A Power Purchase Agreement (PPP) is a long-term agreement between a developer and a consumer on the purchase of energy. The Iberdrola Group has extensive experience in this sector in countries such as the United States, Mexico and Spain. An alternative to a direct AAE with on-site power generation is an offsite AAE, also called virtual or synthetic AAE. Under an offsite AAE, the customer and the renewable energy project must not be in the same region. This gives customers more options to select projects and allows customers to use PPAs in countries where PPAs are not available locally or where there are physical space restrictions that would prevent the installation of production devices. “The industry has come together to forward these recommendations to the government and present a reasonable plan to upgrade tidal and wave energy in the UK, and we look forward to working with them on these proposals in the coming months.” As business AAEs have been studied in both mature and emerging markets, the challenges facing the sector and the barriers faced by business buyers have become clearer and more understandable. The report provides an overview of these challenges and a detailed overview of emerging innovations in the market to address them and accelerate the introduction of more corporate PPAs into mature markets and support opportunities in new markets. Norton Rose Fulbright is a leader in the global AAE market. Over the past six years, the company has advised more than 50% of the PPAs signed in the UK and a number of major PPAs signed in Europe, such as the Krammer wind farm in the Netherlands and Nestlé`s direct purchase of electricity for 50% of its UK application. “As the report points out, the market is developing to meet challenges and innovation is the key to significantly increasing the number of business PPPs in the future. The electrical power generated by the energy system is then purchased by the customer at a rate generally lower than the retail rate of the distribution company, resulting in immediate savings.
The PPP rate generally increases by 1 to 5% per year for the duration of the contract (i.e. a pricing staircase), to account for a gradual decrease in the operational efficiency of the system, operating and maintenance costs, and the increase in retail electricity. AAEs are generally long-term agreements of 10 to 25 years. At the end of the term of the contract, the customer can extend the life, purchase the system from the developer or have the devices removed from the property.