PPA structures and parties involved

To what extent are corporate PPAs presently deployed and what sort of structure do they take?

Corporate PPAs remain uncommon in Angola. 

Article 48 of the Electricity General Law provides that outside the scope of the public electric system, the conditions of sale of electric energy will be established by the parties.

Article 15 of the Executive Decree No. 122/19 of May 24 (electric energy sales tariffs) provides special arrangements for the sale of electricity by means of special or bilateral contracts between producers and distributors and those with final customers, under the terms set out in the Tariff Regulations (Presidential Decree No. 4/11 of January 6) shall be authorized by an order of the Minister of Energy and Waters, after hearing the regulatory authority.

All the contracts with National Transportation Network ("RNT" as a sole buyer must comply with certain requirements specified in Article 11 of the Presidential Decree No. 4/11 of January 6 as amended by Article 11 of the Presidential Decree 178/20 of June 25, in order to their prices are allocated to tariffs.

Last modified 9 Feb 2021

Demand for renewable corporate PPAs within Australia has surged in recent years, following the first deal concluded on behalf of the Victorian Government in 2016. Since 2017, Australian corporate PPAs have supported renewable energy projects with a combined capacity of almost 7,500 MW.

2020 was the biggest year yet for corporate PPAs in Australia, following subdued levels of activity in 2019. Numerous corporate and public entities (including Amazon, ALDI, CSIRO and Transurban) have entered into significant long-term PPAs within the last 12 months.  Previously, Coles (a national supermarket chain) entered into a corporate PPA in 2019 as part of the company’s risk management strategy, joining the ranks of other major Australian companies such as Westpac, BlueScope Steel and Telstra, all of which have secured similar PPAs of their own. 

A large appetite for PPAs also exists amongst university providers, with the University of Technology Sydney, the University of Queensland, Monash University and University of New South Wales all recently signing PPAs.

Energetics’ Corporate Renewable PPA Deal Tracker reveals that at the time of writing,  New South Wales has now overtaken Victoria as the preferred host state in which to conclude PPAs in Australia. However, the data shows that the uptake of PPAs in the 2020 calendar year has been greatest in Queensland, where BHP, Shell and others have concluded deals for a combined capacity in excess of 1500 MW. Queensland remains reliant on a small number of very large PPA transactions though, whereas PPAs concluded in the New South Wales and Victorian jurisdictions are far more varied in size and capacity.   

Corporate PPAs in Australia tend to be either sleeved or financial. ‘Behind the meter’ or direct wire PPAs for direct supply are also possible with the appropriate tenure and approvals, and are becoming more common (the PPA concluded by Shell in 2020, for example, involves a behind the meter on-site solar farm). However, the prevalence of this structure is still limited, due to the nature of the distribution infrastructure and energy market system in Australia.

Australia’s renewable corporate PPAs are almost exclusively underpinned by projects employing solar and wind technology.

Transactions are facilitated by initiatives such as the Business Renewables Centre Australia (BRC-A). This platform has been a successful market-based initiative to coordinate local appetite for PPAs. It  provides an online information hub to streamline the deal process and a marketplace for corporate purchasing of large-scale wind, solar energy and storage. At the time of writing the marketplace featured over 110 projects from 44 developers, with 14,550 MW of capacity. BRC-A is based on a previous platform led by the World Wildlife Fund-Australia’s ‘Renewable Energy Buyers Forum, which boasted over 250 member organisations.

Last modified 16 Dec 2020

Independent electricity plants owned and controlled by private sector companies produce approximately two-thirds of electricity in Bahrain, and their overall output is connected to the national grid under PPAs between the Electricity and Water Authority ("EWA") and the independent provider. [1]

Long-term power purchase agreements are seen as an incentive by a competitive procurement mechanism for attracting private investors to develop renewable energy projects in Bahrain. [2]

[1] Bahrain Diplomatic Handbook Volume 1 Strategic Information and Developments (International Business Publications, USA, 2018 Edition)

[2] The Kingdom of Bahrain National Renewable energy Action Plan (NREAP) Executive Summary (Sustainable Energy Unit, Bahrain, January 2017)

Last modified 16 Dec 2020

Corporate PPAs are relatively new phenomena in the Belgian market, but there is clearly a growing interest in them. The potential for corporate PPAs is now fully recognised because they allow undertakings to become more environmentally friendly while being supplied with electricity at stable and competitive prices. The project developer also benefits from concluding a corporate PPA, by obtaining a stable long-term income stream, thus enhancing the bankability of a project.

All relevant types of Corporate PPAs can be concluded in the Belgian market and under the regulatory framework in the country. Major corporate entities who have concluded Corporate PPAs with renewable electricity generated in Belgium include Google, INEOS and Borealis. Given the limited number of corporate PPAs concluded so far, it remains unclear what type of corporate PPA is used most often in Belgium.

Last modified 25 Feb 2021

Corporate PPAs are not currently deployed in Botswana.

