Key information on PPAs

Index

What is a PPA?

A PPAS (Power Purchase Agreements) , or renewable PPAS, is a long-term contract between a producer and a consumer, or between a consumer and an energy trader.

This agreement defines the power purchase price and the conditions for volume delivery.

 At Haya Energy Solutions, our PPA experts advise companies throughout all phases of the contract — from technical and economic analysis to negotiation and risk management.

Types of PPAS

On-site PPA

An on-site PPA is a contract for the supply of electricity from an ad hoc renewable plant located on the customer’s property and connected to its internal network. The renewable developer makes the investment and designs, installs, operates and maintains the plant. Afterwards, the developer sells the produced energy to the customer.

Off-site PPA

An off-site PPA is a contract associated with a renewable plant, which is connected to the transmission or distribution network of a country to take energy from its point of origin to the consumption point.

Based on how the energy is delievered

Physical PPAS

Basic content of the PPA contract: this includes how much energy is supplied, duration of the contract, price, measure and point of delivery of the energy and the guarantees established for cases of non-payment risk, regulatory changes, potential price review formulae, penalties regime and contract termination regime. Deviations must also be regularized.

Financial PPAS

Financial PPAs are Contracts for Differences (CfDs) settlements, with a fundamentally financial content. The main content focuses on settlements and how these are made; also, what to do if there are any discrepancies. Normally, they do not focus on a specific installation, or physical or regulatory aspects of the electrical system. However, as they are linked to the state of the electricity market, it is necessary to establish a clause for any potential change of law and resulting causes and consequences of early resolution.

Based on how much energy is delivered

Baseload PPA

The customer consumes the gross generation from the plant. This is the most competitive product when it comes to price; however, it is also the riskiest product for the customer as generation from renewable sources is not predictable.

As-generated PPA

The renewable developer converts the gross generation from the plant into a baseload product. This is the most common product among customers, as there is an interesting balance between cost and risk. However, not all developers are able to offer this type of PPA

As-consumed PPA

The renewable developer converts the gross generation into a curve which faithfully mirrors the customer consumption curve. This is the most common product among non-expert customers as this is the product in which the developer gives most added value to the customer. Only companies with a large generation portfolio can compete for this type of PPA.

Outlook: European context

In May 2022, the Commission proposed a series of measures in its REPowerEU package to achieve three key objectives: saving energy, producing clean energy and diversifying the EU’s energy supply sources.

In early 2023, the Commission launched a public consultation to study the reform of the electricity market. Member States submitted various proposals. However, all insisted on the need for a more reliable, stable and predictable market to encourage massive investments in renewable energy. Instruments such as PPAs are promoted to achieve the double objective of price stabilisation and development of renewable energies.

'' Renewables Power Purchase Agreements are expected to become a major driver in the coming years '' HES.

 

2022 was a historic year in the energy sector, marked by a triple crisis (gas supply disruptions, unavailability of the French nuclear fleet and shortages of hydroelectric production).

However, the number and volume of PPAs signed remained in continuity with the growth of the previous five years. For the fourth consecutive year,

Spain occupied the first place, with 3.2 GW of PPAs signed

The two main sectors that signed PPAs were IT and heavy industry (Metalury & Mining).

Contracted Capacity in PPAs per Sector (as of March 2023). Source: RE-Source European platform for corporate renewable energy sourcing

Regulation in the European Union

The Council adopted its stance (overall strategy) with regard to a proposal for legislation to ensure the integrity and openness of the wholesale energy market (REMIT). By outlawing trading based on insider information and discouraging market manipulation, the plan seeks to support a free and open market for wholesale energy in Europe.

The remaining components of the reform, which seek to reduce the dependence of electricity prices on unpredictable fossil fuel prices, safeguard consumers from price spikes, hasten the deployment of renewable energies, and enhance consumer protection, will be decided later.

Optimal support conditions include: i) a growing market of renewable energy projects, ii) high liquidity of power futures, thus enabling long-term hedging, iii) simplified procedures enabling the signature of direct contracts between consumers and clients and iv) public tenders that are compatible with corporate PPAs.

