The rise of corporate PPAs by Baker & McKenzie
PDF available online (URL)
Prepared by Itaru on 19 February 2017
- Rapid growth of corporate PPAs (data from the US)
- Early entrants
- Google, Facebook and Amazon.
- In Europe, smaller companies are forming consortia to generate sufficient power demand to make a PPA
- Primary motive: economic
- Secondary: green/sustainable
- Even though the benefits for both offtakers and generators are substantial, price risk is seen the highest for the offtakers.
- Others: counterparty risk, accounting considerations and regulatory/subsidy issues
- Structure of PPAs
- Often complex
- ¾ of corporate PPAs were synthetic
- Contract-for-difference: paying the difference between the agreed price and market price between offtakers and generators
- Options: likely that offtakers provide put options to generators in case the price drops below a certain level and then buys call options from generators in case the price rises above a certain level
- Commodity hedges: using natural gas and/or coal
- Financing renewable energy projects
- More challenging due to the credit rating, demand profile and collateral allocation.
- Security over specific collateral should be sought, letter of credits
Corporate PPA marketplace (platform/exchange)
Supported by RMI