Last modified 9 Feb 2021

Corporate PPAs in Brazil (which are essentially of solar and wind sources) have been exponentially growing in the past years and the regulatory and economic perspectives indicate that this trend will continue for the future.

Most PPAs in Brazil are physical, however, the development and maturity of this market may lead to the rise of more complex arrangements.

Last modified 16 Dec 2020

Currently, PPAs are less frequently deployed, because the spot price of energy is in a historical low level, which incentivises corporations to buy their energy from the spot market. Notwithstanding, in case of a long-term energy demand -for example, the supply required by distribution companies- the PPA’s continue to be the predominant agreement. 

PPAs are adapted to the requirements of both parties. Therefore, there are many structures that a PPA’s can take, for example, physical delivery, take or pay contracts, lump-sum contracts, fixed prices contracts, indexed prices, among others. 

The first and most used PPA’s in the generation industry in Chile is lump-sum contract, where within a certain period of time, usually monthly, there is a commitment from the generator to deliver and to sell a minimum or maximum of energy units (MWh). This implies that if the generator is not capable of generating the energy agreed upon, it must buy the energy in the spot market to fulfill the supply obligation.

Last modified 16 Dec 2020

A CPPA could be sold to a corporate buyer via a utility company or through a self-generation scheme. 

CPPA via a utility company takes the form of a Financial PPA in the sense that not physical delivery is required (a volume imbalance implies that the generator could buy the difference at the wholesale energy market). 

CPPA via a self-generation scheme takes the form of o Physical PPA. 

Financial PPAs between a corporate user and a generator are allowed by regulation and they can be negotiated over-the-counter or through the exchange market organized by the Colombian Stock Exchange (so called, DERIVEX). However, they are not commonly used because of additional regulatory costs that makes the deal not appealing in mostly all cases.

Last modified 16 Dec 2020

Corporate PPAs are a recent phenomenon in Ethiopia and consist mainly of utility PPAs.

Under existing Ethiopian law, transmission and distribution of electrical energy through the integrated national grid system is exclusively reserved for the two Government-owned utilities (Ethiopia Electric Power or EEP tasked with generation and transmission of power and Ethiopian Electric Utility or EEU responsible for the distribution part). This implies that IPPs can sell electricity they generate to third parties (corporations, for example) provided they do not use the national grid system. Corporate PPAs, therefore, are permitted as long as IPPs use off-grid transmission.

In addition, Ethiopian law authorizes Ethiopian Electric Power (EEP) to lease electricity transmission lines. IPPs can, therefore, enter into a lease/ wheeling arrangement with EEP and sell the energy they generate to relevant third parties by leasing the national grid system.

Although the Ethiopian Energy Authority has recently issued a Directive to regulate the manner of involving in mini, off-grid power generation and distribution, the Directive does not deal specifically with corporate PPAs. Hence, at this stage, there is a lack of clarity on the type of structure cPPAs may take.

Last modified 18 Feb 2021

The PPA market in Finland is still relatively under-developed, at least compared to Norway and Sweden , where power investments have increased significantly after the expansion of the electricity certificate system. However, the number of signed PPAs in Finland is expected to rise after the support from the state aid under the feed-in tariff scheme came to its end at the end of 2018. More than 75% of total consumption in Nord Pool countries is traded through Nord Pool Spot.

The first signed PPA drafted in Finland related to wind power output and was announced in the summer of 2018. However, before that project, there were a number of PPAs involving a Finnish party.

Last modified 16 Dec 2020

Although corporate PPAs are generally permitted in Germany, they are not widely deployed. This is mainly due to the way in which the German renewable energy support scheme works. 

In Germany, when marketing electricity generated through renewable energy sources, provided they meet certain criteria, installation operators generally have two options: they will either use (1) a form of financially supported marketing which allows operators to benefit from a "market premium" (which is a financial bonus for the operators of systems that generate energy from renewable sources and market their power directly on the free energy market), or (2) the so-called "other direct marketing form" (sonstige Direktvermarktung), which is not financially supported. 

Being able to utilize the "market premium" method mitigates market price risks and provides installation operators with a degree of comfort regarding their revenues. However, a precondition of being able to benefit from the market premium is that the installation operator must transfer the right to label electricity produced in the installation as 'electricity generated in renewable energy installations' to the competent network operator. If the installation operator transfers this right in order to utilize the market premium, it will no longer be permitted to also sell electricity as green energy to third party purchasers because to do so would cause it to be in breach of the so-called prohibition of multiple sales (Doppelvermarktungsverbot) under the German Renewable Energy Act. 

For new installation operators, corporate PPAs for the supply of green energy are only permitted under the German Renewable Energy Act where the electricity is marketed by way of the "other direct marketing form". Accordingly, operators of new installations cannot benefit from the "market premium". This often makes corporate PPAs financially less attractive to operators of new installations and/or corporations/utilities as potential counterparties. 

