Companies around the world are increasingly turning to renewable energy power purchase agreements (PPAs) to deliver their electricity needs, according to a global report by Baker & McKenzie.
The report, titled The Rise of Corporate PPAs: A New Driver for Renewables, indicates that a number of businesses are now purchasing electricity under long-term renewable PPAs directly from independent generators, as well as investing in generation assets instead of buying power direct from utilities.
The report says corporate renewable PPAs are especially on the rise in the US, where almost 1.6 GW of renewables capacity was contracted in the first half of 2015, up from 1.4 GW in 2014 and more than double the 600 MW contracted in 2013.
This includes major commitments from companies such as Google, Apple, Amazon and Facebook.
The trend has yet to reach Australia, where the corporate PPA market is still in its infancy. However, Paul Curnow, Baker & McKenzie Partner, says Australia could still be in line to benefit.
“Almost 90 per cent of surveyed corporates, utilities, IPPs and investors believe more corporates will enter into PPAs in the next 18 months than in the past 18 months,” Mr Curnow said.
“This is good news also for the Australian market, as the renewable energy industry here has faced obstacles in recent years with uncertainty over the Renewable Energy Targets and project developers obtaining the necessary finance.”
To date, says Freddy Sharpe, CEO of Climate Friendly, only one contract has been signed in Australia using a corporate PPA model, representing just 200 kW of capacity.
Mark Clover, Director, Power & Utilities Australia, Project & Export Finance at ANZ, explains that one reason for this is regulatory uncertainty.
“The regulatory environment has made renewable energy projects difficult for developers, offtakers and lenders,” he says in the Baker & McKenzie report. “Retailers are hesitant to enter into long-term PPAs if they think there will be a change of law or the renewable energy target will change or disappear.
“Secondly, some of the retailers unfortunately have entered into offtaker agreements that are now out of the money as power prices didn’t rise as fast as previously anticipated. This is partly caused by changing regulations.”
Nonetheless, Mr Curnow said corporate PPAs offer new market opportunities for Australia, providing new customers for renewable energy projects and enabling corporate customers to directly access renewable energy sources that to date they’ve only been able to access through the GreenPower program.
“Corporate PPAs provide corporate customers with the benefit of reduced and relatively certain electricity prices and a boost to their green and sustainability profiles,” Mr Curnow said.
