Purchase Power Agreements (PPAs) have existed for almost two decades. However, many businesses that want to take advantage of the savings they offer, especially in the green energy space, are unfamiliar with how they work. That is where we come in. For over 16 years, we have been partnering with businesses in a variety of industries such as hotels, care homes, and retail, helping them optimise energy efficiency, thereby reducing costs.
PPAs provide a way for smaller organisations to purchase their energy directly from an energy producer. They comprise of long-term contracts, a fact which can make those interested in purchasing energy in this way slightly nervous. After all, large conglomerates have the in-house expertise required to successfully understand and negotiate a 20-year agreement (although PPA contract terms have been shortened to 15, 12, or in some cases 10 years to meet buyer demands). Most SMEs do not have this level of specialist in-house resource.
Our clients feel confident in entering into a PPA because we provide expertise at the outset and manage the entire contractual process. From structuring the contract to getting the answers to queries, to managing any disputes that arise, the Maximeyes and Optimeyes teams will take the task of energy procurement off your shoulders.
A brief guide to PPAs
A PPA is a contract between a corporate buyer (off-taker) and the power producer (developer, independent power producer, or investor) to purchase electricity at approved prices for pre-agreed periods. The agreement covers the commercial terms of the electricity sale: length of the agreement, delivery point/date, volume, and price. The electricity can be supplied by existing renewable energy assets or new build projects.
The advantages of a PPA include:
- You enjoy the certainty of cost for the length of the contract.
- Fixed energy costs without the upfront capital required to build your own renewable energy plant.
- You will not be responsible for operating and maintenance costs.
- Your business can legitimately claim that most of its energy comes from renewable sources.
Working alongside our team, who have relationships with all the UK’s main energy suppliers, your SME can access the same benefits as a large corporation. Furthermore, you can be confident that we will ensure all necessary elements of the PPA are examined and negotiated.
Contractual considerations when negotiating a PPA
During PPA negotiations, you need to consider:
- Negotiations can take many months, during which time, energy prices can wildly fluctuate. To mitigate this, it is good practice to define a reference price for the negotiation period.
- Changes in the law, relating to the acquisition and distribution of energy and taxes could affect both revenue and risk for one or both parties. The PPA must set out how statutory changes will be handled.
- The method by which disputes will be managed and resolved.
- How will under-performance be treated?
- What circumstances may trigger an early termination of the PPA?
- Both parties to such a long-term contract must protect themselves against credit risks. For example, what if the energy provider runs out of investment funds partway through the contract? Or the off-taker falls into insolvency? These risks need to be considered and mitigated.
In addition to these points, there must be an in-depth understanding of the off-taker’s energy requirements and how much of this can be met by the PPA. Many consumers are unaware that a renewable energy PPA will not meet all their energy needs. Our team, having managed hundreds of PPAs over the past 16 years, will work out the level of PPA your business needs and the most effective way to source the balance of your energy requirements.
Concluding comments
The Maximeyes Group assists SMEs exploring the benefits of PPAs. Our knowledge and experience ensure the process is smooth, from beginning to end, and your risk is mitigated through careful planning and negotiation. By managing the process on your behalf, you are left free to focus resources on your customers and developing further revenue streams.
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