The situation may be different where market prices of electricity from renewable energy installations continue to move towards grid parity, meaning operators of new installations would not need to rely on the financial support offered under the "market premium" method. Further, the increasing desire of companies to be (or at least appear) sustainable means that many companies are willing to pay a higher price for green labelled energy. As a result, installation operators may opt for the "other direct marketing form" as doing so becomes increasingly financially rewarding.  

Moreover, the financial support offered under the "market premium" method is for a finite period of 20 years only. Corporate PPAs are, therefore, beginning to play an important role for existing installations that, after 20 years following their commissioning, fall outside of the support scheme. 

The development of standardised documentation for PPAs (e.g. as recently endorsed by the European Federation of Energy Traders - EFET) will likely lead to further interest in corporate PPAs in the German market and facilitate further engagement in them. 

Finally, interest in PPAs might further increase where the above-mentioned prohibition of multiple sales (Doppelvermarktungsverbot) under the German Renewable Energy Act is eased. In this respect, there is a growing debate on the limitations for the further development of renewable energy production in Germany this prohibition is creating.

Last modified 16 Dec 2020

Corporate PPAs are used in Italy for energy sources but with certain limitations.

Corporate PPAs are short-term contracts in Italy (usually having a duration of 1 year) and adopt the sleeved structure. A key limitation to the use of corporate PPAs are their duration as it is not long enough to allow the project to be bankable or become profitable.

Existing long-term corporate PPAs provide for a term not longer than 5 years and variable prices based on the market price of the energy.

The market does not offer long-term corporate PPAs due to risks associated with long-term energy price trends and the buyer's financial standing long-term requirements.

Long-term corporate PPAs do not offer prices which are capable of sustaining a project from a financial perspective. The current legal framework does not provide any form of public guarantee or mitigation of such risks.

Last modified 16 Dec 2020

Currently, most of the electrical needs of the country are met by KPLC (Kenya Power and Lighting Company) with power being generated by KenGen (a government-backed power generation company) and Independent Power Producers (IPPs) who enter into long-term PPAs with KPLC. KPLC then distributes energy and sells to retail consumers. 

Changes brought in with the Energy Act of 2019 ("Energy Act") opened up the power sector by permitting other entities to distribute and transmit power and also allowing for net metering and wheeling of generated power. 

Although, most large corporates have only recently genuinely begun exploring how they might generate their own power.  There are a few limited examples of this:

  • Some large malls and corporate headquarters in Nairobi have financed and installed solar systems to generate power without the use of PPAs.
  • Other parties have used direct wire/private wire PPAs. These usually take the form of roof-mounted solar panels installed by a contractor/operator on premises owned by the corporate and operated for a fixed term with fixed prices for power generated. 

Generation of up to 1MW of power for ‘own use’ is permitted under the Energy Act without the need for extensive licensing. This makes the approaches highlighted above appealing to corporates who want a simple fix to the rising costs of power in Kenya. Direct wire PPAs also avoid the need to rely on any external party for transmission or distribution, further reducing the potential for administration and bureaucracy. 

Virtual PPAs and sleeved PPAs are almost non-existent in Kenya. This could be because the regulatory framework is not mature/sophisticated enough (see below) and/or because corporate sustainability goals/targets for the use of renewable energy can, in fact, be inadvertently met by reliance on the national grid (more than 70% of Kenya’s energy is already generated from renewable sources). 

We expect further development in this area as the Energy Act imposes obligations on designated factories and buildings to conserve energy and assess energy consumption (ss. 188 and 189). PPAs which give corporates the freedom to choose more efficient energy sources may therefore be an attractive solution to some large manufacturers or industrial groups.

Last modified 18 Feb 2021

Traditionally in Mexico, Corporate PPAs have been Physical PPAs under the legacy regime called Autoabastecimiento or Self-Supply, where a group of medium to large consumers (usually belonging to the same corporate group) together with a selected generator form a corporation (the “Self-Supply Corporation”), which will be responsible for obtaining the necessary permits (particularly important is the power generation permit from the Energy Regulatory Commission “CRE”) and entering into the relevant agreements (particularly important are the Transmission Agreements for the wheeling of electricity with the State-owned transmission and distribution utility “CFE”). The generation would own the vast majority of shares in the Self-Supply Corporation and the consumers would need to own at least one share. The PPA would be entered directly between the Self-Supply Corporation and the consumers.

This Self-Supply regime was the only mechanism available to purchase the electricity from a private generator. Prior the energy reform of December 2013 in Mexico, only the CFE could generate and sale power and electricity. The Self-Supply scheme was an exception to the CFE state-owned monopoly, where private parties were allowed to generate their own electricity through the Self-Supply Corporation. With the reform of 2013, the projects that were developed under the Self Supply scheme have been recognized as legacy projects and will remain valid for the remaining duration of the Transmission Agreement entered into with the CFE. Although no more projects of this type will be authorized.

