From regulatory uncertainty to low fossil fuel prices, the renewable energy industry is competing on a number of fronts around the world.
But in recent years, a new alternative has emerged that has the potential to breathe new life into the sector: the corporate renewable power purchase agreement (PPA).
The corporate renewable PPA market has grown significantly in recent years.
Statistics on the volume of corporate renewable PPAs indicate that large companies around the world are now more than ever seriously exploring the purchase of renewable energy.
This trend is accelerating.
What is driving the growth of Renewable PPAs?
- Cost savings is the initial reason.
- On the other hand, an internal green or sustainability agenda as the primary objective for executing corporate renewable PPAs.
- The appetite for “going green” is increasingly high among companies.
- But, for a proportion of companies, neither economic nor green factors are the main reason for entering into Renewable PPAs, but are based in low-income countries, where alternatives to direct PPAs may not be available because there is no access to the grid or because the power supplied is extremely intermittent. This is a strong driver for growth in many emerging economies
What types of renewable PPAs do we work with at Bettergy?
There are two possibilities:
- A physical one where the connection is by direct line, i.e. a renewable installation is connected through a consumer’s internal grid without using the general grid.
- The second, where the connection is virtual, would be a contract in which a buyer would take the rights to the electricity generated at a more beneficial price than those existing in the wholesale market, but using the grid for that exchange.
Physical PPAs
Physical PPAs are those in which there is a direct physical delivery of electricity, contracts where a long-term purchase and sale price of electricity is established.
Financial PPAs
Financial PPAs are more flexible in their structure and do not require physical delivery of electricity.
They are long-term energy price hedging contracts, in which differences between producer and consumer in price or quantity of electricity are adjusted.
As we can see, Renewable PPAs would have a hedging operation for both parties and ensure the flows of collections and payments (income and costs) of the business of each of the contracting parties.
