About PPA - R.Power Renewables

Power purchase agreements (PPA)

A direct, customized agreement between a renewable energy producer and its consumer. It allows for the large-scale purchase of clean energy at an attractive price. Through a PPA, the consumer simultaneously contributes to the creation of new green assets.

R.Power currently has over 3 TWh of energy (500 MW) in renewable assets for commercialization in Poland and international markets.

Paweł Kowalski
Commercial and PPA Manager
+48 507 345 341
pawel.kowalski@rpower.solar

About PPA

  • A Power Purchase Agreement (PPA) is a contract between an electricity producer (seller) and an energy consumer (buyer). The contract defines the conditions for purchasing energy from renewable sources, including price, quantity, and duration.
  • PPAs are typically long-term, usually lasting 10 years or more, which is crucial for the producer as it enables the financing of new renewable energy projects.
  • For the consumer, the primary advantage of a PPA is the guarantee of energy price stability, often leading to cost reduction. In the case of solar energy purchases, consumers can achieve significant cost optimization due to the low cost of this technology. Moreover, solar power plants offer low volatility and predictability in energy production volumes.

An additional important benefit of a PPA is its role in increasing the share of renewables in the national energy mix, contributing to a more sustainable and cleaner energy future.

Types of PPA

Off-site Physical PPA

  • This type of PPA can be entered into either with an end consumer purchasing electricity for their own needs or with an energy company engaged in electricity trading.
    • In the first case, the end consumer directly benefits from the energy generated by the renewable energy installation.
    • In the second case, the trading company acts as an intermediary, purchasing energy from the producer and supplying it to dedicated corporate clients.

When the energy producer delivers energy to the consumer through the public power grid, additional settlement is required via balancing groups for both the power plant and the consumer.

Balancing groups are operational structures within the power system that help balance energy production and consumption. Through this mechanism:

  • The power plant (renewable energy producer) joins a balancing group responsible for supplying energy to the grid.
  • The energy consumer joins their balancing group, which manages their energy consumption from the grid.

This system allows for effective energy flow management, with any differences between projected and actual energy consumption and production settled at the balancing group level.

  • Based on the Off-site PPA, the consumer pays for the energy and the guarantees of origin provided by the producer.
  • Payments under such PPA agreements are calculated as the price multiplied by the volume of energy delivered each month.

Off-site Financial PPA (Virtual PPA)

In this PPA model, known as vPPA (Virtual Power Purchase Agreement), there is no physical sale of electricity between the producer and consumer. It is a financial agreement based solely on the monetary settlement of the difference between the PPA energy price and its spot market price for a given day or hour.

In this model:

  • The energy producer sells energy on the market, e.g., to a trading company.
  • The consumer purchases energy on the market from a freely chosen trading company.
  • The financial settlement of the price difference ensures both the producer and consumer are protected from fluctuations in market electricity prices.
  • The producer provides the consumer with guarantees of origin for the renewable energy corresponding to the quantity of energy subject to the price difference settlement, ensuring that the vPPA supports the generation of such energy at a zero-emission source (a renewable energy installation thus assigned to this consumer).

The price difference settlement means that if the market price of energy is higher than the agreed price in the contract, the producer pays the consumer the difference, whereas if the market price is lower, the consumer pays the difference to the producer. This mechanism acts as protection against energy price fluctuations.

On-site PPA

  • The consumer signs an agreement with a producer who builds a renewable energy installation directly connected to the consumer’s premises.
  • The on-site PPA price is determined by both parties in the contract.
  • Energy sold under an On-site PPA is supplied without using the power grid.

PPA Volume

  • R.Power uses the best photovoltaic modules on the market. Current technology requires an estimated annual degradation of PV module efficiency. This is calculated as 0.4% of annual production.
  • The pay-as-produced formula means that the consumer agrees to purchase the entire annual energy production under the PPA.
  • The pay-as-produced formula allows the consumer to receive Guarantees of Origin equivalent to the energy produced.
  • Before entering into a PPA, the consumer should estimate their energy needs. Our team of experts assists clients with these calculations.

Contract for difference used in Financial PPA

  • According to a financial PPA, the market price (MP) is determined monthly for specific settlement periods.
  • If the MP in a given settlement period is higher than the PPA price, the energy producer pays the consumer the price difference [SA+].
  • If the MP is lower than the PPA price, the consumer pays the producer the price difference [SA-].