instead of locking in a fixed price, the seller is paid based on a spot market or an agreed-upon index. This structure benefits sellers when market prices rise but introduces revenue uncertainty. These contracts are often used when renewable developers seek to capture merchant pricing upside.
Floor with Revenue Sharing (Storage Offtake Contract)	Minimum Guarantee with Upside Sharing	A contractual structure where a storage operator receives a guaranteed minimum payment (floor price) while sharing additional profits with the buyer. This balances risk and reward, ensuring stable revenues while allowing participation in market gains.
Force Majeure Clause	Act of God Clause	A contract provision that relieves both parties from performance obligations due to unforeseen, extraordinary events (e.g., natural disasters, war, government intervention). These clauses are particularly important in renewable PPAs, where weather events like hurricanes or wildfires could impact generation.
Forecast Inaccuracy	Forecast Inaccuracy	The difference between forecasted, often on a day-ahead basis, and actual realised production of a plant.
Forward Curve	Forward Curve	A curve to represent the value of power, when the power is transacted today for delivery in the future.
GoO or GO	Renewable Energy Certificates (RECs)	Guarantees of Origin are an instrument defined in European legislation that labels electricity from renewable sources to provide information to electricity customers on their energy source. In many cases, GoOs are used as property rights to transfer the “green benefit“ of renewable electricity production from the seller to the buyer.
Grid Charging	Grid Charging	The process of charging a battery storage system (BESS) using power from the grid, rather than from a co-located renewable asset.
Grid Congestion Risk	Transmission Curtailment Risk	The risk that electricity cannot be delivered due to transmission system constraints, leading to lower revenues. This is a growing issue in high-renewable penetration areas where grid upgrades lag behind capacity additions. Curtailment provisions in PPAs help determine compensation when congestion affects project economics.
Hedge Ratio	Hedge Coverage Ratio or Hedge Effectiveness	In the energy trading lingo, it’s the percentage of a hedged position with respect to the open position. In simple words, it shows how exposed one is to energy risks. In a PPA, it’s common for a producer to hedge 70% of the production. In trading lingo, it’s the comparative value of an open position’s hedge to the overall position.
Hedging	Hedging	In energy sales, hedging is a process to reduce price risk, as in protecting against price uncertainty, by taking an offsetting position of approximately the same size but opposite price direction. Hedging can be done by using standard products traded on an exchange or over-the-counter to transfer price risk to other market participants. Analogous transfer of risks can occur through a PPA or any other bilateral agreement. The hedged position is the volume not exposed to price risk.
Hybridisation	Hybridisation	The combination of different energy sources or technologies (e.g., solar + storage or wind + storage) to optimize energy output and flexibility. Hybrid systems improve capacity utilization, mitigate intermittency issues, and can provide more stable revenue streams.
Imbalance costs	Deviation Charges or Real-Time Settlement Costs	Costs incurred when energy generation or consumption deviates from scheduled commitments, requiring balancing market adjustments. These charges ensure grid stability by incentivizing accurate forecasting and flexible generation or storage solutions.
Indexed PPA	Market-Linked PPA	A contract where the price is tied to an external benchmark, such as wholesale electricity prices, fuel costs, or inflation. This structure helps offtakers hedge against long-term market fluctuations while giving sellers exposure to potential price increases. It contrasts with a fixed-price PPA, where the price remains constant throughout the contract.
Intraday Market (IDM)	Real-Time Market (RTM)	The intraday market (IDM) enables electricity trading within the same day, allowing market participants to adjust their positions closer to the actual delivery time. This market is essential for managing forecasting errors, responding to unexpected demand fluctuations, and integrating variable renewable generation more effectively. Wind and solar generators frequently use the IDM to fine-tune their energy deliveries as more accurate weather forecasts become available. Additionally, battery storage operators leverage the IDM for short-term arbitrage, capitalizing on rapid price movements by charging and discharging based on real-time market conditions.
Legal Risk	Regulatory & Contractual Risk	PPA contracts are complex. Commercial risks, Force Majeure, Change of Control, Termination, and Conditions Precedent are amongst key clauses that need to be negotiated. This is the risk of a change in the law that affects the balance of revenue or risk between the parties, for example, tax change.