The European Union has set targets for the decarbonisation of the economy to reduce our impact on the environment and tackle the biggest risk in our lifetime:climate change. In order to meet the targets, Member States need to facilitate the build-out of renewable energy and invest in grid infrastructure to incorporate the changing supply-and-demand characteristics that come with an electricity grid with high volumes of renewable power.
Corporate renewable electricity sourcing is set to play a large part in the transition of the economy and can provide developers with long term revenue stabilisation which allows them to obtain financing to build renewable energy projects. This is especially important in Members States where government support schemes do not provide revenue stability. In addition, corporates are increasingly looking at ways in which they can reduce the impact of their own operations on the environment, both for reputational reasons and to gain a competitive edge in a society in which awareness and the importance of environmental impacts are ever increasing.
Corporate renewable power purchase agreements (PPAs) can provide the security of returns which a developer of renewable power plants needs to secure lending to build the project. But they are not simple. PPAs have many risks associated with them, risks that have traditionally been handled by utilities, developers and energy traders. Now these risks need to be engaged and owned by corporates who generally do not have expertise in the area. This is one of the main barriers to the development of PPAs throughout Europe. RE-Source is committed to facilitating PPAs, be it by helping to raise awareness at the national level of administrative barriers which governments should remove, or by providing educational material in our Corporate Buyers’ Toolkit.
This report, which will be a living document in that Toolkit and will develop over time, is one of the tools. The report has been written in two parts. Part 1 outlines the current trends in PPAs and describes the risks associated with PPAs, the typical PPA contract structures, and how the risk-sharing differs between the counterparties. Part 2 is written by providers of risk
mitigation products, and sets out how that product mitigates certain risks. We hope this report helps you on your way to signing a PPA and contributing to the build-out of new renewable power.