Regen has recently published a very useful guide for local authorities on models which can be used to help deploy renewable energy. One of the methods is a synthetic or virtual PPA (power purchase agreement) and it seems to be receiving quite a lot of attention. These types of PPA have been around for a while and we were lucky enough to advise on the roll out of a suite of these over a decade ago. It has taken a while for them to get traction but judging from what is on our desk at the moment their time has come. The concept of these PPAs is that the local authority or corporate effectively guarantees a price to the project for its power. The project trades electricity as it might normally, but if the price it gets is lower than the guarantee then the local authority/corporate tops up and if higher the project pays over the excess to the local authority or corporate. In effect a contract for difference. It does not need the physical delivery of the electricity although that can be structured in.
The aim of the fixed price or guarantee is to enable a project to attract the funding it needs to deploy, leading to the additionality in renewable generation. While in the UK not many of these types of PPA have been signed up the ones we have helped sign up have been shown to work. We have produced draft models for LASER Energy part of Kent County Council's Commercial Services Energy Division as well corporates, renewables developers and community energy groups.
In many ways they are a simpler document and proposition compared to a full blown back-to- back or sleeved corporate PPA. There are however, a variety of elements to them to consider, such as what happens in an energy regulatory change in law scenario, build out requirements and milestones and the consequences of failure to maintain a project etc.
If you are a developer or local authority, public body or a corporate considering such an arrangement and are interested in finding out more one of our team would be happy to speak to you.
Local authorities, cities and regions have a key role in the development of renewable generation