After the energy reform, the electricity market has been opened to private participation in generation, marketing, and supply of electricity. Only physical transmission and distribution of electricity remain a state monopoly. As the market develops, we will begin to see different types of corporate PPAs.

Last modified 16 Dec 2020

Law No. 13-09 relating to renewable energy1 introduced the possibility for operators of renewable energy production installations to enter into direct power purchase agreements with end-users to sell the electricity produced. The price is freely agreed between the parties and is not determined by the law (no feed-in tariffs). However, the end-users cannot resell the electricity to third parties.

Law No. 13-09 requires that all renewable energy projects be connected to the national grid. Therefore no direct wire projects can be implemented pursuant to Law No. 13-09. In this regard, the operator has the right to access the national low-voltage, medium-voltage, high voltage and very high-voltage grids within the limit of their carrying capacity.

[1] Law No. 13-09 relating to renewable energy as amended by law No. 58-15 and its implementing decrees

Last modified 10 Feb 2021

The Mozambican government is attempting to develop the Renewable Energy sector to connect more communities to the grid and grow the economy.

Corporate PPAs in Mozambique most closely resemble the sleeved structure, known as an "off-take" agreement in Mozambique.

Electricidade de Moçambique (EDM) is the national utility company, and because it manages the national grid, it tends to be the sole electricity off-taker. There are only a handful of projects which has a corporate buyer of electricity directly from the generator.

Last modified 1 Feb 2021

Corporate PPAs are relatively new phenomena in the Dutch market, however there is an increasing attention for them. The aforesaid is supported in particular by, on the one hand, the continued roll out of large scale renewable energy projects (wind and solar), and on the other hand the wish of purchasers to enhance their sustainability profile. The advantages of price predictability for the purchaser and lower financing costs for the developer, resulting in the possibility of subsidy-free projects, are also contributing toward the increased popularity of Corporate PPAs.

The availability of the Amsterdam Internet Exchange (AMS-IX) makes it attractive for data centres to locate to the vicinity of Amsterdam. These data centres, also large consumers, are particularly interested in PPAs.

The EU unbundling requirements are implemented in a very restrictive way in the Netherlands. The group prohibition prohibits grid operators to be part of a corporate group that includes companies generating, supplying or trading energy. This prohibition however creates the possibility for Corporate PPAs between the generator and the purchaser, leaving the ‘sleeving’ to the grid operator.

Several different types of Corporate PPAs exist in the Netherlands: on-site PPAs like the one between Vattenfall and Microsoft in relation to a 180 MW windfarm in Wieringenmeer as well as off-site PPAs, both in sleeved or synthetic versions.

Major corporates in the Dutch PPA market include Microsoft, Google, NS (state owned Dutch railway operator), Philips, AkzoNobel and DSM.

The electricity and gas markets in the Netherlands are regulated by the Netherlands Authority for Consumers and Markets (ACM), which is in charge of ensuring compliance with the Electricity Act and Gas Act.

Last modified 16 Dec 2020

The majority of large scale renewable projects in Norway in recent years use direct purchase structures (i.e. long term end-user PPAs) for the material part of electricity produced by the relevant facility (usually somewhere around 70% of P50, for a duration of between 15-25 years, baseload or pay-as-produced).

Corporates may purchase electricity directly from a production facility.

Eligible Norwegian corporate power purchasers (limited to certain power-intensive industries) can obtain credit support to cover a material part of their PPA obligations to the producer by GIEK - the Norwegian Export Credit Guarantee Institute (effectively providing a AAA wrap on the relevant part of obligations).

While there are instances of sleeved PPAs, 90% of all energy produced in Norway is traded over one exchange, Nasdaq Nordpool. Financial corporate PPAs thus primarily take the form of a financial hedge against price fluctuations. The hedge can take many forms including, fixed price offtake, floor and collar.

Since Norway maintains a market-based green energy subsidy system (but being phased out in 2021), a project usually requires offtake regarding green electricity certificates issued to producers of green energy and sold in the market. This usually takes place under an "EPA" in the form of direct purchase or a financial hedge.

Last modified 16 Dec 2020

Corporate PPAs are widely used in Peru’s energy market and are either sleeved or physical wherein either distribution companies or free customers purchase energy directly from the generation companies. 

Distribution companies serve all regulated clients and for that purpose, pursuant to Law 28832, Law to Secure the Efficient Development of Electricity Generation, they carry out competitive tenders, at firm prices, to acquire energy and capacity from the generation companies. These tenders result in the execution of long or medium-term PPAs. 

OSINERGMIN, Peru’s energy regulator, approves all bidding documents (including contract templates). Distribution companies may enter into short bilateral PPAs with producers to cover to possible future energy imbalances, but they represent a very small percentage of their energy consumption.

Free customers and generators directly negotiate the terms and conditions of their PPAs.

Financial and direct line corporate PPAs are yet to be developed in Peru.

