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The world is changing and the need for electricity continues to grow as the power generation markets continue to evolve. The energy demand in many parts of the world tends to outstrip the available supply. In fact, the Energy Information Administration (EIA) reports that world energy consumption will grow by nearly 50% between 2018 and 2050. The central enabling mechanism that enables power generation infrastructure to continue to grow through the investment of both governments and private organizations, is a Power Purchase Agreement (PPA).
PPA is a commercial contract agreement that enables power supplying entities (e.g. Utilities) to supply power to privately owned power generation projects (e.g. Offtakers). Constructing power generation facilities and supporting infrastructure can be expensive. Hence, PPA will provide a modicum of certainty to principle participants as to the execution of the EPC contract, the repayment of the debt, the number of resources provided and the longevity of supply.
3 benefits of a commercial PPA
- Hedge against the risks of fluctuating energy prices
- Have flexibility in the terms of the contract
- Reach your renewable energy goals faster
Hedge against the risks of fluctuating energy prices
Electricity prices often fluctuate according to market conditions such as electricity demand, fuel costs, and power plant and manpower availability. A PPA helps your organization to hedge against the risk of fluctuating energy prices by negotiating with the energy supplier for a fixed price for the supply of power. On average, electricity prices are reported to be on an upwards trajectory. As energy price is projected to increase, fixing electricity prices would help your organization to keep costs low and reduce financial risks.
Have flexibility in the terms of the contract
Entering a PPA enables you to have control over your organization’s energy needs. Unlike traditional energy contracts where the seller has the upper hand, PPA enables equal opportunities for you to negotiate the exact terms of the contract. Non-regular forms of transactions such as purchasing a large volume of electricity through a single transaction would be possible.
Reach your renewable energy goals faster
Although fossil fuels are a major source of energy, it is beginning to diminish as there is an increase in demand for cleaner energy. Alternative energy sources such as wind, solar, tidal, and hydro are gaining traction in the energy market. Centre for Climate and Energy solutions predicts that renewable energy would form 45% of our energy consumption by 2040. To cope with the changing dynamics of the energy market, a PPA would be more useful. Firstly, unlike traditional energy contracts, PPA enables your organization to utilize solar power to your desired capacity without any caps. Secondly, a PPA agreement would firmly showcase your commitment to meeting renewable energy goals. This would help in positioning you as an environmentally conscious organization in the eyes of the stakeholders, boosting your public relations positively.
Now that we have looked at the benefits of PPA, you may be wondering how your organization can also explore the possibility of entering a PPA. To equip yourself with the necessary skills to confidently manage a PPA, a training course that specializes in the key technicalities and formalities of a PPA will help to enhance your skills and ability to execute a PPA with competence.
Power Purchase Agreements is a 3-day training course which would be held from 2 – 4 December 2020 at Kuala Lumpur. This course has been specifically tailored to explore the complex contractual area of Power Purchase Agreements (PPA). Through problem-solving and open discussion, delegates will understand how the global energy market is continuing to evolve. Topics such as bankability, ‘curtailment’, mechanics of LNG SPA’s and Force Majeure would be discussed. Moreover, key generator issues and risk factors that underpin PPA and knowledge of the operation of assignment provisions would also be explored. At the end of the course, delegates will be able to grasp the key challenges involved with balancing an energy system and successfully manage a PPA.
Feel free to contact us for more information or if you would like to view our training schedule for alternative dates or for more information at firstname.lastname@example.org.