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With an increased number of low cost renewable energy coming online, as well as the temptation of cheaper renewable energy certificates, corporate renewable power purchasing agreements (PPAs) are a growing trend in Australia.

What is a corporate PPA?

Put simply, a corporate PPA is a long-term contract between a business and a power generator. A business agrees to purchase electricity directly from a generator for a fixed-price through the National Electricity Market. In the case of renewable PPAs, the energy is from renewable sources such as wind, hydro or solar.

There are two main types of Corporate Renewable PPAs, physical or financial. Physical PPAs involve an on-site or nearby renewable generation source, while financial PPAs are when a company agrees to purchase renewable energy as a financial hedge and the generation is not nearby.

A type of physical PPA is a “behind the meter” PPA. Whereas virtual PPAs are a good example of a financial PPA.

Behind the meter

The energy user installs some form of technology that is generating power before the connection to the market. Examples include rooftop or on-site solar or wind installations, such as the solar farm powering Sun Metals’ refinery in Far North Queensland, and Neoen’s wind and battery backup supplying energy to Victoria’s Nectar Farm agribusiness.

In most cases, behind the meter PPAs still require grid connections to allow for times when the renewable energy generation cannot meet demand. Depending on the contract, the generator may be able to sell excess power back to the grid.

Co-locating batteries and other technologies such as pumped solar may see this type of PPA become increasingly popular, particularly for large consumers in more remote locations. They have many advantages, including making it easy to trace exactly where your power comes from. Their main drawback, however, is that not many businesses have the space for on-site generations.

Virtual PPAs

For businesses that don’t have enough room for on-site renewable generators, there are virtual PPAs where the consumer agrees to purchase renewable energy from an off-site source.

These are essentially financial “hedges” that involve an agreement with a renewable generator for a fixed price usually over a long-term contract of up to 10 years.

Under Flow Power’s renewable PPAs, customers buy direct from the wholesale market in real time and a portion of their energy is hedged through the purchase of renewable generation. Any power that is not used by the business is sold back to the market or to Flow Power.

Several Flow Power customers, including Olam Orchards, ANCA and Idyll Wines have signed up to the unique corporate PPAs, allowing them to offset their electricity consumption and potentially save thousands of dollars in electricity costs and reduce overall emissions.

PPA Advantages Challenges
Virtual
  • Electricity costs are much lower than the current market
  • LGC cost is much lower than the current market
  • Does not require land at or near the customer’s site
  • Can onsell any power not used back to the market
  • Business may have to provide a payment guarantee
  • Business assumes risk associated with decreasing price of renewables and LGCs
  • Deals are long term, up to 10 years
  • Network costs still need to be managed
Behind the Meter
  • Network charges can be removed
  • User receives long-term certainty on the cost of LGCs
  • Easily able to trace where your power comes from
  • Power is directly from the renewable source
  • On-site space may not be enough
  • Corporate may be a tenant therefore requiring landlord approval
  • Energy users may want to focus on running their business rather than a power plant

This partner content is brought to you by Flow Power. To learn more about corporate PPAs, register now for Flow Power’s webinar at www.flowpower.com.au.

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