Last modified 16 Dec 2020

The use of corporate power purchase agreements ("CPPAs") has increased in recent years, partially due to renewable energy generation and storage technology becoming more affordable. It has also been driven by increased appetite from corporates to act in a more sustainable and socially and environmentally responsible manner. Due to certain intermittent electricity supply issues faced in the country, corporates have also sought to diversify their energy supply arrangements so as to place less reliance on utility generated power.

The most common forms of CPPAs in South Africa, in our experience, tend to be those concluded on a direct or private wire basis or a wheeled basis.

Direct or private wire CPPAs typically involve a generation facility being built or installed on, or adjacent to, the property of the corporate. The facility is developed, owned and operated by an independent power producer ("IPP") and the corporate buys all or a portion of the power from the IPP. Any required power in excess of that generated by the IPP is provided by the utility (national utility or municipality).

Generally speaking, for a wheeled CPPA, the corporate concludes a CPPA with an IPP and electricity is ‘wheeled’ by the utility from the IPP to the corporate via the grid. The CPPA itself will be a bilateral arrangement concluded between the corporate and the IPP, and will regulate the purchase by the corporate of renewable energy from the IPP. In addition to this, a series of further agreements is required to cater for the ‘wheeling’ of energy. More often than not, wheeling is achieved through a series of amendments or contractual modifications to (i) the standard form power supply agreements between the utility and its customers (i.e. the corporate) and (ii) the distribution, connection and use of system arrangements between the grid operator (Eskom) and generator (the IPP).

Last modified 16 Dec 2020

2018 was the year in which the real take-off of the PPAs took place in Spain. In that year some major PPAs were signed: Audax with Cox Energy (600MW) and WElink  (708MW); Iberdola with Euskaltel (500 MW) and with Kutxabank (391 MW); and Factor Energía with ENHOL (94 MW, being this the longest lasting PPA in Spain -20 years- so far). In 2019 other major PPAs were: Audax with the Chinese giant Trina Solar (500 MW), and with the Norwegian company Statkraft (525 Gw yearly, during 15’5 years).

According to the Electricity Sector Act (Act 24/2013) PPAs in Spain may take one of either the following forms:

  • Physical PPAs. Current options via batteries or derivatives contracts may still result expensive, so there are options to be offered to corporate consumers that can better manage this risk by firming up load requirements from a retailer via for example a ‘sleeved’ Synthetic PPA.
  • Financial PPAs:
    • Contracts for Differences (CfDs): prices are cleared with respect to one strike price established by the contract.
    • Collar PPA: including cap-and-floor prices to constraint final prices within a given range.

Last modified 16 Dec 2020

The Nordics are often seen as one of the most environmentally progressive areas of Europe. Sweden was the first country in the world to pass an environmental protection act, as well as hosting the first UN conference in 1972 focusing on the global environment. Therefore, it will not come as a surprise that Sweden has ambitious goals for sustainability going forwards. The Swedish government has pledged to become fossil-free by 2045 using 100 per cent renewable energy.

Corporate PPAs have been, and continue to be, a useful tool to enable Sweden to reach its goal. Indeed, Sweden hosts one of the most developed corporate PPA markets in Europe.

PPAs have gained favour in Sweden for a number of reasons. First, fluctuating market prices for power and some bad experience with shorter term financial hedging have led mainly lenders to seek long term price security. It is exceedingly difficult to raise bank debt for a project absent a PPA. Second, a trend has been set in Scandinavia for large data centres operating in the Nordics to sign up to PPAs for their power consumption needs.

For some time after the PPA market got going in earnest, pay as produced, physical PPAs were the most common form of agreement structure. However, over recent years we have worked on a full range of PPA forms in Sweden - including synthetic, portfolio and baseload structures. At the time of writing we have worked on over 5GW of onshore wind PPAs in the Nordics all with varying PPA solutions.

Last modified 16 Dec 2020

Corporate PPAs are uncommon in Uganda.

Last modified 9 Feb 2021

Power generation by private entities is strictly regulated across the Middle East. In certain countries the only means of entering a non-utility scale transaction is under a net-metering scheme. Generally such schemes are arranged on the basis that the owner of a property will also own the power generation plant.

Notwithstanding, we do see corporate PPAs in the Middle East where the energy facility is located on-site or adjacent to the business needing the energy. However the agreement structure tends to be a leasing or hire-purchase structure where the offtaker pays for the power generation plant according to its performance.

Wheeling regulations are becoming more common in the region, thereby allowing energy generated from a renewables facility in one location to be bought by an end user in another, using the national/local grid network.  Jordan is perhaps the largest market where wheeling of power takes place.

