1. HOW A CORPORATE PPA WORKS
A Power Purchase Agreement (PPA) is a long-term agreement for an energy buyer to purchase electricity generated by an off-site renewable energy project, like a solar or wind farm. This allows the energy buyer to lock in a current electricity price to protect against future rises and volatility in market prices, while the renewable energy generator benefits from certainty of revenue over the PPA term which can help it to secure the finance needed to get a project up and running.
A retailer is a ‘licensed intermediary’ so they are required to supply the electricity consumed by the energy buyer. The PPA can therefore be entered into as a lone standing agreement with the generator, or the PPA can also involve a retailer to link the contract to the supply of electricity and ensure constant supply even during times when the renewable energy generator is not generating. This is commonly known as a ‘sleeved PPA’.
2. THE BENEFITS
An energy buyer may seek a PPA to secure lower energy pricing as a PPA can reduce the cost of electricity below standard retail offers. A well-negotiated PPA can potentially provide savings between 15–47% on the energy component of a typical electricity bill expected in 2020.
However, forecasting long term electricity prices can be difficult and a PPA can offer more predictable energy costs and shield the energy buyer from volatile electricity prices.
3. THE CATCH
PPAs are a great way to save money and protect against future price rises, but in the past, this has only been an option for large corporates. A very large energy demand is needed to warrant the generator taking the time to negotiate these agreements.
That’s why Threadlet has started small business and residential PPAs to open the market up to every Australian. To find out more about how you can benefit, visit Threadlet now.
