Capture rate
A generator earns the price prevailing in the periods it actually produces. Solar produces when every other solar farm produces, and that abundance depresses the price in exactly those hours. The proportion of the average market price that an asset actually captures is its capture rate.
This is why two assets with identical annual output can be worth materially different amounts, and why an offer quoted as a percentage of baseload needs reading carefully.
Cannibalisation
As more of a technology is built, its capture rate falls, because it increasingly sets the price in its own generating hours. It is not a market failure, it is the market working, and it is directional: it gets worse as deployment grows, not better.
For a generator, a fifteen year PPA priced off today’s capture assumptions carries a real risk. For a buyer, the same effect is why a floor priced contract can look expensive today and reasonable in year eight.
Negative prices
Where generation exceeds demand and inflexible plant cannot come off, prices go below zero. Periods of negative pricing are becoming a routine feature of high renewables systems rather than an anomaly.
This turns a previously dull clause into a central one. Does the contract pay for generation during negative price periods? Does the generator curtail, and who bears the cost of the volume forgone? Contracts written five years ago frequently have no clear answer, and that ambiguity is now worth arguing about.
What both sides should do
Generators: understand your asset’s historic capture rate before you accept a price, and treat any offer that ignores the direction of travel with suspicion. Dispatchable assets, including hydro, anaerobic digestion and storage, are worth relatively more as this trend continues.
Buyers: a low strike price on a technology facing capture rate decline can look like a bargain and behave like one for several years. Model it against forward curves, not history, and make sure the negative price and curtailment clauses say what you think they say.