When Power Purchase Agreements Go Digital: The Role of Tokenization in Renewable Energy Markets
Publication Date
1-6-2026
Abstract
Problem definition: 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 financing difficulties. As a solution enabled by blockchain technology, these contracts can now be digitally recorded and stored in the form of crypto tokens, a process referred to as tokenization. Motivated by the recent emergence of tokenized PPAs tradable on platforms such as WePower and PowerLedger, we study its implications for both energy project developers and offtakers (energy buyers). Methodology/results: This paper presents the first study on PPA tokenization. We develop a game-theoretic framework, calibrated with empirical data, to compare traditional and tokenized PPAs. The analysis isolates the effects of tokenization by examining two key mechanisms: the accessibility to multiple offtakers and the use of decentralized financing. Our results reveal important trade-offs: while tokenization enables more flexible energy contracting, it is economically viable for a narrower set of energy projects. Moreover, although tokenization lowers entry barriers for smaller offtakers, it does not improve their overall position, as their profit shifts toward developers; yet this profit shift does not guarantee higher developers' profits under tokenization. Managerial Implications: These findings provide a strategic framework for decisionmakers to evaluate tokenization, revealing that tokenized PPAs should be viewed not merely as digital substitutes for traditional contracts, but as a mechanism to trade project viability for market efficiency. Relative to traditional PPAs, tokenization is particularly beneficial when developers face weaker bargaining power and more restrictive bank financing terms. Within tokenized settings, developers should prioritize projects with longer panel lifespans and offtakers with relatively larger budgets.
Document Type
Article
Keywords
Blockchain, Tokenization, Power Purchase Agreement, Renewable Energy, Utility-Scale Solar
Disciplines
Business Administration, Management, and Operations
Source
SMU Cox: IT & Operations Management (Topic)
Language
English
