Corporate PPAs can be an all-round win for producers and users

Corporates and industrial power users are playing an increasing role in driving wind deployment but challenges remain before the market can reach its full potential, says Pierre Tardieu

by Pierre Tardieu

19 July 2017

The likes of Google, Norsk Hydro and Facebook are leading the growing trend of major companies looking to secure reliable and competitive power from renewable energy and reduce the risks associated with fossil fuel-based power supply.

The numbers speak for themselves. In Europe, the volume of corporate renewable energy sourcing almost tripled in 2016 compared to 2015. In the US, they accounted for almost half of the installed renewable energy capacity in 2016. Last year, 1.5 GW of renewable energy capacity in Europe supplied power to corporates under PPAs – up from 74 MW just four years ago – a majority of which is in wind energy.

Power Purchase Agreements (PPAs) have numerous economic benefits for generators as well as the wider industry.

First, they facilitate investment for utility-scale projects and thus help to bring new and additional renewable capacity online. Second, they provide projects with a stable income stream, particularly in countries where generators are exposed to some degree of merchant risk, such as Norway and Sweden.

Regulatory regimes in some countries do not allow for direct marketing agreements such as corporate PPAs. The value proposition is difficult in particular in Feed-in-Tariff jurisdictions. While the EU’s new Renewable Energy Directive opens doors to address regulations and market risks, issues related to financing still remain.

Financing wind power projects with a corporate off-taker is more challenging than financing a project with a regulated counterparty (i.e. a utility). Corporates have a lower creditworthiness as off-takers (compared to utilities) due to their frequent fluctuations in power demand.

"Wind producers can supply cheap power thanks to a significant reduction in technology and operating costs, but they need stable revenues"

Wind energy producers can supply cheap power today thanks to a significant reduction in technology and operating costs in recent years.

But they need stable revenues to sustain their investments. Corporate PPAs will play an increasing role in supplying corporates with power below the industrial retail price, while ensuring a stable revenue for wind energy generators.

WindEurope and SolarPower Europe, in collaboration with RE100 and supported by Cefic, will host the first renewable energy PPA event, RE-Source 2017 on 11 October 2017 in Brussels.

Large energy consumers including chemical companies, Google and renewable energy players Engie, EDF Energies Nouvelles, ENEL Green Power, Envision and Vestas will come together with policymakers to ensure Europe can fully reap the benefits of a competitive and reliable renewable energy supply to power its economy.

Pierre Tardieu is chief policy officer of WindEurope