PPA Advisory

Get the most out of Power Purchase Agreements with expert guidance worldwide, from choosing the right project to delivering sustainability and financial targets.

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What is a PPA?

A Power Purchase Agreement (PPA) is a contract between an electricity producer and a buyer for the delivery of energy at a stable price.

Typically signed for multi-year periods, PPAs guarantee the consumer –known as an off-taker– hedging against volatile energy markets. At the same time, they afford developers a steady, long-term source of income that makes new renewable energy projects, such as solar or wind parks, viable.

Types of PPAs

There are several types of PPAs, each offering different possibilities and advantages to off-takes and producers.

Based on location:

Off-site	Renewable energy is produced away from the consumption site. Electricity is delivered through the public grid, and EACs are used for documentation.
On-site	Clean energy is produced close to or where it is consumed. These agreements bypass the public grid, delivering electricity from the source to the consumption site via a private cable. Clean energy consumption is not documented with EACs.

Based on the delivery of energy:

Physical (sleeved)	Physical electricity is provided to the off-taker. EACs bundled with the underlying power are also delivered. The buyer is responsible for the cost of balancing the grid.
Virtual (VPPA)	The off-taker gets EACs for the agreed volume but does not receive physical electricity. Consumers buy power from a third-party provider, with the producer settling the difference between the agreed energy price and the market value. The seller is responsible for the cost of balancing the grid.

Why consider a PPA?

PPAs are suitable for companies with high electricity consumption who wish to secure stable energy prices. For power producers, PPAs offer long-term certainty, making new projects bankable.

Financial risk management

noun-finance-7902597 PPAs guarantee stable energy prices, acting as a hedge against volatile power markets.

Renewable energy claims

noun-wind-turbine-7864439 The delivery of clean power is tracked with EACs, allowing companies to report reduced emissions in line with global standards.

Additionality

PPAs provide stable revenue for power producers, reducing the cost of capital and enabling the construction of new renewable energy installations.

01 Groundwork

Onboarding and upskilling of internal stakeholders.
Market pre-study, including price levels and possibilities for cross-border contracts.
Definition of decision criteria, including financial, regulatory, and sustainability factors.

02 Forecasts and risk assessment

Deep market analysis, including different price forecasts and scenarios.
Evaluation of relevant policy.
Risk appetite assessment.

03 Project evaluation

RFPs from selected projects.
Concrete offers with project information on volume profile, price, etc.
Profitability and investment analysis.

04 Term sheet negotiation

Offer assessment against pre-defined criteria.
Guidance throughout the negotiation process.

EAC Management

Signing a PPA is a big milestone. However, getting the highest sustainability results from these contracts depends on skilfuly handling the EACs that come from them.

Ecohz takes care of all incoming documentation to reduce administrative burdens and ensure you get full recognition for your renewable energy procurement.

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At Ecohz, we simplify how companies use a suite of sustainability solutions to lower their emissions and unlock positive impact.

Our advisors conduct personalised assessments and provide individual counsel to each of our clients, putting our extensive know-how at your disposal and breaking complexity into manageable tasks.

PPAs explained: what you should know about Power Purchase Agreements

PPAs are increasingly important in corporate sustainability strategies due to their role in creating clean energy capacity and benefits for consumers and producers. There are, however, unanswered questions that make potential buyers unsure if a PPA is right for them. And we answer them in this article.

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Preben Munch
Senior Director Sales & Solutions

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Lars Semb Maalen-Johansen
Renewable Portfolio & PPA Manager