The advantages of a Power Purchase Agreement include long-term price security, opportunities to finance investments in new power generation capacities, or the reduction of risks associated with electricity sales and purchases. In addition, a specific physical supply of electricity with certain regional characteristics and guarantees of origin can occur. Customers can use this opportunity to make their brand more sustainable and greener.
The open-end of the contract’s design also creates a great deal of leeway to reflect preferences of individual plant operators and electricity consumers. This also applies to pricing: PPAs can be signed at fixed prices, or can allow for greater participation in market risks and opportunities.
PPAs are complex contracts and often require a great deal of time and negotiation prior to conclusion. The long-term nature of PPAs can be a disadvantage in the event of price developments that end up being negative for one party. Furthermore, electricity production itself – especially from wind and photovoltaics – can fluctuate. If the quantities of electricity – agreed upon well in advance – are not available at the time of delivery, the plant operator must provide financial or physical compensation, or outsource to a third party such as an electricity trader.
Disclaimer: Next Kraftwerke does not take any responsibility for the completeness, accuracy and actuality of the information provided. This article is for information purposes only and does not replace individual legal advice.
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With the rise of renewables all over the world, we are facing a gigantic transformation of the global energy system. The Virtual Power Plant answers the demands of the decentralized energy world and opens up new business prospects for its participants and, of course, RES aggregators. We help you utilize them in the best possible way.