Understanding Power Purchase Agreements

Power Purchase Agreements

Power Purchase Agreements are gaining popularity as Australian businesses look for security of supply, a smaller carbon footprint and more affordable electricity prices – but what are they and how can they help your business?

Power Purchase Agreements involve businesses buying electricity from one source – usually a renewable one – for a set period and at a set price – instead of from retailers.

PPAs are becoming popular because they are a no-risk, cash flow positive investment.

The PPA trend began with multinational companies including tech giants Google, Amazon, Facebook, Apple, and Microsoft as they became the world’s biggest investors in large-scale solar and wind energy development through corporate PPAs.

PPAs are gaining traction in Australia, with intensive energy users such as Carlton & United Breweries, Telstra, Sun Metals and the University of New South Wales supplementing self-generated energy with PPAs for renewable energy.

Australia’s skyrocketing electricity prices left many businesses in dire straits as overheads went through the roof.

PPAs are being touted as a fixed medium-term solution giving businesses security because you know exactly what you will be paying for.

Onsite PPAs

With onsite PPAs, businesses can engage a solar generation company to install solar panels on rooftop space at no charge.

The electricity generated is sold back to you at cheaper rates than offered by traditional retailers.

This provides a risk-free 100% cash flow positive investment with maintenance and monitoring to ensure the system is at optimum performance.

You do not have to leave your current power supplier so you can still use traditional grid power at times of shortfall.

Essentially, signing a PPA means that you allow a company to install solar panels on your roof for free and retail you the energy produced from the solar.

Many PPA providers will pass ownership of the solar panels over to you once the specified term of agreement expires.

Because the energy is generated on site, it is not subject to expensive network tariffs which are charged by distribution companies to transmit power from point A to point B.

Purchasing the system

An alternative to the above model is an on-site PPA agreement where you pay a fixed fee for a company to develop, build and operate a solar system directly on your property, with energy fed directly into your electrical system.

Under this setup, your business will own the electricity generated and you will not have to pay network charges.

Offsite PPAs

If you consume less than 25 to 50 GWh/year, partnering with other organisations may be the most effective way to underwrite the development of a new power plant.

In partnering with others, companies will group clients together to build an on-site solar generator feeding energy accordingly. The drawback is that businesses need to be physically close to each other for this to work, although technology is constantly evolving.

Multisite PPAs

If you consume less than 25 to 50 GWh/year, partnering with other organisations may be the most effective way to underwrite the development of a new power plant.

In partnering with others, companies will group clients together to build an on-site solar generator feeding energy accordingly. The drawback is that businesses need to be physically close to each other for this to work, although technology is constantly evolving.

Recent Australian examples of Corporate Power Purchase Agreements

2017 has been labelled the breakthrough year for corporate PPAs in Australia. GFG Steelworks, for example, have announced that the only way for the business to remain profitable is to source all energy from renewable sources at their own sites.

Telecoms provider Telstra, Nectar Farms, Sun Metals, Westport and GMA Garnet have also entered into undisclosed PPA terms.

One Australia’s biggest breweries, Carton United, will be purchasing all its energy from renewable sourced PPAs, supplementing the shortfall with on-site generation.

Australian universities, Monash, UNSW, the UTS and Newcastle University have announced similar approaches.

Sydney Markets have also installed a huge rooftop solar installation in its drive to 100 percent renewable energy.

Take action against cost volatility.

What action is your business now taking to control energy cost volatility?

Leading Edge Energy is an energy cost reduction specialist focused on helping businesses minimise their dependence on grid-sourced electricity.

Our holistic approach to energy management delivers tangible energy cost savings by helping businesses plan, prioritise and deliver strategies to minimise energy rates, minimise energy waste (energy efficiency) and maximise generation and storage opportunities.

We also provide ongoing monitoring and reporting solutions to help our business clients identify opportunities and monitor the implemented solutions.

Contact Leading Edge Energy today for an obligation free evaluation of your business energy costs. Call us today on 1300 852 770 or email us on info@leadingedgeeenergy.com.au

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