Power Purchase Agreements (PPA)
Power Purchase Agreements (PPA)
What are Power Purchase Agreements (PPA)?
Power Purchase Agreements (PPAs) are legally binding contracts between two parties—one that produces electricity (the generator) and another that agrees to buy it (the buyer). These agreements cover the purchase and sale of a specific quantity of energy generated from renewable sources, either planned or already produced.
PPAs may define either a fixed volume of energy or a percentage of the total electricity generated by the seller. Pricing can be set at a fixed rate per kilowatt-hour or based on fluctuating market rates, depending on the contract terms.
Some background information on PPA
A brief explanation on the procurement process for PPA will be presented. The UK Government decided to offer financial incentives for renewable projects or investments, such as subsidies, to promote renewable energy products. Due to advances in technology, the cost of building renewable assets has decreased over the past few years and as a result, the growth in renewable projects has accelerated. In the process, the UK Government abandoned the support service.
In these circumstances, PPA will allow renewable asset owners/developers to implement a consistent revenue stream and enables the financial security to renewable project. Not only generators, but also buyers benefit from PPA. For energy buyers, it can assure fixed long-term costs and enable a company to (indirectly) fund a renewable project and receive a green attribute, e.g., Renewable Energy Certificates.
Who are suitable for PPA?
To begin your Power Purchase Agreement, you need to be in one of the following two situations. Either a renewable project ready to be built (solar, wind, etc.), with a pre-agreed connection to the grid I.e., and export meter installed, or an existing renewable project (solar, wind, etc.) that needs refinancing (renewal contract needed)
What are the benefits of PPA?
There are mainly two benefits that you can receive from PPA. First, you get price protection. Signing a PPA protects companies from fluctuating energy prices, because the initial price you agree to pay extends throughout the entire length of your PPA. This means that even if the price goes up, you carry on paying the same. Second, you can obtain business sustainability.
PPA helps reduce your carbon footprint, and running companies on renewable energy is always a good thing which helps a business strive toward meeting their sustainability targets. Furthermore, PPAs often involve the giving of a Guarantee of Origin to the consumer, which is effectively a certificate of evidence that you have purchased a certain amount of renewable energy.
Here’s The Plan and PPA
Here’s The Plan will procure a quote from the export market which is influenced by many factors making it hard to predict when it is ideal to lock in. With the company’s experience in handling export contracts, we will provide advice on when the best timing to export rates will ensure you receive competitive rates.
