Power Purchase Agreement (PPA)

PPA (Power Purchase Agreement) contracts are also starting to be used in Slovakia by more and more companies that want to reduce their carbon footprint. Green PPAs will help you meet your decarbonisation goals and, what’s more, ensure stable electricity costs in the long term.

PPA model

The European Commission sees long-term renewable energy purchase agreements (RPAs) as one way to achieve a massive increase in renewable energy in Europe. According to Directive (EU) 2018/2001, also known as RED II*, wind turbines, photovoltaic systems and hydropower are the most sustainable ways to generate green electricity.

*RED II does not include nuclear energy among RES.

One of the solutions to increase interest in the use of RES is the PPA (Power Purchase Agreement). It is actually a “power purchase agreement”, i.e. a long-term contract at a fixed or indexed price. The PPA provides the parties with price certainty for the power component of the electricity supplied (stability of future costs and revenues) while guaranteeing the origin of the electricity.

PV Power Plant

  • New PV power plant,
  • PV power plants will produce electricity for a specific customer

Network

  • Engie Delivers generated electricity (MWh) to the RDS grid
  • The client takes the same volume from the grid in standard mode

Investment

  • ENGIE investment
  • Engie finances, builds, operates

Client

  • The customer mutually agrees to take electricity for 5 or more years from a specific generation source
  • Thanks to ENGIE’s investment, the customer will be able to cover its electricity consumption from renewable sources up to 25% from PV and up to 70% in the case of wind power.

Variants of PPA contracts

A number of specific parameters must always be taken into account in order to select the appropriate variant.

Off-site PPA: “Pay as Contracted”
(“Pay as Contracted”.)

The site of production of green electricity and the site of consumption are not on the same premises. The green electricity producer guarantees 100% supply from its generation source or purchased. The electricity so supplied shall have a guarantee of origin. The price under a “Pay as Contracted” PPA contract is generally higher than that under a subsequent “Pay as Produced” PPA contract.

Off-site PPA: “Pay as Produced”
(“Pay as Produced”.)

The place of production of electricity and the place of consumption are not on the same premises anyway. The consumer undertakes to take a certain percentage of the green electricity produced, while the producer does not guarantee the volume and structure of its production (due to climatic conditions – length and intensity of solar radiation, wind strength, number of wind days). 100% of the electricity so delivered has a guarantee of origin. The price under a PPA “Pay as Produced” contract is generally lower.

On-site PPA

The place of production of green electricity and the place of consumption of this electricity are on the same premises.

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How does it work?

We create a link between your company and a specific renewable electricity generation source.
With renewable energy you can cover:
up to 24% of your consumption volume when using photovoltaics
up to 75% when combining PV with wind power.
In this way, you are able to secure a long-term fixed price per MWh of electricity supplied under the PPA.

1. Choosing the right variant

    • According to your specifics, we will define the best PPA contract option. The result is an indicative offer.

2. Term-sheet

    • A PPA contract is a joint commitment for 5 to 25 years. All terms and conditions need to be discussed and understood in detail.

3. Signing of the PPA contract

    • Defining the terms of the contract and setting the PPA delivery start date.

4. Construction of an electricity generation source

    • The course of construction of a given type of production resource with agreed production capacity and contractual terms.

5. Starting the electricity supply

§ A predetermined date for the start of electricity supply. You will receive a guarantee of origin in a 15-minute profile for the withdrawn electricity

Advantages of the PPA

  • Long-term fixation of the power electricity price (approx. 15 years)
  • No investment required on your part – replacing capital expenditure with operating costs
  • Guaranteed carbon footprint reduction
  • Guarantees of origin are part of the electricity supply
  • The customer buys electricity from a specific generation source
  • If the green source produces more electricity than the customer consumes, the supplier will sell it to other customers,
  • If the green source produces less electricity than the customer consumes, the supplier buys it from other producers
  • PPA is the way to achieve a massive increase in the green energy ratio

PPA in industry

In addition to electricity and gas price shocks, the industrial market is also experiencing growing interest in solutions for the Net Zero and ESG 2025 targets, under which European industry seeks to reduce its carbon footprint in Scope 1 / Scope 2 / Scope 3.

Green PPAs (green electricity supply) are a direct tool for reducing the carbon footprint with the fulfilment of Scope 2 targets, with the European market gradually moving from the simple solution of green GoO (Guarantees of Origin) certificates to on-site generation from PV and the purchase of green electricity from specific renewable sources, with a priority on new, “additional” sources (as opposed to existing subsidised power plants built on the basis of state support).

The automotive sector is one of the sectors that is placing increased emphasis on the use of green energy. Several European automotive brands have already informed their suppliers of the requirements related to the transition to full green electricity from 2025 in the form of Green PPAs. This means that individual plants in the supply chain will have to contract green electricity from their energy suppliers, with an emphasis on new RES (wind, photovoltaics) and their guarantees of origin.

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