Renewable energy
knowledge explained

This alphabetical glossary contains information and explanations related to the terminology
used in the renewable energy market.


Arbitrage in the energy sector is the purchase and sale of electricity to profit from differences in price between delivery times. For example, a battery will buy and store electricity at low prices and sell the electricity at much higher prices time spots.


baseload contract

A baseload contract describes continuous electricity production and demand for all hours contracted. For example, a 1 MW baseload contract requires the delivery of 1 MW per hour for every hour contracted. In the case of an EEX Yearly Baseload contract, the supplier has to provide 1 MW for all hours within the years. That results in a total volume of 8760 MWh.


The loss of power to a portion of the distribution or transmission system due to imbalances in the system. As the power line frequency is varying from the nominal power of 50 hertz it can lead to a blackout.


commercial operation

All approvals, permits, licenses, agreements and registrations that are required for the generator getting connected to the grid.

committed availability

Percentage of actual number of available hours of the generator per year.


day ahead market

The day-ahead market enables market participants to sell and buy power one day before physical delivery. Most of the wholesale markets close the bidding at noon.


electricity generation facility

Any technology or device that generates energy for consumer use, including everything from utility-scale fossil fuel power plants to rooftop solar panels.


fixed for floating

Is a contractual arrangement (Swap) in which parties agree to swap cash flows (fixed rates vs. floating rates). These types of contracts are very popular arrangements when it comes to Power Purchase Agreements between RE projects and Corporates &  Industrials (C&I's). When the power prices are below the agreed PPA Strike Price, Off-taker will compensate for the difference as a to up to the renewable asset owner. In the other case, when power prices are higher then the strike price, asset owners will transfer additional revenues to the off-taker. This set up is enabling a hedge for both parties. RE asset owners are hedged against low power prices and off-taker are hedged against high power price.

forward market

A market where delivery of the item purchased is at some future point in time.

future market

A supply contract between a buyer and seller where the buyer is obligated to take delivery and the seller is obligated to provide delivery of a fixed amount of electricity at a predetermined price at a specific period in time. Futures are bought and sold through an exchange such as EEX in Europe.


grid emission rate factor

The grid emission rate factor displays the average emissions generated by all energy facilities (e.g. coal, lignite) within a grid system. Often it is possible to calculate the emission factor on a smaller grid area to achieve higher accuracy.

grid parity

When the LCOE of Renewables is equal to the LCOE of thermal plants, the so-called grid parity is achieved. Policymakers around the world introduced subsidies for renewables to provide incentives for many companies as possible to enter the renewable energy sector. Increased competition and increased expenses in R&amp


hydrogen (H)

Hydrogen is the most abundant element in the universe and experiences a trend in the energy sector as its lacking of feasible storage systems. With the renewable energy transition at some times, there is much more electricity available as demanded and needs to be shifted to a period where less electricity is available. Producing Hydrogen from Electrolysers (Electricity and Water as input) results in the perfect storage medium and can easily be transformed backward through fuel cells.



The discrepancy between the amount of electricity delivered into the grid and the actual amount the entity consumes. These Power differences will be balanced by the grid operators through primary and secondary energy reserves (Imbalance Power).

imbalance power

Power purchased by the system operator through auctioning necessary capacities to stabilize the grid as imbalances occur to keep the system supply in balance with demand.

independent power producer (IPP)

A generation company that is privately-owned and not part of a regulated vertically-integrated utility company that sells commonly power output under a long-term contract.

installed capacity

Actual installed capacity of the power plant usually in MWp

intraday market

The intraday market enables trading 24/7 every day until one hour and in some cases until the delivery hour. In general, the intraday market supports market participants to optimize their power portfolios traded on the day-ahead market and reduce under/ -oversupply.



