Category: Mechanics

N2EX vs EPEX SPOT: Which Reference Price for a UK Virtual PPA?

The one drafting question every widely-read virtual PPA explainer skips because it is written for US or EU markets: which GB day-ahead index should your confirmation actually name.

Every widely-read explainer of a virtual PPA's settlement mechanics is written for the American or European market, and every one of them skips the one question a British buyer actually has to answer before signing: which published index does the confirmation name as the reference price?

There is no statutory answer

Unlike the government's own Contracts for Difference scheme, which settles against a defined reference price calculated by the scheme administrator, a corporate virtual PPA in Great Britain has no statutory reference index. The confirmation names one, and the choice is a private negotiation between the two parties — which is exactly why so many buyers arrive at signature without having asked the question.

The two candidates

GB day-ahead power is auctioned on two exchanges. The N2EX Day-Ahead Auction, operated by Nord Pool, publishes a daily auction with physical delivery the following day. EPEX SPOT runs its own GB Day-Ahead auction independently — the two exchanges used to compute a single joint reference price under a European coupling arrangement, but each now runs and publishes its own auction result separately. A confirmation that simply says "market price" without naming one of these, and without a stated fallback if that index is discontinued or restated, is a dispute waiting to happen.

Baseload index or the asset's own capture price

The second choice matters as much as the exchange. Some confirmations reference a flat baseload index — the same number for every settlement period. Others reference the specific generator's achieved capture price: the volume-weighted price that farm actually earned in the periods it was generating. For a midday-weighted solar profile, the achieved capture price normally sits below the flat baseload index, because solar output is concentrated in the hours when wholesale prices are typically lower. Baseload and capture are genuinely different numbers on the same day, and which one your contract names changes the economics of the deal materially — not just which exchange publishes it.

What to put in the confirmation

• Name the exchange and the exact product — "N2EX Day-Ahead Auction reference price" or "EPEX SPOT GB Day-Ahead auction price", not "market price".
• Say whether it is baseload or the asset's capture price. These are not interchangeable and the gap between them compounds over a 10–15 year term.
• Agree a fallback for discontinuation or restatement of the named index before you need one.
• Match the settlement granularity. GB wholesale trading resolves into 48 half-hourly settlement periods a day; a monthly-average reference price is a different instrument entirely from a half-hourly one, and the two price very differently against a solar generation shape.

This is one of the mechanical questions that decides whether a virtual PPA behaves the way the headline strike price suggests it will. The full mechanics — settlement, basis risk, IFRS 9 accounting and what a UK buyer can actually claim under REGOs — are set out on our virtual PPA guide.

Sources: Nord Pool — N2EX Day-Ahead Auction; EPEX SPOT — Focus GB. Verified 17 September 2026.