Power Purchase Agreements (PPA)

Understanding Power Purchase Agreements

A power purchase agreement (PPA) is a contractual agreement between two parties, the seller who generates electricity and the buyer who agrees to purchase the electricity. The seller is usually referred to as the “Developer”, “Asset owner” or “Generator”, and the buyer is referred to as the “Offtaker”.

The buyer agrees to purchase renewable energy from a specific asset, within the boundaries of a pre-established pricing framework from the seller. This can be a fixed or flexible pricing structure. Power Purchase Agreements are particularly useful for companies requiring large volumes of electricity and supplier who are looking to buy energy, to then resell onto the retail markeplace.

Finding the right Power Purchase Agreement

For buyers exploring Power Purchase Agreement solutions, navigating the varied options can be daunting. PPAs include types like Virtual, Physical, and Sleeved, with delivery methods such as Baseload, ‘as-consumed’, or ‘as-generated’ PPAs. This complexity can deter many from the marketplace.

Developers face challenges like finding informed buyers familiar with PPA pricing. Companies often prefer short-term contracts, making them hesitant about committing to 10-15 year agreements. While market volatility pushes buyers towards shorter-term PPAs, developers seek long-term commitments for investment security and clear long-term revenue projections.

Power Purchase Agreement Solutions

McGrady Clarke assists both PPA developers and buyers. For buyers, we advise on PPA options and associated risks, spotlight developer projects, manage contract negotiations, validate statements, monitor asset performance, and oversee REGO certificate transfers.

For developers, we connect them with corporate buyers and suppliers across the globe. Our analysts provide long-term power market forecasts and facilitate introductions to buyers. These introductions help developers meet requirements while enabling buyers to cut costs and advance their net zero goals. Our involvement with both sides aids in mediating and structuring agreements.

Our
Process

Requirement Analysis

The first stage of our Power Purchase Agreement (PPA) process involves working closely with both the developer and the buyer to determine and define their requirements. This includes analysing factors such as the type, location, and capacity of the development, as well as the expected completion timescale of the asset.

PPA Options Review

Once we have a comprehensive understanding of the requirements, we proceed to review the various PPA options available to the buyer. This step involves going through each option in detail to ensure that the selected PPA aligns with the buyer’s needs and preferences.

Negotiation and Agreement

In the third stage, we negotiate terms with the developer, working diligently to reach a mutually beneficial agreement for both parties. Our team leverages their expertise and market knowledge to secure a fair and favorable agreement.

Review and Facilitation of Contract Transfer

Upon reaching an agreement, we review the contract thoroughly to ensure that all terms are clear, fair, and fulfill the interests of both parties. We then facilitate the transfer of contracts, handling the administrative process and ensuring a smooth and efficient transition.

Ongoing Satisfaction and Progress Monitoring

Once the agreement is in place and the contracts have been transferred, our involvement doesn’t end there. We continue to monitor the progress of the contract and ensure that both parties are satisfied with its progression. We stand ready to provide ongoing support and assistance as needed throughout the duration of the agreement.

Why choose McGrady Clarke for your Power Purchase Agreement solutions?

McGrady Clarke provides access to bespoke Power Purchase Agreements solutions, working alongside both the developer and the buyer. Our consultants have a proven track record of extracting value from the PPA for both parties, and our strategic approach to sourcing PPA offers our clients a clear path to achieving Net Zero.

McGrady Clarke provides a fully managed end-to-end service from enquiry to contract management. This bespoke PPA solution means both parties in the transaction are satisfied with the arrangement terms.

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Guide 10/04/23