Electricity generated by RES through Power Purchase Agreements
29th April, 2020
Possible ways how industrial companies can contribute to the low carbon energy transition of the sector is a purchase of electricity from renewable energy sources (RES), which is one of the measures supported by financial mechanisms addressed by FIRECE project. In this regard, so called Power Purchase Agreements (PPAs) has become more important and gained growing attractiveness.
The purchase of “clean” electricity directly from the producer through PPA represents a systemic change in the way of financing the production of electricity from RES and the transition from state-financed support to private support.
The contract for the purchase of electricity from RES is concluded between the customer and the producer of electricity from RES, irrespective of the type of source and the technology used, for up to 25 years. The subject of the contract is a long-term supply of “clean” electricity to the customer, who receives certificates from the producer proving the origin of electricity from RES (guarantees of origin).
PPAs bring benefits to both customers and also electricity producers; on the customer's side, it is primarily a long-term fixation of electricity costs, minimization of the risk of fluctuations in electricity prices and guarantee of electricity consumption from renewable sources. Producers of electricity from RES have a long-term predictable income, which guarantees their return on investment and the possibility of bank financing.
The popularity of PPAs has been increasing worldwide, which is obvious from the growing volume of installed capacity of RES electricity provided through these contracts.
