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A Power Purchase Agreement is a purchase and delivery agreement between two parties. Usually between a (renewable) energy producer and a customer. It stipulates that one party supplies power to the other party.

The customer agrees to buy this power for a certain period of time. This is usually a large company with high energy consumption. We then speak of a corporate PPA. With the agreement, energy is purchased for a longer period at a fixed price.

Security in energy purchase

Through the agreement, the energy producer has a guarantee that the produced energy will be taken. This is necessary. It makes the investment profitable and helps to secure financing from investors. In recent years, the number of PPA’s has been growing considerably.
Many benefits for the buyer
Companies are more concerned than ever with sustainability. Their own electricity supply is an important component. A PPA can make the electricity mix greener all at once. This means that a greater proportion of the electricity consumed within an organisation is renewable energy. Thus, a PPA contributes to the energy transition.
Furthermore, a PPA offers:

A stable energy supply
A fixed energy price for the long term, usually for 5 years
A worry-free supply; the producer ensures that the green energy reaches the customer (in the case of a physical PPA, more on this later)
Organisations have the freedom of choice to choose a PPA that suits their operations.

The solution to smartly switch off energy production during peak hours is COMCAM’s Steering Box Energy Intelligence. It allows solar panels to be automatically switched off during peak times, which can improve PPA positions and reduce significant costs for the producer.

Mass adoption of PPA?

Based on its benefits, a PPA is the ideal deal for many organisations. Yet a PPA also has risks. Not all organisations are willing to take those risks.

The stable price can become a disadvantage, for instance, if energy prices drop sharply. And how do you estimate whether the PPA will still be appropriate for your business in five years’ time? These are things to consider carefully before entering into a Power Purchase Agreement.
In a nutshell:

Renewable energy production is weather-dependent and therefore variable. If production is disappointing, the buyer needs to be able to compensate.
Entering into a PPA means a long-term deal. That while future energy needs are difficult to predict.
It is possible for the fixed energy price to be higher than the market price during periods. The customer will pay the higher price when that happens.
Also, new developments may cause energy to be produced more efficiently and cheaply. The customer is not able take advantage of this.

PPA forms

The customer has a choice of different PPA forms. For instance, between a “physical” and “virtual” PPA.

The physical PPA
This form appeals to the most. The customer buys the generated energy directly from the producer. And thus uses the renewable energy himself.
The virtual PPA
This form of a PPA is indirect. The organisation contracts with a renewable energy supplier, but does not use the energy itself. The renewable energy is supplied to the market. The organisation continues to receive energy from its own energy supplier.

If the market price is higher than the agreed price between producer and buyer, the buyer has an advantage. By entering into a PPA, an organisation contributes to the energy transition and can even receive GO certificates (guarantee of origin).

A promising product

A PPA is a great product with many advantages. It suits an organisation with high energy consumption. An organisation capable of properly mapping future energy needs. And has the means to absorb price and supply risks. Or by working with an energy portfolio specialist. It requires a lot of knowledge and strategy. If those conditions are met, a PPA can be a very interesting option for stable energy supply that contributes to sustainability. That is a great ambition now and in the future.

Interested?

COMCAM can provide a PPA for your business through our unique approach to Energy Portfolio Management. COMCAM is the specialist in all options for energy contracts for supply and feed-in. Through our independent position, we know the possibilities with the energy suppliers. Our analysts follow all price developments closely. We can react quickly thanks to our direct access to the energy trading markets. Would you like to know more about our possibilities? Contact us without obligation.