Power Purchase Agreements Explained - Flow Power

Power Purchase Agreements Explained

Power Purchase Agreements (PPAs) are becoming an increasingly common alternative to fixed-rate energy agreements. You may have seen the news that Sydney Opera House, the City of Adelaide and Pernod Ricard have all committed to sourcing energy linked to renewable projects through PPAs.

But what exactly is a PPA and how do the different options stack up?

What is a PPA?

Typically, Power Purchase Agreements (PPA) is an agreement between a power generator and a purchaser, sometimes referred to as the off-taker, for the sale and supply of energy.

In Australia, three types of PPA are common:

  • Retail-sleeved PPAs: In this scenario, the agreement is between the wind or solar farm and an energy retailer, which then links supply to the renewable generation through a retail agreement.
  • Front of the meter PPAs: Typically, these are between large businesses or retailers and a renewable generator.
  • On-site PPAs: Have on-site solar? This can be wrapped into a PPA by a retailer allowing you to make the most of your on-site generation

Why enter into a PPA?

PPAs are an alternative to standard retail contracts that give long-term price visibility and may also allow businesses to meet sustainability goals.

PPAs let businesses buy energy from renewable projects, often at rates that are much lower than standard market rates. The long-term and transparent design means that businesses can better manage energy use and costs.

For businesses looking to reduce their environmental footprint, PPAs can be an effective way to meet sustainability goals and show support for Australia’s pipeline of renewable projects.

Where does my power come from?

No matter who your provider is, it’s important to note electricity from the grid is typically the same. Renewable energy generators (such as Flow Power) and fossil-fuel generators both export electricity to the grid, which is then distributed to you. In the process, it is combined and as a result, you can’t choose to use renewable energy only.

Flow Power’s PPA presents a solution for businesses wanting to go greener by establishing a virtual link between energy consumers and renewable energy generators. Under these arrangements, you pay for a proportion of the clean energy a renewable generator puts into the grid. Once the capacity of that generator is sold out, demand increases for another to be built!

What happens when the wind doesn’t blow or the sun doesn’t shine?

There will always be times when the wind isn’t blowing and the sun isn’t shining. This gap is referred to as your ‘balance of supply’.

It doesn’t mean that you won’t have power at these times, instead your energy supply will simply be linked to other source.. To minimise your ‘balance of supply’, choose a PPA that will give you optimum coverage through renewable sources.

What do I pay?

Between your business and a retailer or generator, you will agree to buy your renewable generation at a set price that is usually fixed for the duration of the contract.

This is not the final price you’ll see on your bills each month – it’s simply the rate that you’ve agreed to pay for the portion of renewable energy you’ve committed to.

Your ‘balance of supply’, how you cover it and at what rate, will also factor into the final price you see on your monthly bill.

Businesses don’t have to simply take traditional fixed-rate contracts, the energy market has opened up more options. If you want to find out more about renewables and how to make a PPA work for your business give our team a call on 1300 08 06 08.

Questions about Power Purchase Agreements? We’re here to help.

If you have any questions about PPA’s or need help deciding whether buying renewable energy would work for your business, please don’t hesitate to get in contact with the Flow Power team.