green finance money

A new guide launched Thursday evening has been designed to help chief executive officers and chief financial officers navigate the growing corporate renewable power purchase agreement market.

Green Hedging: A Guide to Structuring Corporate Renewable Power Purchase Agreements (PPAs) has been prepared by law firm Baker McKenzie and WWF Australia, with funding from the NSW Office of Environment and Heritage.

A PPA is contract between an energy buyer and an energy generator to buy electricity at a certain rate for a certain period of time. As grid energy costs rise, corporates are increasingly turning to renewable PPAs as a source of cheap energy.

“Corporate PPAs are becoming more popular both globally and domestically, as corporates become increasingly interested in actively managing their electricity procurement costs in the face of volatile and/or rising power prices and in investing in the renewable energy industry,” the report says.

According to the report, which is intended to expand the market, a key barrier to increased corporate PPAs in Australia has been a lack of information and knowledge about how to structure such agreements, which can be extremely complex, particularly for large energy users.

The report goes through the various ways corporate PPAs can be structured, pros and cons of each PPA structure, making the business case, key challenges for corporates, and the practical and regulatory considerations companies need to be aware of.

The five types of PPAs described include virtual PPAs, modified virtual PPAs, sleeved PPAs, buying large-scale generation certificates (LGCs) and behind-the-meter generation.

The main drivers for entering into such agreements include:

  • Managing energy and LGC cost risk
  • Lowering the cost of electricity
  • Lowering the cost of meeting renewable energy and emission reduction targets
  • Achieving renewable energy targets
  • Reducing risks associated with climate change
  • Reporting on carbon emission reduction targets
  • Supporting new renewable energy projects

The report isn’t the first to broach the subject. In Melbourne last month a consortium of businesses announced they had secured a PPA that would supply 88 gigawatt-hours of electricity a year from a new wind farm.

As part of the project a Renewable Energy Procurement guide was released to help interested parties get set up.

The past 12 months has seen a number of corporate PPAs signed, including a 70MW eight-year PPA for Telstra; a 30-MW 10-year PPA for Kleenheat; and a 116MW PPA for Sun Metals.

There’s also currently a number of requests for proposals in the market, including Monash University looking for a 55GWh solar or wind farm; University of Technology Sydney, University of Queensland, Coles and ABInBev/Carlton United Breweries.

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