"The current electricity market design has delivered an efficient, well integrated market over many decades, but tight global supply and Russia’s manipulation of our energy markets has left many consumers facing massive increases in their energy bills. We are today proposing measures that will enhance the stability and predictability of energy costs across the EU. Driving investment in renewables will help us reach our Green Deal goals and make the EU the powerhouse of clean energy for the coming decades."

PPAS advantages

Governments

PPAs offer an alternative way to finance the deployment of renewables.

Trading companies

Renewable PPAs are a guarantee of stable and expected revenues over along period of time;  possibility to finance their projects and installations

Renewable energy project developers

PPAs are an alternative and/or complementary source of stable income compared to public support schemes or commercial markets.

Consumer companies

  • Electricity supply costs are fixed for a long-term period

  • Risk of volatility associated to the electricity market price is
    reduced

  • Green energy consumption is proven by certifying GOs
    (Guarantees of Origin)

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Diego is a Consultant at Haya Energy Solutions. He has 1 year of experience specializing in developing models for energy price forecasting, energy availability and production, and battery optimization.

Diego obtained a bachelor’s in Science in Political Economy from the King’s College London, and later a dual Master’s in Management and Computer Science from the IE University of Madrid.

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Céline is the Head of Business Development and Administration at Haya Energy Solutions. She plays a key role in driving the company’s growth by expanding its market presence, strengthening brand positioning at the European level and implementing strategic initiatives. She also manages the company’s administrative operations, ensuring efficient financial management, including accounting and budget oversight.

She is also a Consultant at Haya Energy Solutions, specialising in the optimisation of energy procurement through the analysis of market trends and regulatory developments. She also provides strategic guidance to identify opportunities and tailor solutions to the specific needs of each client.

Céline holds a degree in Philology from the Sorbonne University and holds a master’s in Project Management and Cultural Tourism from the University of Clermont-Ferrand.

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Head of Business Development and Administration

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Investment Advice

“Decarbonization of the Energy and Transport sectors is arguably today’s main economic driver for the industry.”

Biography

His career started in civil engineering as a Project Manager in France, Martinique and Australia. Afterwards, he became the General Manager of a subsidiary in Venezuela. In 1992, he established Dalkia in Germany (district heating, cogeneration, and partnerships) and represented Véolia in Thailand. In 2000, he opened the commercial office of Endesa in France to take advantage of the liberalized retail market. From 2006, as a development Manager at Endesa France, he led Endesa’s plan for Combined Cycle generation in France and developed the wind and PV portfolio of Snet at the same time. 

Philippe worked for 3 years at E.ON’s headquarters coordinating the company´s activities in France. He was strongly involved in the French hydro concession renewal project. As a Senior Vice President – Project Director at Solvay Energy Services from April 2012 to February 2014 he was in charge of the H2/Power to gas and European direct market access deployment projects. Philippe has been an HES expert since 2014.

Philippe holds engineering degrees both from the Ecole Polytechnique and the Ecole Nationale des Ponts & Chaussées (France) and has a combined experience of more than 25 years in energy and infrastructure. In addition to English, Mr. Boulanger is fluent in French, German & Spanish.

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Electricity Expert

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“The world is changing. New investors pay particular attention to the energy sector while historical actors adapt their position to the market.”

Biography

Antonio is the founder and President of Haya Energy Solutions, a specialized consulting firm focused on the energy sector, which has developed M&A projects in renewable and conventional power generation, cogeneration, district heating, gas and power retail, energy procurement and power optimization in France, Spain, Portugal, Germany and UK.

Prior to this, Antonio was CEO of KKR’s CELEST Power in France (2x410MW CCGT). He was also CEO of Endesa France and General Secretary, Strategy & Corporate Development Director at E.ON France. Formerly, he held different positions at Endesa, including Responsible for M&A at Endesa Europe and Regulation Specialist at Endesa Distribution.

Antonio holds an MBA from the University of Deusto and a degree in Industrial Engineering from the Higher Technical School of Engineering of the University of Seville.

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