Power Purchase Agreement (PPA) - Wind Energy
Overview
The Power Purchase Agreement (PPA) should be signed before the construction starts. Under a PPA, off-takers agree to buy power from the project company for a set period at a certain rate. PPA agreement usually takes between purchaser (often a state-owned electricity utility)and a privately owned power producer.[1] The PPA is obviously the most important agreement to be negotiated for the project as it dictates the future revenues of the project, It is crucial that the PPA does not penalize the project company if the power supply is affected by low wind levels.
Aspects of Power Purchase Agreement (PPA)
Pricing (Structure)
PPAs usually have a two- part contract, where the contract price reflects the cost of energy (variable charge) and the cost of the underlying technology being purchased (availability charge). The availability charge should cover the project company's fixed costs (including a return on equity for the project company) and the vaiable charge should cover the variable cost of energy generation (depends on the power supplied). For example, a hydro power plant and a gas-fired plant would have different two-part contracts. The hydro power plant would have a high fixed component and a lower variable component as compared to the gas-fired plant.[2][3]
PPAs usually last from 15-20 years and thus they should include all the variations in the tariff.
Further Information
- Wind Portal on energypedia
- Power Purchase Agreement (PPA) for Medium Scale Wind Power Projects
- Power Purchase Agreement (PPA) for Small Scale Rural Power Projects
- Power Purchase Agreement (PPA) produced for Pakistan
- Power Purchase Agreement for Kenyan Electricity Regulatory Board
- Power Purchase Agreement for Grid-Connected Wind Power
- Power Purchase Agreement for Isolated Mini-Grid – Based on Tanzania/Kenya Examples
- Power purchase Agreement for Isolated Mini Grid - Based on Zimbabwean Practice
- Power Purchase Agreement for Srilanka
- GTZ 2009: Development of Implementation Strategies for a Regional Regulatory Action Plan (RRAP) for the Western Cape. Power Purchase Agreement pp. 42
- Thumann,A., Eric,W.A.(2009)CRM Energy Project Financing:Resources and Strategies for Success. Available at: http://regulationbodyofknowledge.org/wp-content/uploads/2013/10/Thumann_Energy_Project_Financing.pdf
References
- ↑ PPP in Infrastructure Resource CenterfckLRfor Contracts, Laws and Regulation,2014. Available at: http://ppp.worldbank.org/public-private-partnership/sector/energy/energy-power-agreements/power-purchase-agreements#key_features
- ↑ Gardiner, M.& Montpelier, V., Best Practices Guide: Implementing Power Sector Reform.Available at:http://pdf.usaid.gov/pdf_docs/PNACQ956.pdf
- ↑ PPP in Infrastructure Resource CenterfckLRfor Contracts, Laws and Regulation,2014. Available at: http://ppp.worldbank.org/public-private-partnership/sector/energy/energy-power-agreements/power-purchase-agreements#key_features