Last modified 21 Jan 2021

Corporate PPAs have become more prominent in recent years due to the rise of wind and solar in GB and the convergence of a number of market conditions. The closure of the Renewables Obligation (RO) scheme to new participants from 31 March 2017 has meant that generators are seeking alternative financing options. Corporate PPA prices are increasingly beating wholesale electricity prices. cPPAs have become an attractive prospect for corporate buyers who increasingly want to be seen to be acting sustainably. cPPAs offer corporates a hedge against future volatile power prices by securing a fixed energy price for a fixed period. Major corporates in the GB Corporate PPA market now include Shell, M&S, Unilever, Sainsbury's, Nestle, McDonalds, Lloyds and HSBC. In addition to this, an increasing number of corporates are becoming members of RE100, a group of companies that have pledged to work towards meeting 100% of their energy needs from renewable sources.

The electricity and gas markets in GB are regulated by the Gas and Electricity Markets Authority (GEMA), operating through the Office of Gas and Electricity Markets (Ofgem). Ofgem makes decisions on a wide range of regulatory matters, including price controls and enforcement. The regulatory framework and the aggregated nature of the electricity grid meant that the large majority of cPPAs in GB have been concluded using the "sleeved" structure or so-called "physical" PPAs, where electricity is physically settled. Although GB has seen synthetic PPAs, where no electricity is physically delivered, but the price differential between an agreed price and the wholesale electricity price is paid (i.e. financial settlement) (e.g. M&S), this approach has not yet been widely adopted.

The structure of sleeved cPPAs is intended to mitigate risk for the corporate buyer by passing through balancing obligations and liability to a utility. A sleeved cPPA involves a direct agreement between the corporate buyer and the generator to purchase all or some of the electricity generated at a pre-determined price. All too often, the corporate does not have the capability to manage the actual power offtake, including necessary balancing services. The corporate buyer, therefore, additionally enters into a bilateral agreement with a utility, who will then act as the corporate's agent in managing the offtake as well as taking care of all balancing services and grid access. This cPPA offtake will be credited by the utility against the corporate's electricity requirements, and the utility will then top it off during any periods where the corporate's demand is higher than the generator's actual output. The utility will charge a management fee for its services in relation to the cPPA called the "sleeving fee".

Last modified 16 Dec 2020

Many private companies in the United States have altered the way they procure power significantly in the last decade.  Traditionally, power was obtained by corporate buyers from the local utility without consideration of the sources of such power. Public commitments to use renewable or “green” energy have driven a movement toward the direct procurement by commercial and industrial companies of renewable energy from independent power producers in the wholesale market. Such commitments came first from tech companies but have spread across many sectors, from retailers to industrial manufacturers. In 2020, the Renewable Energy Buyers Alliance reports that 10.63 GWs of corporate deals were announced in the US up from 1.53 GWs in 2016. The EPA’s Green Power Partnership, a voluntary program, now sets minimum usage for its members from 7% to 50%.  Commitments to go 100% renewable or even carbon negative have become more common - the RE100 reports that 79 of its 260 members are in the United States.[1]

Multiple options are available to a corporate offtaker looking to achieve its green power goals. 

Renewable Energy Credits

Historically, corporate buyers have purchased and retired Renewable Energy Credits or RECs separate from power procurement to demonstrate the reduction of carbon emissions. This strategy is still being employed. The NREL reports about 197,000 customers procured about 68.7 million MWh of unbundled RECs in 2019. 

Self-Supply

Another option for corporate and industrial buyers to gain access to renewable energy is through the ownership of on-site generation. This is not achievable at every location since only certain places in the US are suitable for solar or wind, for example. This approach also depends upon the buyer having sufficient space and a facility that can support on-site generation.   

Traditional PPA with an Independent Power Producer

A Traditional PPA involves the direct purchase of energy from a generation project and the physical delivery of energy from such project. The buyer takes title to the power at the delivery point. This requires the ability to physically interconnect either directly or through the local transmission grid. Generation equipment may be installed on-site, including wind turbines or rooftop or ground-mounted solar facilities. The transaction usually includes the purchase of RECs along with the energy. Under existing regulations, physical transactions directly with wholesale producers are not permitted in all locations.      

Virtual PPA with an Independent Power Producer

Virtual PPAs or financial PPAs are based on a contract for the purchase of energy generated by a renewable project which is then physically delivered and sold into the regional wholesale market in which the renewable project is located. The project receives a variable market price from the regional market. If the contract price exceeds the market price, the corporate offtaker pays the project the difference. In this way, the power project is assured that it will sell power generated at a fixed price which supports development and financing of the project.  The transaction is often in the form of a contract for differences or a fixed-for-floating swap.  A Virtual PPA also typically includes the purchase of RECs.  Divorcing the transaction from the physical delivery of energy provides broader flexibility to corporate offtakers in addressing practical constraints and regulatory restrictions which can limit potential transactions.   

Green Tariffs

Bundled products are offered by utilities in some locations including green power and RECs. Retail products can be market-based or linked to a specific renewable project which are sometimes called “Green Tariffs.”

[1] RE100 is an association sponsored by The Climate Group that include companies making such a commitment such as Google, Bank of America and Facebook. See REI100’s 2020 annual progress report online.

