From negative prices to positive impact: Unlocking the full potential of Nordic energy through smarter wind strategies

In Finland, since the start of 2024 until September 2025, 8% of all hours were with negative spot prices, and the wind farms have been producing at the average capacity of close to 40% of the installed one during these hours. Even when the spot price had been below -€5/MWh, the average producing capacity had been about 30% of the installed one. So it seems that there is an untapped potential in Finland in adjusting terms of existing pay-as-produced PPAs to unlock the positive financial impact of terminating production at low market prices.

In case of a classical pay-as-produced PPA, it is usually economical for the wind producer to keep producing even at strongly negative spot prices. To understand this, let's have a look at an example of a physical pay-as produced PPA covering 70% of production at the price of €50/MWh. Please note, all the figures in the example are arbitrary and are only for the sake of example. They do not describe any real PPA case and should not be interpreted as any recommendation.

 

The chart illustrates the situation for an hour with the spot price of -€5/MWh. The loss from the spot sales is only applied to the merchant volume which makes 30% of the total production volume. So -€5/MWh spot price is translated into just €1.5/MWh cost component while the PPA revenue makes €35/MWh at the same time. The total revenue minus the variable cost is clearly positive. The spot price needs to be close to -100 eur/MWh to turn the total result negative. In this example, we considered the turbine operations and maintenance (O&M) and land lease cost as variable, but the situation depends on the contract terms and the cumulative amount of curtailed production. If any significant volumes are curtailed during a year, the minimum payment under turbine O&M agreement may be triggered and then this cost item should not be regarded as variable. Land lease cost may not be production dependent at all. And even if it is production dependent, there may also be a minimum payment. If the turbine O&M and land lease costs are not variable, the spot price needs to be even more negative to make the wind park production uneconomical.

What if the PPA counterparties agreed on two conditions?

1) Wind park does not produce when the spot price is negative
2) The PPA offtaker pays for this curtailed volume on the same conditions as for the produced volume

In this case, during the time of curtailment, the wind producer still receives PPA revenue of €35/MWh but avoids selling 30% of the volume to the spot market at negative spot price, saves grid fees, and avoids balancing cost for the part of the merchant volume. Whether turbine operations & maintenance and land lease costs are part of the savings, depends on the situation as described above. Curtailment also has a negative impact on the wind producer. The revenue from the sale of guarantees of origin (GoO) for the merchant part of the volume is lost. Curtailment strategy will also affect bidding behaviour of the wind producer in the ancillary services markets (sale of reserve products to TSO) with potentially negative impact. The net result is positive in this example irrespective of whether O&M and land lease costs are considered or not. 

The PPA buyer also sees benefits: it can now buy the PPA volume in the spot market at negative price if it needs this volume or it does not need to sell the PPA volume in the spot market at negative price if it does not need this volume. The buyer also avoids wind balancing cost for the part of PPA volume. From the other side, the buyer does not get the GoO for the part of curtailed PPA volume and would need to buy those from the market if it lacks GoO volume. The net result is positive in this example also for the buyer. So with such changes in the PPA terms, in this example, it is economical to terminate production when spot price is -€5/MWh, and both counterparties enjoy positive financial impact. The more negative spot price is, the larger the positive impact is.

How financial PPAs can share value through smarter compensation structures?

In case of a classical financial PPA, the wind producer bids the entire production volume to the spot market and carries balancing cost for the entire volume. So with the two conditions described above, all the benefits of curtailing production are with the wind producer, while the PPA buyer loses GoO and still needs to settle curtailed PPA volume against the spot price. To make the curtailment economical also for the PPA buyer, the wind producer can provide replacement GoOs  during curtailment periods and some other benefit. For example, the curtailed volume may be settled against the curtailment threshold (which is €0/MWh in this example) instead of spot price.

So far, we have been talking about curtailing production when the spot price is negative. But the optimal curtailment threshold is not necessarily €0/MWh. Actually, in the studied example, the optimal curtailment threshold happens to be higher than €0/MWh and is slightly different from the wind producer’s and PPA buyer’s point of views. The optimal curtailment threshold depends on the value of GoO, balancing fee in the balancing service agreement or expected imbalance cost, and estimated impact of curtailment on the ancillary services revenue. As these parameters change over time, so does the optimal curtailment threshold. The curtailment threshold needs to be agreed between the PPA counterparties so that it suits both of them, and it makes sense to regularly review the curtailment threshold.

In some cases, there may be limitations on curtailing production volume, e.g. due to a strict requirement to deliver a certain volume of asset specific GoOs. There may even be commitments towards a 3rd party in respect of GoO. Such limitations should be naturally considered when designing curtailment strategy. And in general, each PPA case needs to be assessed individually.

To conclude, a positive value can be created collectively for both PPA counterparties by optimizing production when the spot price is below a certain threshold. To unlock the value, the PPA terms should allow sharing it between both counterparties. The optimal curtailment threshold depends on the market conditions and thus it makes sense that the curtailment threshold is reviewed at times.

We work closely with our B2B customers to design PPA structures that maximize value for both parties. If you’re representing industrial or commercial energy consumer interested in smarter, more flexible PPAs, with a balanced risk sharing between the counterparties, please contact us.

At Fortum, our strategic target is to have at least 800 MW of wind and solar projects ready-to-build by the end of 2026. Fortum currently has a pipeline of onshore wind and solar projects in the permitting processes totaling approximately 8 GW across the Nordics and more in the earlier phases.