When Power Purchase Agreements Go Digital: The Role of Tokenization in Renewable Energy Markets
Publication Date
10-1-2025
Abstract
Traditional Power Purchase Agreements (PPAs), the conventional approach to renewable energy contracting, suffer from several drawbacks, including limited accessibility, lengthy durations, lack of transferability, and difficulty in matching projects with offtakers. Enabled by blockchain technology, contracts can be digitally recorded and stored in the form of crypto tokens, a process referred to as tokenization. This paper presents the first study on contract tokenization in the renewable energy market. Using a game-theoretic framework with evidence-based numerical calibrations, we compare traditional and tokenized PPAs and examine their implications for both energy project developers and offtakers. Our results reveal important trade-offs: tokenized PPAs require higher technological standards to achieve feasibility but, once feasible, support shorter contract lengths. Moreover, while tokenization enhances market efficiency and broadens access to renewable energy-particularly for smaller-scale energy consumers that are often excluded by traditional PPAs-it shifts surplus toward developers, increasing their profits at the expense of offtakers' utility.
Document Type
Article
Keywords
Blockchain, Tokenization, Power Purchase Agreement, Renewable Energy, Utility-Scale Solar
Disciplines
Business Administration, Management, and Operations
DOI
10.2139/ssrn.4932043
Source
SMU Cox: IT & Operations Management (Topic)
Language
English
