The ESEM Regional Reference PPA is designed to help renewable assets secure the long-term price certainty needed for financing. Its standardised structure allows the ESEM Administrator to buy long-dated contracts and resell shorter-dated products as each contract's delivery year approaches. The seller receives a fixed price on its share of reference-fleet generation and pays the fleet’s realised spot revenue, whilst the asset earns merchant revenue separately.

Modo Energy’s forecast shows why long-term price certainty has value. Capture prices vary widely across the forecast, exposing assets to materially different revenue outcomes.

Asset-level risk remains because settlement follows the fleet rather than the asset. In the backcast, the most exposed wind sites faced liabilities of up to $73k/MW/year, whilst constraint exposure reached $40k/MW/year. High-price outages created separate exposure when asset revenue could not offset the fleet settlement.

Executive summary

• ​The Regional Reference PPA provides renewable assets with long-term price certainty, whilst sellers retain differences between asset and fleet revenue.
• Solar receives more consistent debt-cover support than wind. Solar improves in all four regions in the backcast, whilst wind improves only in Victoria and South Australia.
• Sellers retain material asset-level risk. The most exposed wind sites would have faced liabilities of up to $73k/MW/year in the historical backcast.
• High-price outages create concentrated settlement exposure. The largest shortfall in the backcast reached $16.7k/MW, making uncovered settlements central to contract design.

Fixed revenue reduces the time assets fall short of minimum debt cover

Revenue volatility affects finance when earnings fall short of debt repayments. From 2022 to July 2026, selling the contract would have reduced the time below lenders' 1.1 debt-cover threshold for solar in every mainland region, with mixed results for wind.

​Solar receives more consistent downside support because individual assets remain more closely aligned with the regional reference fleet. Wind outcomes are more mixed, reflecting greater variation in resource and output across assets. Queensland wind also contains only three assets, making its result less representative.