The Future Of Corporate PPAs In Ireland

Author:Mr Garret Farrelly

What is a "corporate PPA"?

In general terms, a "corporate" power purchase agreement (or "PPA") refers to a contractual arrangement whereby independent generators (typically renewable) and corporates that are large energy consumers, contract for the sale of power to that consumer (in Ireland, through their affiliated licensed supply companies). This model is replacing the traditional utility-backed PPA or green energy supply contract.

As noted above, consumers are typically large companies with a high demand, and who are willing to commit the necessary financial and technical resources in order to explore options outside of the traditional utility supply model. Large corporates (in particular the US tech companies) that are committed to consuming energy from renewable sources to power their activities are responsible for the increased popularity internationally of corporate PPAs in the last few years.

Do all corporate PPAs follow the same structure?

Internationally, there are different ways to structure a corporate PPA (depending on the underlying regulatory regime).

Under a "synthetic" PPA structure, the generator and the consumer enter into a direct financial hedging contract, such as a CFD (rather than a PPA). The consumer retains a supply contract with a utility, but contracts separately with the generator to provide a price floor for that generator's output in return for the associated green rights.

A "sleeved" PPA is a direct PPA between a generator and a consumer for an agreed level of power output. The consumer immediately sells all of the power procured under the generator PPA to a traditional utility under a second, back-to-back PPA. The utility (for an agreed financial margin) runs the power through the grid, 'tops up' the power if necessary to match the consumer's energy demand and then sells the power back to the consumer.

In Ireland, the likely contractual arrangement will be for the large corporates (through a related / affiliated supply company) to enter into a PPA (similar to the well-developed 'supplier-lite' renewable PPA commonly employed for renewable generation projects) with the independent generator together with a direct electricity supply contract between the corporate and its related / affiliated 'supplier-lite' supply company.

What are the advantages of entering into a corporate PPA?

For generators, a corporate PPA provides certainty for the generator to sell all or part of its electrical output at an agreed price...

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