Stricter climate targets and the increasing electrification of processes are also increasing the demand for green electricity in industry in order to replace oil and natural gas. Where possible, companies are turning to their own energy supply systems, such as PV systems or CST, in order to be able to obtain green energy cheaply and independently. However, the construction of such systems is costly and time-consuming. One quickly available alternative is a Power Purchase Agreement, which allows companies to buy emission-free electricity at stable prices. In combination with heat storage systems, this energy can be utilised even more efficiently and around the clock.
How does a Power Purchase Agreement work?
A PPA, short for Power Purchase Agreement, is a long-term contract for the supply of electricity between an energy producer and an energy consumer that offers many advantages for both parties. The contract usually covers a period of 5 to 20 years. Under a PPA, the producer undertakes to supply a certain amount of energy over a fixed period at a fixed price. This gives the producer financial planning security and guarantees the consumer stable and often lower energy costs. Project developers are also increasingly using PPAs to finance renewable energy plants.
Different types of Power Purchase Agreements
The various types of Power Purchase Agreements differ in terms of their structure, contractual conditions and areas of application. A distinction is made between physical, off-site and on-site PPAs, as well as synthetic PPAs.
On-site PPA
With an on-site Power Purchase Agreement, the electricity is supplied directly to the customer. As a rule, the public electricity grid is bypassed and the electricity is usually supplied via a direct power line. With an on-site PPA, the energy source is located on the premises or in the immediate vicinity of the company. The energy systems, such as photovoltaics, CST or a wind turbine, are often installed, operated and maintained by the energy producer. The company undertakes to purchase the electricity generated at a fixed price over a certain period of time.
Off-site PPA
In contrast to on-site PPAs, the energy in off-site Power Purchase Agreements is fed into the public electricity grid. The energy plant therefore does not have to be located in the immediate vicinity of the customer. It is an agreement on the balance sheet purchase of a physical quantity of electricity defined in the PPA at an agreed price over a fixed period of time, for which the company receives the corresponding green electricity certificates (guarantees of origin).
A special type of off-site PPA is the Sleeved Power Purchase Agreement. In this model, an energy service provider acts as an intermediary to manage and supply the electricity. The sleeving process involves the physical delivery of the electricity through the public grid, with the energy service provider taking care of grid utilisation, billing and managing the energy flows.
Synthetic PPAs
Synthetic Power Purchase Agreements, also known as virtual PPAs, are a type of contract in which a company agrees to finance the renewable energy production of a remote energy project at a fixed price without purchasing the physical electricity. Instead, the electricity is fed into the public grid and the energy producer receives the market price for the electricity sold. The difference between the fixed contract price and the actual market price is settled financially between the company and the energy producer. Synthetic PPAs offer flexibility and easy integration into existing energy procurement strategies without the need for physical infrastructure changes.
Advantages of PPAS: Why are they so important for the energy transition?
Power Purchase Agreements play a decisive role in the success of the energy transition, as they offer both economic and environmental benefits. Companies can secure stable and often more favourable electricity prices in the long term by connecting directly with renewable energy producers. The conclusion of a PPA also enables companies to achieve their sustainability goals and improve their carbon footprint without having to invest in expensive infrastructure themselves.
PPAs are also an important driver for the expansion of renewable energy and encourage investment in renewable energy projects by providing financial security and predictability for producers.
Combining ThermalBattery™ with Power Purchase Agreement: The advantages for companies
By combining this with innovative energy storage technologies such as the ThermalBattery™ from ENERGYNEST, companies are able to utilise the emission-free electricity that they obtain by concluding a PPA even more efficiently and flexibly. Surplus electricity can be stored in the ThermalBattery™ in the form of heat and released as process heat or steam when required. On the one hand, this enables the electrification of processes that were previously often powered by natural gas using green electricity. On the other hand, the integration of the heat storage system increases the efficiency of energy utilisation, which can significantly reduce the company’s energy consumption and therefore its energy prices. Ultimately, the combination of PPA and thermal energy storage offers a sustainable and economically attractive solution for optimising energy consumption and decarbonising industrial processes.
