Contract Tokenization in the Renewable Energy Market
Publication Date
9-20-2024
Abstract
The conventional approach to renewable energy contracting, primarily through traditional Power Purchase Agreements (PPAs), presents several disadvantages including lengthy contract durations, non-transferability, difficulties in matching projects and offtakers, and limited accessibility. Endorsed by the blockchain technology, contracts can be digitally recorded and stored in crypto tokens, which is referred to as being tokenized. Using the renewable energy market as a backdrop, we study the impact of contract tokenization on different parties in the industry based on their respective incentives through a game-theoretic approach. In particular, we compare tokenized and traditional PPAs for utility-scale solar projects. Our results show that that tokenized PPAs typically yield higher energy prices, shorter contract lengths, and increased land utilization. As a first study on contract tokenization in the renewable energy market, we find that tokenized contracts offer greater profits for developers, but with a slight reduction in utility for offtakers. Notably, tokenized PPAs enable more efficient energy market operations and foster broader access to renewable energy, particularly for smaller entities previously constrained by traditional models.
Document Type
Article
Keywords
Blockchain, Tokenization, Power Purchase Agreement, Renewable Energy
Disciplines
Business Administration, Management, and Operations
DOI
10.2139/ssrn.4932043
Source
SMU Cox: IT & Operations Management (Topic)
Language
English
