Shape risk is the risk that a generator's real output profile differs from the profile used to price its power purchase agreement. Power is worth different amounts at different times of day, so the shape of the output matters as much as the volume. A PPA priced on the wrong shape loses margin in every interval, for the whole term of the contract.
Most PPAs are still priced on a regional or national average generation curve. That average smooths away everything that makes a site different, such as a tracker that pushes solar output into the afternoon, a wind farm with its own daily pattern, or local weather.
The cost of that gap is growing in both the UK and Australia. As more solar connects, midday prices fall and negative-price periods become more common, so output in the wrong hours is worth even less.
Illustrative example (not market data): a regional solar curve values a farm's output at $60/MWh, but a site-specific forecast values it at $55/MWh. On 100,000 MWh a year over ten years, that $5 gap is $5 million priced into the contract that the asset will never earn.
The fix is to forecast generation for the specific site, then value that output against the forward price curve interval by interval. The result is the price the asset can actually earn, not the price an average asset would earn.
Factor, a forecasting-led pricing engine used by energy retailers and gentailers in Australia, New Zealand, the UK and Europe, does this in a single run. It builds hyperlocal generation forecasts into the pricing model and returns a price in about 10 seconds, so originators can test terms while a deal is still live. Most teams are up and running in two to four weeks. Factor is part of Gentrack.