Last modified 24 Mar 2021

Angola

Angola

To what extent are corporate PPAs presently deployed and what sort of structure do they take?

Corporate PPAs remain uncommon in Angola. 

Article 48 of the Electricity General Law provides that outside the scope of the public electric system, the conditions of sale of electric energy will be established by the parties.

Article 15 of the Executive Decree No. 122/19 of May 24 (electric energy sales tariffs) provides special arrangements for the sale of electricity by means of special or bilateral contracts between producers and distributors and those with final customers, under the terms set out in the Tariff Regulations (Presidential Decree No. 4/11 of January 6) shall be authorized by an order of the Minister of Energy and Waters, after hearing the regulatory authority.

All the contracts with National Transportation Network ("RNT" as a sole buyer must comply with certain requirements specified in Article 11 of the Presidential Decree No. 4/11 of January 6 as amended by Article 11 of the Presidential Decree 178/20 of June 25, in order to their prices are allocated to tariffs.

Do the country's regulators allow corporate owners to purchase (1) directly from a facility, or (2) from a choice of suppliers?

In accordance with Article 11 of the General Electricity Law, the use of the facilities and networks that incorporate the Public Electricity System is allowed under the conditions provided for in the aforementioned regulation or agreed between the interested parties and their holders, as long as the supervisory body approves it after prior validation by the regulatory authority.

Hence, corporate owners are allowed to purchase directly from a facility or a choice of suppliers, as long as it has been approved by the supervisory body and has effectively gone through a prior validation from the regulatory authority.

Other than the generator and the off-taker, are any third parties commonly party to the PPA structure (e.g. a utility or other market agent)?

In addition to the electrical energy provided by the Company ENDE E.P (National Electricity Distribution Company) that comes from hydraulic dams and private generators, so far, there are no other third parties as a common party to the cPPA structure.

Is a generator permitted to sell electricity directly to an end user? If so, do they require a licence or other form of authorization?

As previously stated, Article 48 of the Electricity General Law provides that outside the scope of the public electric system, the conditions of sale of electric energy will be established by the parties.

Last modified 9 Feb 2021

Angola

Angola

What are some of the technical, political, financial or regulatory challenges to corporations adopting green energy in the short/medium term in your country and how have these challenges been overcome (or how can they be overcome)?

More incentives and benefits need to be created for companies that want to implement green energy systems. Facilitating the process of importing and accessing currencies to pay for equipment to implement the projects related to renewable energy is necessary. Governments should create incentives for companies that are implemented across the country, thereby creating employment and facilitating greater acceptance of new technologies in rural areas.

Last modified 9 Feb 2021

Angola

Angola

Are there any anticipated regulatory changes which will alter the regulatory landscape for corporate green energy and corporate PPAs?

International development partners are providing technical support to the Angolan government to establish a regulatory framework which includes negotiating power purchase agreements with independent power producers (IPPs) and design of a feed-in-tariff scheme for renewables.

Last modified 9 Feb 2021

Angola

Angola

What is the corporate appetite for green energy, including any political or financial incentives available to corporates to adopt green energy?

Even though national and international companies have been showing interest to develop green energy structures in Angola, this is still something that has to be well studied and thought through it. However, there are already small dimensions of solar energy structures being developed, for example, but only for particular purposes.

What are the key local advantages of the corporate PPA model which can benefit our clients?

The key local advantage of the corporate PPA model in Angola is energy security and easier access to financing having the corporate PPA as collateral.

What subsidies are applicable to the generation and sale of renewable energy?

This information has not been made public.

Does your country implement a national support scheme with tradable green certificates (such as guarantees of origins)?

Not yet, as green energy has not yet been implemented.

Last modified 9 Feb 2021

Angola

Angola

To the extent corporate PPAs are deployed, how are prices, terms and risks affected?

Do prices tend to be floating or fixed?

According to Article 26 of the Presidential Decree 178/20 of June 25, the tariff structure is applied by the RNT concessionaire and by the distribution companies to users connected to their networks. Along these lines, this same diploma, on its article 27, establishes that the tariff structure reflects the costs to which users give rise, according to the characteristics of consumption and the level of tension to which they are connected, regardless of their social or legal character and the final destination give to the energy consumed. 

Hence, the prices are fixed considering the elements above mentioned.

What term is typically agreed for the PPAs?

There is not a fixed-term for cPPAs it all depends on the activity to be exercised. However, it is important to mention that the tariff regime is, in general terms, in force in a four-year tariff regime. Alongside with that, the tariff period is defined by a specific diploma by the Sector Regulatory Entity, which must be multiannual, as established on Article 28-A of the Presidential Decree 178/20 of June 25.

Are the PPAs take-or-pay or limited volume?

Not applicable.

Are there any other typical risks?

Not applicable.

To the extent corporate PPAs are deployed, in whose favour will the risks typically be balanced?

