What is a PPA?
To fully understand what a power purchase agreement is, it’s important to understand the state of the power generation industry. Traditionally, corporations have procured electricity from utilities, often on a short-term basis without long-term price certainty and with no control over the source of power delivered.
Recently, organizations are increasingly looking to reduce their environmental footprint and their energy costs. This is leading to consumers purchasing directly from renewable energy generators.
These contracts are known as “Power Purchase Agreements” or PPAs. PPAs are long-term contracts to buy renewable energy in agreed volumes and at prices that meet the needs of the generator and the consumer. These agreements provide both parties not only with financially beneficial solutions, but also secure clean renewable energy supplies to the corporates and enable investment in additional renewable energy developments.
What are the Benefits of Renewable PPAs for Developers & Investors?
As government subsidies are removed, long-term price certainty is more important than ever. A PPA is a tool that can be used to provide secure long-term revenue to projects. This could be in the form of a fixed price, a price that floats within a band, or a floor price.
Power Purchase Agreements for renewable energy can be negotiated between generator and offtaker at any time – there’s no need to wait for government tenders. Instead of entering an auction with uncertain outcomes, a PPA contract can be negotiated bilaterally on a schedule that suits the parties.
The secure contracted revenues from a credit-worthy counterparty provided by PPA reduces the volatility in revenues for the project an enables debt and equity financing to be secured more easily.
What are the Advantages of Corporate PPAs?
PPAs provide long-term certainty in your electricity costs, protecting your business from volatility in energy prices. The offered prices are normally below analyst forecasts of future electricity price, locking in potential cost savings together with customized flexibilities.
Choosing to enter into a PPA can help your organization reduce its carbon intensity and help your company progress towards its renewable energy targets. PPAs typically involve the transfer of Guarantees of Origin to the consumer, providing evidence that you have purchased that quantity of renewable energy.
Leadership in sustainability
Greenhouse gas emissions continue to rise to more than 50% higher than their 1990 level. Global warming is causing long-lasting changes to our climate system. It’s more important than ever to be on the forefront of climate leadership, and renewable energy PPAs are a great way to achieve this leading position. Signing a PPA will enable a new project to be built, generate more renewable capacity and make the world a greener place.
With our broad network of corporate contacts, GE is in a leading position to originate PPA opportunities with credit-worthy counterparties.
Our experience as equipment manufacturer, operator, financier and investor, gives us the skills and experience to structure renewable Power Purchase Agreements in creative and advantageous ways to ensure that offtaker requirements are met while ensuring the bankability of the PPA.
When you choose GE to support you with your PPA you get the strength of more than 100 years of technological expertise.
You will also get access to GE’s:
- Capability to originate offtake contracts, through our broad corporate network
- Experience and skills to structure and negotiate the Renewable Energy PPA, ensuring that offtaker requirements are met without sacrificing bankability
- Wide portfolio of renewable energy solutions, from onshore to offshore wind turbines to hydropower equipment.
- Global footprint, as well as energy consulting and finance experience
Ready to get started?
Contact a GE specialist today