Purchasing Power Agreements

Purchasing Power Agreements (PPAs) have become an increasingly popular way for businesses to access renewable energy. PPAs are contracts between a renewable energy developer and a business or organization, allowing the business to purchase energy directly from the developer at a fixed rate over a specified period of time.

A PPA benefits both the developer and the business. The developer secures a long-term buyer for their energy, providing financial stability and allowing them to secure financing for new projects. The business, on the other hand, benefits from a predictable and often lower cost of energy, while also reducing their carbon footprint.

PPAs can take different forms. One common type is the virtual power purchase agreement (VPPA), where the business does not physically take delivery of the renewable energy, but rather purchases certificates representing the environmental attributes of the energy. This allows the business to claim that they are using renewable energy without physically connecting to a renewable energy project.

PPAs are particularly popular in the tech industry, where companies like Google, Apple, and Facebook have committed to purchasing large amounts of renewable energy through PPAs. In 2019, Amazon announced that it had signed a total of 66 renewable energy PPAs, making it the largest corporate purchaser of renewable energy in the world.

While PPAs can be an effective way for businesses to access renewable energy, there are some potential challenges to consider. For example, the business may be committing to purchasing energy at a fixed rate for a significant period of time, which could be problematic if energy prices drop. Additionally, the business may need to work closely with the developer to ensure that the energy production aligns with their needs.

Overall, PPAs are a promising way for businesses to access renewable energy while also supporting the growth of the renewable energy industry. As more and more companies commit to reducing their carbon footprint, PPAs are likely to become an increasingly important tool for achieving those goals.