A unit of energy equal to 1,000 watts.

kilowatt-hour (kWH)

A unit of energy equal to 1,000 watts over 1 hour. Kilowatt-hours are most commonly known as a billing unit for energy delivered to consumers by power utilities.


levelized cost of energy (LCOE)

The Levelized Cost of Energy (LCOE) defines the costs that occur to transfer one energy form into electrical power (EUR/MWh or $/MWh). The LCOEs are derived by capital costs, the fix and variable operation costs, fuel costs, and targeted return expectations. In the last 10 years LCOEs both for Wind Onshore and PV plants have decreased in high rates  making power from renewable sources the cheapest energy form. Therefore RE projects have reached grid parity in many markets around the world.

load shedding

Load Shedding is a synonym used for Peak Shaving.

load shifting

Load Shifting is defined as a short-term reduction of electricity consumption by rescheduling a certain amount of electricity to a later date when power prices or grid usage is lower. Load Shifting can be realized by turning on own onsite Electricity Generation Facilities or turning off unnecessary plants or machines. In addition, electricity storage facilities owned by the electricity consumer can also contribute to bridge phases of high prices or high loads. Note that Load Shifting does not mean that the total amount of electricity consumed is reduced. It means that the consumption only occurs to a later date in the short-term future.


mark to market

Contracting parties do fix the power price when signing a Power Purchase Agreement. Each of the contracting party has different assumptions about the future price development of power markets. The real-time value of power is however determined at the time of generation by the real-time power market price. Furthermore, power prices are very volatile. The Mark to Market determines for example if a PPA contracting party has fixed prices at a high level, the market prices however remained at a low level. This would have a bad impact on the balance sheet of the contracting party.

merchant exposure

In many liberalized markets, RE asset owners can sell the generated power in the energy wholesale markets (Spot and Future). Since power prices in wholesale markets are volatile and differ from hour to hour, RE asset owners are exposed to power prices (often referred to as merchant exposure). Is the merchant exposure high  financial institutions can not calculate the certainty of cash flows  thus provide a lower debt ratio.

merchant risk

Merchant risk relates to volatile power sales on the wholesale market. Due to multiple effects, the power prices can fluctuate dramatically within a daily trading period or between individual years. On one side periods with high wind speeds relate to dropping short-term power prices du to high wind power generation. On the other side changes of regulations like the implementation of carbon taxes (certificates) lead to higher long-term power prices due to higher power generation costs of conventional power plants (e.g. lignite).



Hours with the lowest power demand during the day. Off-peak products can be traded separately.



Hours with the highest power demand during the day.


A synonym for electricity.

price volatility

The movement of power prices over time on the spot market.

production guarantee

Production Guarantee means the Independent Power Producer, or more precisely the Special Purpose Vehicle (SPV), has the obligation to deliver a certain volume during a certain period (i.e. Settlement Period). In case the production volume is below the guarantee amount AND the damage is solely caused by reasons for which the SPV is responsible, the damage under Power Purchase Agreement is often calculated as differences between the Settlement Price and the PPA Price times the deficit amount. A production guarantee is commonly included in a Fixed Volume PPA.


SCOPE 1 emission

All Direct Emissions from the activities of an organisation or under their control. Including fuel combustion on site such as gas boilers, fleet vehicles and air-conditioning leaks.

scope 2 emission

Indirect Emissions from electricity purchased and used by the organisation. Emissions are created during the production of the energy and eventually used by the organisation.

scope 3 emission

All other Indirect Emissions from activities of the organisation, occuring from sources that they do not own or control. These are usually the greatest share of the carbon footprint, covering emissions associated with business travel, procurement, waste and water. In most of the cases the emssions can not be directly influenced by the company itself.

spot market

The spot market enables multiple market participants to trade multiple standard trading products (e.g.Day-Ahead, Futures etc.). Physical products have to be settled at least two days after the conclusion of the transaction. In general, the traded volume of the spot market represents about 10-20% of all generated electricity and is used for short-term optimization of portfolios.


termination payment

In case of termination following default by the other party, the termination payment represents the compensation of the default party. This can be either a formula based approach with linking to the power market or a fixed payment sum.



An entity that generates, transmits, and/or distributes power from facilities that it owns and operates.


wholesale market

The wholesale market enables power producers and buyers to sell or buy multiple energy-related products. In general, the traded energy volume on the wholesale market represents up to 20% of all electricity traded, because the highest amount is still traded over-the-counter (OTC). Overall the standard power products are called baseload and peak load. Both can be traded intraday, day-ahead, or on the futures market.