Power purchase agreements - A smart energy choice for business

Power Purchase Agreements: Potentially a smart choice for businesses 

In the evolving landscape of energy procurement, Power Purchase Agreements (PPAs) have emerged as a compelling option for commercial and industrial (C&I) energy customers. These agreements offer a structured way to purchase renewable energy, providing both economic and environmental benefits. 


What is a PPA? 
A PPA is a contract between an energy buyer and a power producer. Under this agreement, the producer agrees to supply electricity at a predetermined price for a specified period. This arrangement allows businesses to secure a stable energy supply while often benefiting from lower costs compared to traditional energy sources. 


Why PPAs are attractive for C&I customers 

• Cost stability and savings: One of the primary advantages of PPAs is the ability to lock in energy prices for the long term. This price certainty can protect businesses from volatile energy markets and potentially lead to significant cost savings. 
  
  
• Sustainability goals: Many companies are under increasing pressure to reduce their carbon footprints. PPAs enable businesses to purchase renewable energy directly, helping them meet sustainability targets and enhance their corporate social responsibility profiles.

• Energy security: By entering into a PPA, businesses can ensure a reliable supply of energy. This is particularly important for industries where energy is a critical component of operations. 
  
  
• Regulatory compliance: As governments worldwide implement stricter environmental regulations, PPAs can help businesses comply with these new standards by sourcing clean energy.

Types of PPAs 
PPAs can be broadly categorised into two types – on-site and off-site. On-site PPAs involve generating and consuming electricity at the same location, such as with rooftop solar installations. Off-site PPAs, on the other hand, involve purchasing energy from a remote renewable energy project, which is then delivered via the grid. 


The New Zealand context 
In New Zealand, the private sector is increasingly recognising the potential of PPAs. Initiatives like the one led by the Business Energy Council (BEC) aim to unlock large-scale clean energy generation through PPAs. 

This movement is supported by various stakeholders, including Transpower and PwC, who highlight the economic and environmental benefits of these agreements. 


Conclusion 
For commercial and industrial energy customers, PPAs represent a strategic approach to energy procurement. They offer cost stability, support sustainability goals, ensure energy security, and help with regulatory compliance. As the energy landscape continues to evolve, PPAs will likely play an increasingly important role in helping businesses navigate the transition to renewable energy. 

By embracing PPAs, businesses can not only achieve their energy goals but also contribute to a more sustainable future.