Synthetic Power Purchase Agreement

April 13, 2021 james

These structured agreements provide financial security for distribution companies and developers, removing a significant barrier to financing and building new renewable energy facilities; As a result, AAEs are helping to increase the number of renewable energy sources in the grid. In a financial AAE, the seller and customer agree on a “strike price” per kilowatt-hour that the seller receives for zero-flow delivery to the wholesale market. Then any monetary difference between the strike price and the wholesale price is exchanged between the two parties, so that the seller always receives the net strike price of his electricity sale. Renewable energy (REC) certificates produced by the electricity producer are generally submitted contractually to the customer under financial AAEs. RECs can give customers exclusive rights to use the green electricity generated by the generator and the corresponding reduction in Scope 2 emissions reductions. However, no electricity is physically delivered from the generator to the customer. Many companies use financial PPAs to access green electricity, including Microsoft, Unilever, Equinix, Mars, Incorporated and Iron Mountain Information Management. [10] Next Central, What is a PPA, available at:, accessed january 5, 2020. CPPAs are not a new phenomenon, but the magnitude and frequency of transactions with CPPA has increased significantly. According to Bloomberg New Energy Finance (BNEF), the clean energy produced by CPPa increased by almost 20% in 2017 (from 2015). [1] In 2018, BNEF estimates that large companies have purchased 13.4 GW of renewable electricity from generators through CPPAs, more than double what it had in 2017.

[2] Due to the growing demand from companies seeking to decarbonize, the CPPA market is expected to continue to grow as global groups shift to this market for renewable energy supply solutions. BNEF estimates that the signatories of the RE100 initiative alone will have to finance about 102 GW of new solar and wind projects worldwide to meet their 2030 commitments. [3] Synthetic AAEs decouple the physical flow of electricity from the financial flow. This will further increase the flexibility of contractual agreements. With respect to synthetic chaining contracts (also known as sPPAs), producers and consumers agree on a price per kilowatt-hour of electricity, as does a physical AAE. However, electricity is not delivered directly to the consumer from the power generation facility. Instead, the producer`s energy service provider (for example. B an electricity distributor) takes the electricity generated in its clearing group and acts (in the short-term electricity markets, to cite an example). The consumer`s energy supplier (for example. B, a municipal plant) obtains exactly the power profile that the manufacturer makes available to its energy service provider on behalf of the PPA consumer partner, the purchase being made on a platform such as the spot market.