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Here’s how Power Purchase Agreements are changing the future of renewable energy

Here’s how Power Purchase Agreements are changing the future of renewable energy

EGP is at the forefront in guiding companies toward a new energy paradigm based on renewable sources. Javier Vaquerizo, Head of EGP’s Global Commercial Office, discusses the role of Power Purchase Agreements in this revolution.
By Javier Vaquerizo
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In recent years, we’ve seen an enormous cultural change: companies around the world have started to understand that the sustainability of their business, besdies being a principle for customers and investors who are increasingly interested in environmental protection, is also an important driver for business and for the creation of value.

“Leading this change are the large tech companies that, working in young and dynamic markets, have made sustainability an added value in their corporate figures.”

The most important part of a company’s sustainability lies in their energy consumption: when sustainable energy projects from renewable sources become economically competitive, the combination of these two factors leads to an influential virtuous cycle.

 

Power Purchase Agreements: Domino effect

Tech companies are betting on renewable sources as the main supply source for their energy, creating a market sentiment favourable to increased sustainability and involving partners, associations and investors.

“In a short time, the sustainability of a company has become a social movement, which, feeding on itself, has become more and more important.”

The turning point was in 2014, when one hundred large companies from around the world came together to form the association RE100. Their goal, in just a few years, is to reach a point where they are using only renewable energy in their factories and offices.

Making sustainability a priority and creating a system of measurable milestones, the companies put their reputations at stake. At the same time, investors saw that sustainability made the companies more attractive on the market: so a key ethical value turned into a business factor.

 

Power Purchase Agreement: a new renewable energy culture

In this context, in certain markets, such as the United States, Mexico and ChilePower Purchase Agreements (PPA) contracts for long-term energy supply have started to catch on.

“PPAs are not standard contracts. Rather, they are a commercial solution able to repay investments in new renewable plants through a guaranteed cash flow.”

It’s simplistic to define PPAs as a contract. They are long-term partnerships, from ten to thirty years, during which two companies work together on projects of creating shared value and collaborate to spread sustainability.

These long-term agreements inevitably lead to new forms of collaboration and the traditional relationship between buyer and seller disappears. New projects and opportunities are created together: we are witnessing a change in mentality.

 

EGP’s PPAs

Enel Green Power’s PPAs are tailor-made for each customer and are designed to actively and resiliently respond to normal changes that take place, over decades, in the life of a company.

A PPA is designed to grow in a healthy and sustainable way. For this reason, in most cases, we offer energy supply from a mix of renewable resources, in order to be ready for energy price variations on the market.

“Each PPAs is personalised and built around the customer. There are three main models of partnerships.”

The On-site PPAs involves the design and construction of a new renewable power plant directly on land owned by the customer.

For Sleeved PPAs, the plant may be very far from the customer, physically. The customer purchases renewable energy through the grid, its operator or our commercial division.

Then, there are Virtual PPAs, where energy is released to a predetermined point, usually a market hub.

For us at EGP, the future of energy will be renewable. Thanks to our know-how and experience, strengthened by 1200 plants in five continents, we can move on two levels, locally and globally, and offer a sustainable service based on the customer’s features.    

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