Pay-as-produced vs pay-as-nominated PPAs: who carries the cannibalisation risk?

In a pay-as-produced power purchase agreement (PPA) the buyer takes all output at a fixed price and carries volume, profile and cannibalisation risk. In pay-as-nominated, a volume is fixed in advance: on Uniper's definition the seller covers the forecast gap, on Montel's the buyer nominates. Only baseload, shaped or storage-backed PPAs move cannibalisation risk to the seller.

The definitions below draw on a 2026 European Commission Recommendation, the EFET standard contract, Uniper and Montel. Where they differ, the text says so.

What are the main PPA volume structures?

A PPA volume structure sets how much power the buyer takes in each hour and who covers the gap between that volume and what the plant actually produces. The standard PPA from Energy Traders Europe (EFET, formerly the European Federation of Energy Traders) offers three volume options: all metered output, an agreed part of metered output, or a fixed delivery schedule. In practice four structures cover most solar deals.

• Pay-as-produced: the buyer takes all output at a fixed price agreed in advance.
• Pay-as-nominated (Uniper calls its version pay-as-forecasted): a volume is fixed ahead of delivery, for example the day before. Who sets it is disputed, as the section below shows.
• Baseload: the seller delivers the same volume in every hour.
• Shaped or hybrid: the seller commits to an hourly profile and meets it with solar output, storage and market purchases.

Two terms recur below. Profile (shape) risk is the mismatch between when a solar plant produces and when the buyer needs power. Cannibalisation is the fall in power prices in sunny hours when many solar plants produce at once, which pulls the price a solar plant earns below the average price. The solar capture rate article measures it for Hungary.

How does a pay-as-produced PPA allocate risk?

Under pay-as-produced the buyer carries nearly all market risk. The European Commission's April 2026 Recommendation on power purchase agreements says pay-as-produced PPAs transfer the volume risk to the offtaker, who is exposed to production and profile risk, which can be significant for variable renewable assets. Uniper's presentation adds that the structure passes spot and balancing energy risk entirely to the buyer.

When solar output pushes midday prices below the fixed price, the buyer pays above market in exactly the hours when it receives most energy. That is cannibalisation risk. For the seller the contract is simple: it delivers whatever the plant produces.

The structure is under pressure. The Commission notes that most PPAs have traditionally been pay-as-produced, but that growing price cannibalisation and negative-price hours are affecting the uptake of the model and delaying negotiations. Modo Energy reports that pay-as-produced still dominates for solar in Spain, with a clear push towards baseload or fixed-shape deals in which buyers pay more and sellers carry the shape risk.

The Commission also says the choice of structure affects the bankability of an investment. How banks size a Hungarian solar park loan explains how contracted revenue feeds into debt sizing.

What is a pay-as-nominated PPA?

A pay-as-nominated PPA fixes the delivery volume in advance instead of letting it follow output. Providers disagree on who sets that volume, and they do not use the same label, so the contract wording matters more than the name.

• Seller forecasts (Uniper). Uniper's presentation calls this "pay-as-forecasted". The seller delivers the previous day's forecast "regardless of whether this is actually achieved or not" and bears the difference between actual generation and the day-ahead forecast. The buyer still bears the spot risks, and the seller bears the equalisation (balancing) energy risk.
• Buyer nominates (Montel). Montel's explainer describes the buyer agreeing to buy a pre-nominated amount, typically set day-ahead or week-ahead, and providing forecasts to the generator. Penalties may apply to either party if actual output differs from the nomination, depending on the contract.

The two readings put the forecasting duty on different parties, and the sources do not reconcile them. On the seller-forecast reading, the seller takes forecast and balancing risk and the buyer keeps price and profile risk, so pay-as-nominated does not by itself move cannibalisation risk to the seller. The risk table below follows that reading because Uniper sets out the allocation point by point, while Montel describes it only in general terms.

What do baseload and shaped PPAs change?

Baseload and shaped PPAs move profile and balancing risk to the seller or an intermediary. The Commission says baseload or shaped PPAs provide a fixed delivery profile, which shifts profile and balancing risks to the generator or an intermediary. Under baseload the seller must deliver the same volume whatever the weather, which a solar plant on its own cannot do.

Modo Energy describes the shaped version as the seller committing to a preset hourly profile, with storage, portfolio hedging or trades as the tools to manage any shortfall or surplus. The buyer pays a premium for firmness and operational simplicity.

A single solar park has no portfolio of its own. It needs an intermediary, other assets or storage to cover the gaps.

How does storage change a hybrid PPA?

A battery lets the seller reshape solar output towards the profile the buyer wants. Modo Energy says batteries let sellers firm up delivery profiles, clip negative-price exposure and capture evening peaks, which supports fixed-shape PPAs and higher strikes. The Commission reports that by 2024 more than 10% of corporate PPA contracts in the EU were hybrid contracts bundling several technologies, including storage assets.

The seller then carries the dispatch and forecasting risk that the battery is meant to manage. In Hungary the same battery also earns from balancing and price spreads, so the PPA is one of several revenue lines. See the Hungary battery storage revenue stack for how they compete for the same capacity.

Who carries each risk in each structure?

The table shows typical allocations as the Commission, Uniper and the other sources above describe them. Individual contracts vary, and the negative-price row depends on the clause (next section).

Montel's buyer-nominates reading would put the forecasting duty on the buyer, and its explainer does not say how the other rows would change. Two points follow from the table. First, pay-as-nominated on Uniper's reading splits the contract in a different place from baseload: balancing goes to the seller, price does not. Second, cannibalisation risk only moves to the seller when the seller guarantees a profile that is flatter than solar output.

