Are you familiar with the term Purchase Power Agreements (PPAs)? If not, it`s time to get acquainted with this increasingly popular way of powering businesses and reducing carbon emissions.
PPAs are contracts between two parties, usually a renewable energy project developer and a business, in which the developer agrees to build and operate a renewable energy system (like a solar panel system or wind turbine) and sell the electricity generated to the business at a fixed price for a set period of time.
The reason why PPAs are so attractive to businesses is that they offer a predictable and stable cost of energy over the length of the agreement, usually between 10-25 years. This provides the business with long-term price certainty and protection against volatile energy markets.
In addition, PPAs can help businesses meet their sustainability goals by reducing their carbon footprint and increasing their use of renewable energy. This is becoming increasingly important as companies face pressure from stakeholders to reduce their environmental impact and contribute to a more sustainable future.
So how do PPAs work in practice? Let`s take the example of a solar PPA. A solar developer will install solar panels on the roof of a business`s building, and then sell the electricity generated by those panels to the business at a fixed price per kilowatt-hour (kWh). The business will then use this electricity to power their operations, reducing their reliance on grid electricity (which may be generated from fossil fuels).
The fixed price per kWh is typically lower than the business`s current electricity rate, meaning that the business will save money over the length of the agreement. Furthermore, as electricity prices rise over time, the business will continue to benefit from the stable and predictable pricing provided by the PPA.
PPAs can be a win-win for both the renewable energy developer and the business. The developer is able to secure long-term revenue and financing for their project, while the business is able to lock in a stable and predictable cost of energy while reducing their carbon footprint.
If your business is considering a PPA, it`s important to work with experienced renewable energy developers and to consult with legal and financial advisors to ensure that the agreement is structured to meet your specific needs. With the right approach, a PPA can provide substantial financial and environmental benefits to your business for years to come.