A power purchase agreement is only as reliable as the project behind it. That has always been technically true. It became financially consequential in 2024 and 2025, when interconnection queue delays, permitting backlogs, and construction cost inflation pushed a significant share of contracted renewable energy projects past their original commissioning dates. The volumes those projects were supposed to deliver to corporate buyers did not disappear. They were simply unavailable, and the buyers absorbed the cost of sourcing equivalent supply from the spot market.
For finance teams that built their energy cost models around contracted PPA rates, delivery shortfalls create a specific kind of variance that is difficult to explain: the price they are paying for energy is higher than the price in their agreement, not because the market moved, but because the contracted supply did not arrive. The accounting is straightforward. The explanation to leadership is less so.
Why Interconnection Delays Are the Primary Driver of PPA Delivery Failures in 2026
The U.S. interconnection queue holds more than 2,600 gigawatts of generation capacity seeking grid access as of early 2026, according to Lawrence Berkeley National Laboratory's annual interconnection queue report. Wait times in major independent system operator regions have extended to five years or more in many cases. Projects that were designed to enter service in 2024 or 2025 are instead waiting for interconnection agreements that the grid operator cannot issue until studies are complete and transmission upgrades are funded and constructed.
For corporate buyers with PPAs tied to projects currently in the interconnection queue, the delivery timeline risk is material and ongoing. The project may be contractually obligated to deliver power by a specified date. The grid operator's schedule may make that date impossible to meet. And the contract's force majeure provisions may not cover grid-side interconnection delays broadly enough to relieve the supplier of its delivery obligations or the buyer of its obligation to purchase replacement power.
FERC's 2024 interconnection reform rule, Order 1920, was designed to address queue backlogs through cluster processing and transmission planning improvements. Implementation is underway, but the reforms take time to affect projects already in the queue. The backlog accumulated over the past several years is not clearing quickly, and the corporate buyers whose supply agreements depend on projects currently waiting in that queue are carrying delivery risk that is not resolved by a regulatory order.
What PPA Delivery Shortfalls Cost Finance Teams Beyond the Spot Market Premium
The most visible cost of a PPA delivery shortfall is the price difference between the contracted rate and the spot market price for replacement power. In markets where spot prices exceed contracted PPA rates, which has been the case in several major markets during peak demand periods in 2025 and 2026, that premium can be significant. A buyer with 100 megawatts of contracted supply experiencing a 20% shortfall during a high-price period can absorb millions of dollars in unbudgeted energy costs in a single quarter.
Beyond the spot premium, delivery shortfalls create two additional costs that are less immediately visible but equally real. The first is the loss of the renewable energy attributes associated with the undelivered power. For organizations using their PPA as the foundation of their Scope 2 emissions accounting, a delivery shortfall reduces the zero-carbon supply they can claim. Replacing those attributes requires purchasing renewable energy certificates at current market prices, which in some markets are higher than they were when the PPA was negotiated.
The second cost is the management time and legal expense associated with identifying the shortfall, documenting it under the contract's notice requirements, and pursuing whatever remedy the agreement provides. Most contracts require prompt written notice of a delivery failure, and buyers who do not maintain active monitoring of contracted versus actual delivery are frequently outside the notice window before they realize a shortfall has occurred.
How Finance Teams Should Model Delivery Risk in Their Energy Cost Projections
The standard approach to energy budget modeling treats contracted PPA volumes as certain and spot market exposure as the variable. That approach underestimates the actual risk in any portfolio that includes PPAs tied to projects that are not yet commissioned or that have been commissioned within the past two years. Those projects carry higher delivery uncertainty than mature, operating assets, and the cost of delivery shortfalls from those agreements needs to be modeled as a risk scenario rather than excluded from the projection.
BloombergNEF's 1H 2026 Corporate Energy Market Outlook reported that global clean PPA volumes fell in 2025 due to power price volatility and policy risks, creating significant vulnerabilities for corporate finance teams. Increased risks in 2026, including tight copper markets and grid constraints, heighten the potential for project delivery shortfalls, according to BNEF analysis. The majority of organizations treated contracted volumes as fully available for budget purposes and handled shortfalls as after-the-fact variance explanations rather than forward-looking risk items.
The organizations that have shifted to scenario-based delivery modeling are treating each PPA as a probability-weighted supply source rather than a certainty. Projects in the interconnection queue carry higher shortfall probability than operating assets. Projects with commissioning dates that have already slipped carry higher probability still. Building that differentiation into the energy cost model allows finance teams to carry a more accurate budget and to surface the delivery risk in terms that leadership can act on before the variance appears in results.
What Contracts Should Say About Delivery Failure and What Many Actually Say
Well-structured PPAs include specific provisions governing delivery failure that address three questions:
- What constitutes a delivery failure
- What notice and cure rights the supplier has
- What remedy the buyer holds if the cure period expires without delivery resuming.
Remedies typically include a right to purchase replacement power at the supplier's expense, a right to terminate the agreement after a specified period of non-delivery, or a combination of both.
The practical problem is that many agreements executed during the high-volume procurement period of 2021 and 2022 include broad force majeure definitions that can encompass interconnection delays as supplier-excused non-performance. If interconnection delay qualifies as force majeure under the agreement, the supplier is not in default, the buyer has no remedy, and the buyer absorbs the full cost of replacement power. Finance teams reviewing their existing agreements need to understand which of their PPAs include interconnection-as-force-majeure language, because that provision fundamentally changes the buyer's risk exposure and options.
