A power purchase agreement, also known as PPAs, allows a company to purchase electricity at a fixed price for a long time. This type of deal eliminates the need for a company to worry about the volatility of the power market.

Why they matter

For power producers, investing in new facilities is a huge financial undertaking. For a long time, these investments have been supported by government subsidies. These help ensure that the producers receive the best possible price for their power.

 Due to the implementation of stricter environmental regulations and the phasing out of government subsidies, many power producers are now looking for new ways to sell their electricity. One of these is through a power purchase agreement. This type of deal allows them to secure the best possible price for their power and avoid volatility in the market.

Big business

 The majority of energy consumers are large companies and corporations. They are looking for reliable and cheap renewable power, 24 hours a day. By signing up for long-term power purchase agreements, these organizations can ensure that they have access to this energy supply all throughout the year.

AB InBev, a global brewing company, signed Europe’s most significant solar power purchase agreement earlier this year. Through this deal, the company can supply enough electricity to 14 breweries. It also means that a German developer can finance two more projects.

One of the most prominent examples is the deal between Google and Eneco, a utility company in the Netherlands. This agreement allows Google to purchase 175 gigawatts of electricity from Eneco’s wind farm. 

The future

According to a senior official at Offshore, the company’s wind farms are attractive to corporate customers due to their scale and environmental benefits.

In Taiwan, a major semiconductor company signed a 20-year contract to purchase the full output of a wind farm that will be operational in 2025. Another company from Germany, Covestro, also signed a long-term power purchase agreement with rested. The company can purchase 100 megawatts of electricity from the Borkum Riffgrund 3 wind farm.

 Despite the huge potential of the corporate power purchase agreement market for offshore wind, the level of investment needed to support these projects still needs to be increased to make them commercially viable.