Professional Documents
Culture Documents
of corporate
PPAs
A new driver
for renewables
Contents
Executive summary...................................................................................... 2
Standard vs synthetic?
Conclusion .................................................................................................. 19
1American Clean Skies Foundation and GreenBiz, Google is just a small slice in the new
corporate PPA boom, www.greenbiz.com/article/google-just-small-slice-new-corporate-ppa-
boom, 2015
2American Clean Skies Foundation and GreenBiz, Google is just a small slice in the new
corporate PPA boom, www.greenbiz.com/article/google-just-small-slice-new-corporate-ppa-
boom, 2015
Agree
69%
2%
Strongly
disagree
20% 9%
3
Ceres, Power Forward 2.0: How American Companies Are Setting Clean Energy Targets and
Capturing Greater Business Value, 2014
Economic factors
(long-term energy
60%
cost stability)
30% 10%
Other
The US is furthest ahead when it comes to operational, the wind farm will power electricity
corporate renewable PPAs. Corporates entered grids that serve Amazons data centres.
into over 1.5 GW of renewable energy PPAs in the
Facebooks purchase of the output of Alterra
US in H1 2015, already surpassing the 1.4 GW of
Power and Starwood Energys 204 MW Shannon
PPAs signed in 2014, according to the American
wind farm under a 13-year hedge contract.
Clean Skies Foundation. By contrast, only 600 MW
of corporate renewable PPAs were executed in The Dow Chemical Companys purchase of 200
2013. Some of the most notable deals in 2015 thus MW of power from a wind farm located in south
far include: Texas under a 15-year PPA. It will power the
companys manufacturing site in Freeport, Texas.
Amazons purchase of 100 percent of the power
of Pattern Energys 150 MW Fowler Ridge wind Survey respondents are unequivocal that the US
farm, currently being built in Indiana. When will maintain its dominance. Almost 50 percent
1,600
Cornell University HP
IKEA Switch
1,200 Amazon
University of California
UC Davis
Walmart
Oklahoma State University
Cisco
1,000 Facebook
Project size (MW)
Microsoft Amazon
800
Philadelphia Area Hospital Groups
Apple
Standford University
Univ. of Maryland/MD DGS
GW/AU
Apple Walmart
Google
Google
Microsoft
400 Google Kaiser Permanente
Facebook Kaiser Permanente
Google
Penn State
200 Apple
Mars
Ecolab
Google
Amazon
University of Oklahoma IKEA
0
2008-12 2013 2014 2015
4
David Labrador, RMI, http://www.greenbiz.com/article/beyond-google-and-apple-whats-
holding-corporate-renewables-back
Agree
Strongly
disagree
54%
6%
15%
25%
Strongly agree Disagree
41%
can successfully structure
corporate renewable PPAs. This Agree 6%
implies corporates must seek
advice from external providers at
an early stage when negotiating
these contracts.
14%
A lot of companies dont have
the necessary skills in-house,
confirmed Mona Dajani, Partner
at Baker & McKenzie. They are
not energy lawyers. Even the
4%
41%
largest companies that do have Strongly agree
skills in-house will often always
use outside counsel. But it is Disagree
really worth investing the time to
get to know this market as they
can save a lot of money in the
long run. I always like someone
from the in-house team to work
with me, learn from me and
To what extent do you agree that it is too complex for
monetize my knowledge so that corporates to enter into renewable energy PPAs? (All
my involvement is limited on survey respondents)
subsequent PPAs.
37%
one way smaller corporates
can enter into renewable PPAs Agree 6%
is through forming consortia
with other companies. Small
and mid-sized corporates have
refrained from signing renewable 18%
PPAs because they either lack
the expertise and knowledge to
do so or because they lack the
power demand to make it a viable
exercise, he said. Outside the
US and especially in Europe I am Strongly agree
2%
44%
now seeing corporates forming
consortia with others to get
experience of how they work Disagree
through combining their power
demand.
Power prices are the one thing High risk Medium risk No risk
that really keeps me up at night,
explained the procurement lead
at a US technology company in
the final stages of negotiating a
renewable energy PPA. If more
natural gas is found or oil prices
How significant are the following risks associated
drop further, suddenly were out
of the money. All our market with synthetic/virtual PPAs? (Generator survey
forecasts show market prices respondents)
rising more quickly than our
current PPA rate, but you cant be
Power price risk wholesale power prices may rise above the
certain.
agreed strike price for a longer period of time than we anticipated
Power price risk is equally 31% 58% 12%
In standard PPA contracts utilities are often required to More voting rights than the hedging
compensate the project for the loss of revenues from counterparty (the corporate)
14%
electricity sales and sometimes tax credit payments if
a curtailment is enforced by the utility. As Skip Rankin,
Partner at Baker & McKenzie explains, this requires
careful consideration during negotiations between the
corporate offtaker and investors.
Which of the following
A big issue is to what extent the offtaker is responsible should corporates
for any type of make-whole payments during a seek to insert into
curtailment and how curtailment is defined. he said.
If it is imposed by a third party the answer is usually no
virtual/synthetic PPA
because it is nothing to do with the offtaker. If the offtaker documentation to
gets involved because the prices fluctuate drastically and reduce risk? (Corporate
the offtaker refuses to pay below the floating minimum
and service provider
price because the market is not functioning normally for a
while, thats what we call an offtaker directed curtailment. survey respondents)
A big talking point is what level of risk a production tax
credit investor takes in that situation? First lien on specific collateral
of the project
On the other side of the equation, voluntary curtailment 74%
may represent economic value. In many jurisdictions
More voting rights than the
the power to scale back at will and decisively react to
debt provider
demand fluctuations represents a significant economic 29%
value, noted Weero Koster, Partner at Baker &
McKenzie. Corporate PPA parties are quickly starting to Other
appreciate this opportunity to enhance their overall value 6%
proposition.
: Roberto Martins,
Partner,
So Paulo
: Joachim Scherer,
Partner,
Frankfurt
: Kieran Whyte,
Partner,
Johannesburg
The findings in this report are based on a survey of over 100 senior
business executives across the world. The survey was conducted
in September and October 2015 and was completed by corporates,
developers, investors, banks and services providers.
The report also includes comments from interviews conducted with the
following individuals:
Mark Clover, Director, Power & Utilities Australia, Project & Export
Finance, ANZ
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