Power Purchase Agreement FAQ

In this blog, we'll explore how PPAs work, the different types of contracts we offer, and the key advantages for businesses seeking reliable and low-carbon energy solutions. Whether you're a business looking to reduce your carbon footprint, secure energy prices, or enhance your energy independence, a PPA could be the right choice for your business. Let's dive deeper into the details and discover how Balance Power can help you take control of your energy future.

What is a Power Purchase Agreement?

A Power Purchase Agreement (PPA), in its simplest form, is a contract between a buyer and seller for the supply of electricity. While there are many variations of PPAs, they all share the core objective of providing price certainty for both parties.

In addition to price security, PPAs can offer several other benefits to the counterparties. These may include guarantees of origin (knowing exactly where and how the electricity is generated), fixed or minimum consumption/generation capacities, and the management of auxiliary processes involved in the transaction. These features are often found in coupled PPA and off-take agreements.

PPAs are entered into by consumers, utility companies (as buyers or sellers), electricity suppliers, electricity generators and third-party brokers or traders.

What Types of Contracts Are Available?

We typically offer a private wire "take or pay" PPA with a fixed term and fixed price (indexed), tailored to meet our customers’ specific requirements. This can include forecasted consumption, self-sufficiency goals, carbon reduction targets, preferred contract length, and target pricing. Additionally, we can facilitate an asset transfer as part of the agreement, allowing ownership of the generating asset to pass to the customer at the end of the PPA term.

We also offer virtual PPAs, where electricity is supplied via your existing grid connection but offset by electricity generated and exported to the grid by one of our assets. These PPAs are generally higher priced, reflecting third-party costs for transmission and trading, and tend to have shorter contract terms. Virtual PPAs are particularly useful when a local asset directly connected to your site isn’t feasible due to land constraints.

How does a private wire PPA benefit me?

Our private wire PPAs can offer several key advantages:

• Price Reduction: Since we are directly connected to your site, there are no third-party transmission costs to pay, resulting in significant savings compared to grid-supplied electricity.
• Price Protection: Our PPAs are usually fixed-price agreements, allowing you to lock in the long-term cost of your electricity. This protects you from external factors like trade sanctions, supply limitations, and rising transmission costs.
• Zero Emissions: By connecting directly to a low-carbon renewable energy source, you can ensure that the electricity you use does not emit greenhouse gases. It will be a long time before grid-supplied electricity can offer this guarantee. This helps you achieve your ESG targets and reassures your own customers that you are actively reducing the carbon footprint of your products.
• Supply Security: A dedicated power source offers increased energy security as it operates independently of the grid, even during outages. Almost all of our assets are connected using underground cables, providing better protection from weather events compared to overhead lines. Being off-grid may allow you to navigate TRIADS, local infrastructure failures or curtailments.
• Renewable Energy Financial Benefits: You may also benefit financially from the Renewable Energy Guarantee of Origin (REGO) scheme, which we typically pass on to our customers as part of our standard PPA.

Will I still receive electricity bills from my supplier?

Yes, you will still receive electricity bills from your supplier. It’s unlikely that an electricity generation scheme will cover 100% of your energy needs. For example, a solar PV scheme cannot generate power during non-daylight hours. However, the amount on your bill will be reduced, as less electricity will be required from your supplier. A typical solar asset can provide around 20% of a customer’s electricity needs.

What is the typical contract length of a PPA?

For assets developed and built solely for your use, a typical PPA term is 25 years. This duration aligns the asset's cost and repayment period to its useful life. However, if the asset is shared by multiple customers or there is access to an export grid connection, the PPA term can be as short as 3 years.

Some customers have restrictions on the contract length they can commit to. In such cases, we work closely with them to determine the optimal contract term that balances value for money while accommodating their specific requirements.

If you're a business owner looking to secure long-term, reliable, and low-carbon energy solutions, Balance Power is here to help. Our team specialises in crafting tailored Power Purchase Agreements (PPAs) that not only reduce your carbon footprint but also protect you from rising energy costs.

Ready to explore how a PPA can benefit your business? Contact us at enquiries@balancepower.co.uk today, and take control of your energy future with Balance Power.