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FAQ

Discover Enel Green Power's FAQ and everything you need to know about Enel Green Power supply

General informations

A Power Purchase Agreement (PPA) is a bilateral contract that allows buyers to purchase energy and Energy Attribute Certificates (EAC) or Renewable Energy Certificates (REC) from a renewable energy supplier. Agreements can be flexible in order to meet the energy buyer’s needs. For example: deals can be purely financial or include physical energy delivery; EACs can be bundled to the PPA price; and length, security package, penalties, price and volume structure can all be negotiated by the parties.

There are multiple benefits to entering into a PPA, including:

  • Direct contract with renewable power project operators
  • Flexibility on agreement terms and types
  • Transparency of energy costs and ability to plan for the long-term
  • Contribution to sustainability targets
  • Environmental commitment to customers and key stakeholders
  • Enable additionality (a new power plant will be built thanks to this contract)
  • Risk allocation reflected in the deal

There are many similarities between the two structures of PPAs, such as: tenor, basis risk, renewable power certification (GOs), project performance, generation profile and credit risk. What differs between the two approaches is that with a VPPA, there is not a physical supply of the energy. The buyer receives the EACs (or RECs if located in the U.S.) and the buyer pays the producer the difference between the contract price and the wholesale market price for the energy. This is also known as a Contract for Differences. Basically, a VPPA can enable additional renewable capacity, and also acts as an energy price hedging tool. Customized volume and price structures can be proposed for both physical and financial contracts in order to optimize the value for the PPA partner.

The customer has the right to change the retailer depending on how open the market is. In Europe specifically, the retailer can be changed at any time for both options: physical PPA and financial PPA. For the former, the energy contracted in the PPA will be made available by the seller to the new retailer, while payments will remain between the original parties through a third-party agreement. For the latter, the long-term CFD structure will stay in place, while the physical supply will switch to another retailer. For other specific markets, please contact our commercial team.

A financial PPA can be a perfect price hedge if the price of the retail contract for the physical supply is indexed at the market price. In contrast, if the buyer decides to enter into a VPPA without any adjustment to its physical retail supply fixed price contract, it will be a valuable price hedge, but it cannot be considered a perfect one.

Supplier/Buyer, Supplier/Buyer Parent Company or Supplier/Buyer Guarantor (as agreed between the parties) shall provide a parent guaranty to guarantee the Supplier’s/Buyer’s payment obligations under the PPA. If the acceptable credit rating of the Parent Guarantor drops below a required level, a Bank Guarantee will be issued.

Yes. Generation from renewable energy can be sold in different ways: as generated, take or pay, or pay as consumed. The underlying volume structure can be baseload, peak-off peak, block of hours, solar or wind profile, or client load profile. Everything depends on the customer’s needs and risk appetite. 

Yes. The PPA provides a grace period for delays in COD, during which time the seller will pay delay damages. If COD is not achieved within the grace period, the buyer has the right to terminate the agreement.

Yes. Before signing the contract, an energy assessment of the facility is done with the buyer. After the construction phase begins, a periodic construction report is shared with the buyer as well. And once the plant is operational, the seller can provide ongoing information and data about production. 

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