For most industrial electricity buyers in South-East Europe, price risk is still intuitively understood as a single number. When discussions turn to power procurement, the focus remains anchored on the average megawatt-hour price secured over a year. This mindset is increasingly disconnected from how power markets actually function.
In solar-heavy systems, the dominant risk is no longer price level but price shape. Shape risk — the mismatch between when electricity is generated and when it is consumed — has become the primary driver of real costs for industrial buyers. And it is the reason why many PPAs that appear competitive on paper quietly destroy value in operation.
The danger of shape risk is that it is invisible at signing, slow to accumulate, and brutally obvious only once monthly settlements arrive.
How solar rewrites hourly price formation
Solar generation does not just add cheap energy to the system. It fundamentally reshapes the hourly price curve.
In SEE markets with rising solar penetration, midday prices are increasingly suppressed. In some hours they approach zero or even turn negative. At the same time, the system becomes structurally short in the late afternoon and evening, when solar output collapses but demand remains high.
The consequence is a widening intraday spread. The distance between the cheapest and most expensive hours of the day grows larger each year. For traders, this creates opportunity. For industrial buyers with inflexible load, it creates exposure.
Importantly, this spread grows even if average prices remain stable or fall. A buyer can report lower average electricity costs while simultaneously paying more during critical operating hours.
Industrial load and the wrong side of the curve
Most industrial processes in SEE are poorly aligned with solar output. Production peaks typically occur during standard working hours and continue into the evening. Processes with thermal inertia or continuous operation cannot simply shut down when prices spike.
This places industry systematically on the wrong side of the intraday curve. Buyers consume most when prices are high and produce nothing when prices are low. Solar-heavy PPAs exacerbate this problem by delivering energy precisely when it is least useful.
The PPA does not fail because it delivers too little energy, but because it delivers energy at the wrong time.
The mechanics of value leakage
Shape risk translates into value leakage through a simple but relentless mechanism.
During midday hours, PPA output exceeds industrial demand. The surplus is sold into the market at depressed prices. During evening hours, industrial demand exceeds PPA output. The deficit is purchased at elevated prices.
The difference between those two prices is the cost of shape mismatch. It is not a theoretical risk; it is realised daily.
As solar penetration increases, this differential widens. What was once a modest inefficiency becomes a structural drag on procurement economics.
Why shape risk is underestimated at signing
Shape risk is routinely underestimated because it does not appear clearly in standard financial models.
Many procurement models use average price assumptions, historical profiles, or simplified load curves. They fail to capture how future solar penetration will reshape prices. They also assume stable relationships between day-ahead and intraday markets that no longer hold.
The result is a false sense of hedge effectiveness. Buyers believe they have locked in a competitive price, only to discover that real-world settlements diverge sharply from projections.
This underestimation is compounded by optimism bias. Stakeholders want PPAs to work. Sustainability narratives reinforce that desire. Uncomfortable scenarios are often downplayed.
Intraday markets: where shape risk crystallises
The intraday market is where shape risk becomes cash.
In volatile systems, intraday prices respond rapidly to forecast errors, weather changes, and system constraints. Solar output forecast revisions can move prices dramatically within hours.
Industrial buyers exposed to intraday procurement during evening ramps face some of the highest prices of the day. Conversely, surplus midday energy is often sold when liquidity is thin and prices are weak.
The asymmetry is stark. Buying is expensive and urgent. Selling is cheap and discretionary. The buyer loses optionality on both sides.
Shape risk versus price risk
It is tempting to think of shape risk as a subset of price risk. In reality, it is more dangerous.
Price risk can be hedged with forwards, futures, or fixed-price contracts. Shape risk cannot. It requires either operational flexibility or sophisticated portfolio management.
A buyer with perfect price hedges but no shape management remains exposed. This is why many industrial PPAs perform worse over time, even as headline prices improve.
Why solar penetration makes the problem permanent
Shape risk is not a transitional issue that disappears once markets adjust. It intensifies as solar penetration rises.
Adding more solar deepens midday price suppression and steepens evening ramps. Without corresponding investment in storage or flexible demand, the system becomes more imbalanced, not less.
In SEE, where grid constraints and limited flexibility amplify these effects, shape risk is likely to remain a defining feature of the power system for the next decade.
The trader’s perspective: shape is the trade
From a trader’s perspective, shape risk is not a problem; it is the trade.
Traders monetise intraday spreads, ramping needs, and forecast errors. They profit from exactly the volatility that industrial buyers struggle to absorb.
When industrial buyers enter PPAs without addressing shape, they effectively donate value to the market. The trader captures spreads created by industrial inflexibility.
This dynamic explains why traders are increasingly interested in structuring products around industrial load, while industrial buyers feel progressively disadvantaged.
When fixed prices amplify shape risk
Fixed-price PPAs can worsen shape risk by locking buyers into rigid structures.
A fixed price applied to variable delivery obscures the true cost of timing. It gives the illusion of stability while embedding exposure to intraday spreads.
As volatility grows, fixed prices become less meaningful as indicators of actual cost. The real driver shifts to when power is bought and sold, not at what average price.
Managing shape rather than ignoring it
The only effective response to shape risk is to manage it explicitly.
This can involve:
- operational flexibility to shift or curtail load
- storage to arbitrage intraday spreads
- hybrid PPAs with firming mechanisms
- active intraday market participation
What matters is not the specific solution, but the recognition that shape risk is central, not peripheral.
Industrial buyers who continue to treat electricity as an annual procurement exercise will remain exposed. Those who manage shape as an operational variable can reclaim value.
Transition point
In solar-heavy SEE markets, shape risk is the silent killer of industrial PPAs. It erodes value slowly, predictably, and relentlessly.
Understanding shape is the dividing line between procurement that looks good on paper and procurement that works in reality.
Elevated by clarion.energy