How do negative-price clauses and curtailment compensation work?

A negative-price clause decides who bears the cost of hours when the market price is below zero. PPA Lawyer, a practitioner newsletter, describes fixed-price pay-as-produced PPAs in GB and France in which the seller kept receiving the fixed price in negative hours, so the buyer carried the cost. For a financial PPA, the same author lists three options:

1. Seller risk. The seller stops generating during negative prices.
2. Buyer risk. The buyer pays the fixed price against the negative floating price.
3. Hybrid. Settlement uses a zero floor. PPA Lawyer calls this probably the most prevalent approach and says it is the position in the new financial PPA template confirmation of the International Swaps and Derivatives Association (ISDA).

Caps are common in the hybrid case. PPA Lawyer mentions caps on the number of negative-price periods for which the buyer pays the fixed price. Modo Energy reports that newer Spanish contracts settle at a floor of EUR 0/MWh and often cap the number of negative-price hours that count each month or quarter. Legacy Spanish contracts suspend settlement in negative hours, so the producer earns nothing for them.

Curtailment is a separate question. In a standard pay-as-produced PPA the buyer pays only for metered energy, so Modo says curtailed energy earns nothing unless the contract has a "deemed energy" clause or explicit curtailment compensation. PPA Lawyer makes a similar point for physical contracts and adds that compensation from a grid operator for involuntary curtailment depends on market rules and does not apply to negative pricing.

The EFET standard PPA draws a line in its force majeure clause. Curtailment counts as force majeure when a competent authority orders it under applicable law, and it releases both parties from delivery and payment for that period. Curtailment caused by the plant's own breakdown, defects or poor maintenance is excluded, and so are changes in wholesale market conditions (clause 15.1(e), (h) and (l)). A price move into negative territory therefore does not by itself release either party.

These examples come from GB, France, Spain and a pan-European standard form. For a Hungarian project, the contract and the applicable grid code decide who is compensated, so check both.

Why does the question matter in Hungary?

The fall in Hungary's solar capture rate and the count of negative-price hours, which are what a pay-as-produced buyer is exposed to, are set out in the solar capture rate article.

The EU Agency for the Cooperation of Energy Regulators (ACER) published a 2025 PPA country sheet for Hungary, built on S&P Global data for publicly reported deals. It puts Hungary at 2% of the PPAs signed in the EU and Norway in 2024, with an average duration of 6 to 10 years. It says the KÁT feed-in tariff drove renewable investment but slowed the take-off of PPAs, and it lists the improved design of the METÁR renewable support scheme and hybrid PPAs with co-located storage as opportunities. How KÁT and METÁR support relates to market contracts is covered in METÁR vs METÁROLÓ vs KÁT.

What do two Hungarian PPAs show?

Two public deals use opposite structures. Neither release discloses a price.

Axpo, three pay-as-produced PPAs. Axpo's release describes three PPAs for about 60 MW, ensuring market access for two green energy producers. Axpo takes the entire output of each plant: 18 MWp at Barcs, 23 MWp at Szakoly and 20 MWp at Szőc, which sum to 61 MWp. pv magazine reported the deals on 28 March 2025 and called them Axpo's first electricity purchase agreements in Hungary.

The terms are short. The Barcs agreement ran to the end of 2025, so it had ended by October 2026. Szakoly and Szőc run to the end of 2026. Axpo says the agreements cover balancing risks and provide revenue certainty by hedging against spot price volatility. Its senior originator in Hungary, Peter Hornyak, said rapid solar growth has "triggered a steep rise in balancing costs" for Hungarian renewable producers. The release does not name the plant owners or set out the balancing arrangement.

GoldenPeaks Capital and Hankook Tire, one pay-as-nominated PPA. Hankook Tire & Technology's release of 23 February 2026 describes a long-term Pay as Nominated PPA with GoldenPeaks Capital. Under the 10-year agreement GoldenPeaks will supply 430 GWh in total, about 43 GWh a year (430 divided by 10). The PPA is for 30 MWp of photovoltaic capacity in Hungary and is expected to replace 20% of annual electricity consumption at Hankook's Hungarian plant. World Kinect advised Hankook.

The volume implies about 1,430 kWh per kWp a year (43 GWh divided by 30 MWp). That is above the 1,252 kWh per kWp that the European Commission's PVGIS tool gives for a fixed-tilt park on the Great Plain, the figure used in the solar capture rate article. The 30 MWp may include trackers, or the volume may include other capacity, but the release does not say.

The release also does not say who nominates, and it gives no price, balancing terms or negative-price terms. The label alone therefore does not show who carries balancing cost or cannibalisation risk in this deal.

What this means for park owners, lenders and corporate buyers

Solar park owners. Pay-as-produced keeps the contract simple and leaves volume, profile and spot-price risk with the buyer. A nominated or baseload contract asks the owner to forecast well, to pay imbalance costs and, for baseload, to cover shortfalls. Check three things: who nominates, who pays imbalance, and which clause governs negative-price hours and curtailment.

Lenders. The Commission says the choice of PPA structure determines how price, volume, profile, balancing and credit risks are split, and that this affects bankability. Fixed-volume structures add forecast and balancing costs to the seller's cash flow. The bank sizing article explains the debt service coverage ratio (DSCR) that lenders test.

Corporate buyers. A pay-as-produced contract delivers output when solar is abundant, so the buyer carries the profile mismatch and the cannibalisation risk. On Uniper's reading a nominated contract moves balancing cost to the seller. Shaped and hybrid contracts move profile risk as well, and Modo Energy notes that buyers pay more for fixed-shape deals. Before comparing headline prices, check which structure each offer uses and who nominates.