Corporate PPAs

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)
    • 2008-2012: 650 MW
    • 1H of 2015: 1.6 GW
    • 2015: 3.2GW (URL)
    • Renewable Energy Buyers’ Alliance: targets 60 GW by 2025 (URL)
  • Early entrants
    • Google, Facebook and Amazon.
    • In Europe, smaller companies are forming consortia to generate sufficient power demand to make a PPA
  • Incentives
    • Primary motive: economic
    • Secondary: green/sustainable
  • Risk
    • 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)

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