Power Purchase Agreement
About PPA
A Power Purchase Agreement, or PPA, is a long-term agreement for purchasing electricity. It is typically concluded between a power producer and an energy-intensive corporation. PPAs usually have a duration of 5-15 years, with an annual volume of delivered electricity ranging from 10 to 200 GWh/a.
A PPA functions as a long-term electricity price hedging instrument, benefiting both the power consumer and the electricity producer. Unlike traditional derivatives hedging, PPAs offer flexibility with various delivery and pricing structures, enabling tailor-made risk management solutions.
PPA may serve as financial instruments for power developers, producers and investors particularly when seeking financing for renewable power asset under development. By entering into a PPA, the power consumer actively contributes to the investment in new renewable energy.
Benefits of a PPA for an energy-intensive electricity consumer
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Affordable and predictable electricity pricing
PPAs provide stable and predictable pricing for electricity, allowing energy-intensive corporations to plan their budgets more effectively.
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ESG (Environmental, Social, Governance) advantages
By engaging in PPAs, corporations can significantly reduce their Green House Gas (GHG) Scope-2 emissions and helps them align with global ESG goals.
Competitive advantage for industrial suppliers in their supply.
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Brand value and media recognition
Corporations that sign PPAs position themselves as forerunners in sustainability, earning recognition for their efforts, attract positive media attention and increase their Brand Value.