A Better Understanding of PPAs

When it comes to securing energy needs for a business, one of the best suited and most cost-effective solutions come in the form of a power-purchase agreement – a power purchase agreement is a long-term agreement between the energy consumer and the power producer, and this is typically for renewable sources of energy. Set of a period of between five to fifteen years and a legally binding contract, these agreements lock an energy price in and help businesses to show their green credentials too.

There are a variety of different power-purchase agreements available on the market to help businesses, however, and different PPA’s can be suited to different businesses. We’ll look at the three most common and the differences between them, but consulting the experts is the best way to secure the best deals.

Financial (Corporate) Power Purchase Agreements

These are the most similar to what a traditional energy deal would look like – they’re often simpler contractual arrangements than other PPA’s but are a flexible option that still delivers on the green energy requirements and energy security too. 

On these plans, electricity isn’t supplied directly from the green generating plant to the consumer, and it is instead traded on the wholesale energy market – the electricity is then accessed in the usual way which means third-party charges can still come into play. Both the supplier and consumer agree on a price per kilowatt-hour, and energy is accessed as usual. 

Grid Access PPA

This physical PPA acts slightly different from the above, rather than deciding on a price per kilowatt-hour, businesses instead make an agreement to buy a set volume of energy that can be supplied through the normal network. This option means that energy-generating assets may be closer to the energy user’s site but can be a great solution for businesses with larger energy needs in particular.

Onsite Generation PPA

Physical PPAs are put in place where the energy physically flows from the generator to the end-user and delivers the biggest benefits by avoiding third-party charges – generation assets are typically installed on-site and commission behind the metering point of the consumer. 

These onsite solutions are typically funded by the consumer and partnered with a trusted provider with some variety of the options available but are another great solution.

As energy prices continue to increase and a bit of an energy crunch occurring in the UK, securing a deal now and locking prices in for up to 15 years is a great way to secure energy security into the future at a great price with net zero credentials too, but be sure to consult the experts as PPAs can be very complex and need careful consideration when being set-up.