What is a PPA (Power Purchase Agreement)?

It is a contract for the sale and purchase of energy that takes place between buyers (Offtakers) and sellers of energy.

The PPA defines the price that an energy provider will receive for each megawatt-hour (MWH) of energy generated from a renewable energy asset.

It also establishes the amount of electricity to be supplied, the duration of the contract, and details such as transmission and insurance matters.

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TYPES OF PPA

There are two main types of PPAs classified according to their location:

Onsite PPA: This is a contract for the supply of electricity where the renewable energy installation is located within the customer's facilities and connected to their internal grid. The developer usually makes the investment, designs, installs, operates, and maintains the facility. The energy generated represents energy that the customer no longer demands from the grid, and the developer offers it at a more competitive price. When the Onsite PPA ends (with an approximate duration of 8-15 years), the energy generated becomes free, and the facility becomes the property of the customer.

Advantages:

The company does not have to bear the initial investment or the maintenance and operational costs of the installation.

At the end of the contract, the company becomes the owner of the installation at a pre-agreed price.

PPA Offsite: contract associated with a renewable energy source connected to the country's electrical distribution network, which distributes energy from its point of origin to the consumption point (customer). This means that there is no physical exchange of energy, and the generation plant may be far from the consumption point.

Advantages:

Economic savings: acquiring energy at a lower price than the wholesale market price.

The company does not need to invest in installation or bear the costs of operation and maintenance. Free choice of the supplier.

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Also exist other kind of PPA:

Virtual PPA: it is a flexible, customizable, multi-year bilateral renewable energy contract powered by renewable energy produced by Enel Green Power, which does not involve the physical delivery of energy from the seller to the customer, who therefore does not need to change providers. Essentially, it is a financial transaction, which is why this type of agreement is often referred to as a "financial PPA." Virtual PPAs operate in the form of contracts for difference (CFDs), under which the energy provider and the customer agree on a price for the electricity to be supplied (the "strike price"). If this price is lower than that set by the wholesale electricity market, the customer receives a discount from the provider equal to the difference between the strike price and the wholesale market price. Conversely, if the agreed "strike price" is higher than the wholesale market price, the customer pays the difference to the provider. Being long-term, these agreements protect companies from the volatility of energy markets while facilitating access to renewable energy supplies. (Source: https://corporate.enelx.com/es/our-offer/business-solutions/power-purchaseagreement/virtual#:~:text=Un%20PPA%20Virtual%20es%20un,no%20necesita%20cambiar%20de%20proveedor).

To learn more about it, I look forward to seeing you at the presentation on October 29 and 30 at the Hotel RIU.

SERGIO A BUSTOS

AMBASADOR OF THE INTERNATIONAL LITHIUM CHAMBER.

LAWYER

REALTOR

EXP. IN INTERNATIONAL TRADE