Volume risk

The risk is born by those who not comply with rule applicable to the specific situation.

Change in law

Usually, when changing legislation, users and distributors are given a period to prepare and adapt to this mentioned change of legislation. Hence, when there is a change in law non complied with, the risk is born by those who have not complied with the rule in place.

Increase / reduction of benefits

Again, similar to the change in law, the risk is born by those who not comply with rule applicable to the specific situation.

Market liberalization (if applicable)

Not applicable.

Credit risk

The risk is born by those who not comply with rule applicable to the specific situation.

Imbalance power risk

The risk is born by those who not comply with rule applicable to the specific situation.

Production profile risk

The risk is born by those who not comply with rule applicable to the specific situation.

Last modified 9 Feb 2021

Angola

Angola

Does your country operate a balancing responsibility scheme?

Not applicable.

If your country operates a balancing responsibility scheme, who is the balancing authority and do the generator and offtaker typically undertake balancing themselves?

Not applicable. 

Last modified 9 Feb 2021

Angola

Angola

What significant transactions/deals have taken place in the last 12-18 months?

Laúca Hydroelectric Power Plant

According to the Government, Laúca Hydroelectric Power Plant (“AH Laúca”) is the largest work in the country today. The Project was commissioned by the Angolan Executive, represented by the Ministry of Energy and Water, and is carried out by ODEBRECHT. COBA and LA MAYER carry out the supervision of the implementation of the project. When AH Laúca is 100% operational, it will produce more than twice as much energy as the other two dams already operating on the Kwanza River. This energy potential will serve 8 million people. AH Laúca will produce 8,643 GWh (gigawatts) of electricity, representing an installed capacity of 2,070 MW (megawatts).

The realization of the project demands great infrastructure support. Because of this, AH Laúca is today a city that is composed by: Leisure area; Sports area; Accommodations; Kitchen and Cafeterias and Medical Center.

AH Laúca is a pole of job and income generation. The project is also committed to providing opportunities for national talent. Today, the enterprise has 8,458 Members. Of these, 8,035 are national, which represents 95% of the entire productive force involved in the execution of the work. The remaining 423 are expatriates, a number that represents 5% of total members.

Through the Acreditar Program, the project offers basic and specific training to AH Laúca Members and also to the residents of the communities surrounding the construction site.

AH Laúca is 86% ahead of Civil Works, 72% ahead of Electromechanical Assembly and 14% in the Energy Transport System. Always overcoming challenges and fulfilling all the goals set with safety, quality and productivity.

2nd Hydroelectric Power Plant of Cambambe and Dam Alignment

With the conclusion of the Cambambe 2nd Power Station and the Dam Raising, it was possible to obtain an additional power of 780MW. This power is helping to reduce the energy supply deficit in the Provinces of Luanda, Kwanza Sul, Malanje, Uige, Kwanza Norte and Bengo.

It will also allow the interconnection of the North-Central Systems with the Benguela Province link, thus reducing production costs and the consumption of diesel for energy production.

More than 10,000 construction posts have been created as part of the temporary work in the rehabilitation, modernization and extension of the hydroelectric complex. The construction owner was GAMEK (Gabinete de Aproveitamento do Médio Kwanza) and the contractor was ODEBRECTH.

Solar village program

The main objective of the Solar Village Programme is electrification, through the installation of autonomous solar photovoltaic systems (isolated) in infrastructures Social, including: Schools; Medical Posts; Police Posts; Administrative Buildings; and, Social Jangos, including Public Lighting Posts.

In the 1st phase of the Programme, awarded to the company Elektra Electricidade e Águas, Lda, 11 localities were selected from 4 Provinces in the country: Bié, Kuando Kubango, Malange and Moxico. This phase has been completed since 2011, with a total of 156,660 Wp of 42 systems and 70 public lighting posts implemented.

In some cases, a system provides electricity to more than one infrastructure. So far, 50 infrastructures have benefited from the electricity supply, namely: 15 schools, 18 medical posts, 1 maternity ward, 1 police station, 1 police station, 9 administrative residences, 1 nurse's residence, 3 administrations.

In the 2nd phase of the Solar Village Programme, four companies were selected for the installation of a total of 75 systems and 160 streetlights.

As part of the 3rd phase of the Solar Village Programme, the project has already started after the Auto de Consignation signed with the Company LTP Energias S.A. The project will benefit the provinces of Kwanza Sul, Cuando Cubango and Lunda Sul, whose aim is to supply electricity to the communities with Solar Photovoltaic Systems of Auto-consumption Kits and Public Photovoltaic Lighting.

It is part of the energy and water sector action plan 2018-2002, to continue the Solar Village Programme and to ensure adequate maintenance of its infrastructure and test a new concept of a 100% solar mini network, based on batteries, to electrify the most isolated municipality headquarters, avoiding fuel logistics.

What transactions/deals are anticipated to come to market in the next 12-18 months?

See Past transactions

Last modified 9 Feb 2021