Energy

Power Purchase Agreements (PPA)

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 suppliers who are looking to buy energy, to then resell onto the retail marketplace.

Finding the right Power Purchase Agreement

For a buyer looking at a Power Purchase Agreement solution, the challenge is navigating the marketplace and the options available. There are multiple PPA options at the point of delivery, including Virtual or Synthetic, Physical and Sleeved. Additionally, there are multiple options on how the energy is delivered to the buyer, including Baseload PPA, ‘as-consumed’ PPA or pay ‘as-generated’ PPA. The complexity and sophistication of these options put many consumers off entering the marketplace.

For the developer, there are also challenges like finding suitable buyers, who understand the pricing structure of a PPA. Companies traditionally sign short-term supply contracts. Therefore, it can take time and education to get buyers comfortable with locking in energy agreements for 10-15 years. Increasing levels of market volatility mean buyers are reluctant to fix pricing structures over the long term and are looking at shorter-term PPA options. Developers are keen to secure long-term agreements as it supports the investment and financing of the asset, as they can attribute long-term revenue clarity to the project.

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Power Purchase Agreement Solutions

McGrady Clarke works with both developers and buyers of PPA. For buyers, we are able to advise on the Power Purchase Agreement options available and associated risks. We are able to highlight upcoming projects from developers, whilst managing contract negotiations. Throughout the contract, we are validating statements, alongside, performance monitoring of the asset. We also ensure the REGO certificates are transferred within the framework of the PPA.

For developers we are able to connect them with both corporate buyers and suppliers, we have strong relationships with suppliers across Europe and North America. Our Analysts and Risk Managers monitor global power markets and provide long-term forecasting to developers. We are able to provide introductions to buyers. These mutually beneficial introductions serve to satisfy the developer’s requirements, whilst allowing the buyer to reduce costs and further their net zero ambitions. By working with both buy and sell sides we are able to mediate between both parties and structure the agreement.

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Power Purchase Agreement Solutions

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Our Power Purchase Agreement (PPA) Process

McGrady Clarke works to determine and define the requirements of both the developer and the buyer. We access the development type, location, capacity and completion timescale of the asset. We run through the PPA options available to the buyer and make terms with the developer, negotiating a suitable agreement for both parties. Once an agreement has been reached we review and facilitate the transfer of contracts. Whilst the agreement is live we ensure both parties are satisfied with the contract progression.

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FAQ's

How do you choose the right Power Purchase Agreement?

There are multiple fixed and flexible Power Purchase Agreements options available, ranging in complexity and suitability. Ultimately developers and buyers have to find the right option to suit their requirements. Both must be attuned to the potential risk and opportunity of each option.

What if the installed renewable technology needs repairing?

The installation and maintenance of the technology are the responsibility of the asset owner. Most PPA contains provisions for maintenance, outages and force majeure.

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.