Wholesale Power Purchase Agreement

We have helped renewable energy project proponents develop and implement sound strategies, with stratified purchases of futures and/or options in wholesale markets, ensuring the protection of a minimum return on investment without blocking opportunities for growing markets. Let us hope that the intoxication of AAEs does not destroy the financial world`s willingness to accept such good business practice. AAEs can be managed by service providers in the European market. Legal agreements between the national energy sectors (sellers) and the distributor (buyer/purchaser of large quantities of electricity) are treated as AAEs in the energy sector. This relates to the difference between what was planned (usually a day before) and actual production (the cost of imbalance). This risk can be reduced by correcting the costs of imbalance through an agreement or intraday trade, if available. To illustrate how this works, imagine that two parties enter a financial AAE with a strike price of 10 cents per kWh. The renewable energy producer owes the difference to the customer when the wholesale price is more than 10 cents per kWh and the customer owes the difference to the renewable energy producer when the wholesale price is less than 10 cents/kWh. At the end of each billing period – usually every month – the customer receives from the producer (or sends) the net price difference per kilowatt-hour between the strike price and the wholesale price.

Therefore, this sudden interest in AAEs as a project promoter seeks to conclude a long-term supply agreement to convince investors and banks. And in their hunger to have these AAEs, they accept discounts on what you can get in the wholesale market. Today, PPAs are an important driver of the widespread use of supply-scale solar projects in the United States. While there are different trade-offs and risks between types of electricity supply contracts, a solar AAE does not require capital investment, does not support maintenance costs and blocks energy prices for up to 25 years. Renewable Energy PPPs put clean energy into the electricity grid and the buyer has all the environmental benefits associated with his part of the project. This is good news in a volatile energy market and for buyers who want to achieve renewable energy and sustainable development goals. The AAE is one of the selling channels in the market that is generally suitable for farmers or landowners with an installed production capacity of more than 100 kWp and is mandatory for those who apply for renewable energy commitment quotas. Many distribution companies offer standard AAEs that allow electricity producers to obtain a guaranteed price for electricity exported on the basis of the wholesale price at the time of fixing. If this is not the case, we should consider a long-term contract setting out all the terms of the agreement. Since RES are treated differently in each AAE, it is important that the client understands the ownership of REC in their respective contracts. The project`s UCs should not be passed on to the client, but are sold by the project owner on the compliance market. To make claims regarding the use of green electricity from the AAE, the client`s owner must be the RECs associated with the project.