SEA-TITAN project related news

Bilateral long-term energy purchase agreements gain strength in the market

The new renewable power will boost the contracts ‘PPA’



Bilateral long-term energy purchase agreements, known as PPA (Power Purchase Agreements), have become a key tool for the development of renewable projects -especially in the US and northern Europe-, since they avoid the volatility risk of the pool and allow the owners the necessary predictability for their projects. The closing of this type of contracts is usually an indispensable requirement to obtain part or all of the credit necessary to carry out such projects.

According to the Corporate Energy Market Outlook report of Bloomberg New Energy Finance for the first half of 2019, 121 firms from 21 countries signed 13.4 GW renewable in PPA contracts in 2018. Of that figure, 8.5 GW were signed in the US and 2 , 3 GW in Europe, the Middle East and Africa. On the other hand, according to the European wind industry association (WindEurope), European companies add, to date, 4.7 wind turbines in this type of contracts.

One of the advantages that, as explained by Unef, has a PPA contract for any company or organization that wants to invest in renewable or want to carry out a strategy to increase their consumption of renewables is that “you do not have to invest directly in a generation project with the risks and expenses that this entails “. There is the possibility, they explain, that with a PPA “the buyer is not responsible for the financing, installation, operation or maintenance of a renewable project if he does not want and, in addition, does not have to have the initial capital for a project of such magnitude. ”

Each contract is a tailored suit, hence there are different PPA models depending on their category. Although these power purchase agreements have always existed in Spain , since the Wind Business Association (AEE) state that “until now they had never been used to finance new facilities.” For this case, they explain, the ideal scenario is that “the validity of the contracts exceeds 15 years, although the best of all is that it covers the entire life of the installation”.

Among the potential subscribers of a PPA are both the trading companies and the final consumers, each with its own benefits. The first, explained from AEE, “have an energy supply that can cover the risk of exponential increases in the price of electricity”, while the consumer becomes “a key axis for the fulfillment of the European objectives of renewable penetration , to stop being a mere recipient of a service to become a fully informed subject, aware of the need for sustainability of the planet and with full capacity for decision “.

Great agreements in Spain

Although the development of PPP in Spain is still very recent, everything indicates that in the coming months there will be a wave of announcements of new contracts signed in our country, mainly photovoltaic. According to the data handled by Unef, “the number of photovoltaic megawatts marketed in PPA contracts signed to date in Spain is estimated at around 2,000”, a figure that could double, according to the sector, in view of the high number of requests the different administrations have received in the last months for the construction of new photovoltaic power.

In the opinion of José Donoso, CEO of Unef, “the negotiations of the PPA contracts are very slow and their speed of growth will also be conditioned by the announcement or not of auctions and under what conditions they are carried out”. A few calls for auctions in terms of quantity and conditions, he explains, “will reduce the need for photovoltaic developers to resort to PPA contracts”.

Paschal quality, pioneer

The first electricity purchase contract of this type in Spain was signed in July 2017 between EDP ​​Renováveis ​​(EDPR) and Calidad Pascual, whereby the power company will supply the food group for five years the wind power produced in its parks through of your EDP marketing company. Since then, the company has signed a large number of them in the US, Europe and Brazil.

Enérgya-VM, Grupo Villar Mir’s Energy Division, closed in December 2017 with the Foresight Group the first solar PPA contract in Spain, for a period of 10 years, for the photovoltaic energy generated in the Murcia Park Torres de Cotillas, with an annual production of 7 GWh / year. María Luisa Huidobro, CEO of the company, has pointed out that an efficient development in the future of the PPAs, “happens because the term contracting is interesting for a group of consumers”.

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