Understanding Power Purchase Agreements (PPAs)
Tuesday, 7 January 2025
Understanding Power Purchase Agreements (PPASs)
Renewable energy is no longer an option for forward thinking businesses; its quickly becoming a necessity. Rising costs, ambitious sustainability targets, and the need to mitigate climate change are driving more organisations to explore renewable energy solutions like solar and battery energy storage systems (BESS). However, one common roadblock s the upfront cost of installation. That’s where Power Purchase Agreements come in.
In this guide, we’ll break down what a PPA is, how it works and why it could be the key to unlocking renewable energy for your business.
What is a Power Purchase Agreement?
A Power Purchase Agreement (PPA) is a financial arrangement between a business (the energy buyer) and a renewable energy provider (the energy seller). Under this agreement, the provider installs, owns and operates a renewable energy system – such as solar panels or a BESS – on the buyers property. In return, the business agrees to purchase the electricity generated by the system at a predetermined rate, typically lower than grid prices.
How Does PPA work?
Site Assessment and Agreement: The energy provider conducts a feasibility study to evaluate the site’s potential for renewable energy generation. Once approved, both parties sign a PPA contract outlining the terms, including the electricity rate and contract duration (usually 10-25 years)
System Installation: The provider designs, installs and maintains the renewable energy system at no upfront cost to the buyer. This can include solar panels, battery storage or a combination of both.
Energy Generation and Purchase: The system generates electricity, which the business consumes. The business pays the provider a fixed or variable rate for electricity, often lower than traditional utility rates.
Maintenance and Ownership: The provider remains responsible for the system’s maintenance and performance throughout the contract duration, ensuring minimal risk or hassle for the buyer.
End of contract options: At the end of the contract, the business can choose to extend the agreement, purchase the system outright, or have it removed.
Benefits of PPA?
PPA’s offer several advantages that make renewable energy projects more accessible and cost effective for businesses.
No upfront costs: The provider covers the installation and maintenance expenses, removing financial barriers for entry.
Lower Energy Bills: Businesses benefit from the predictable and often lower electricity rates compared to traditional grid power.
Risk-Free Maintenance: The provider takes on all operational and maintenance responsibilities, ensuring the systems performance without burdening the buyer.
Sustainability Goals: PPAs help business meet sustainability targets by transitioning to clean energy, reducing carbon footprints and enhancing brand reputation.
Energy Independence: With on site renewable generation, businesses become less reliant on fluctuating grid prices and achieve greater energy security.
Is PPA Right for your business?
PPAs are particularly beneficial for:
Large Energy User: Industries, warehouses, and retail spaces with high energy demands.
Businesses with unused roof or land space: Ideal for on site solar installations.
Organisations with sustainability targets: A PPA makes it easier to demonstrate environmental leadership.
At Dowds Energy Solutions we specialise in providing an end-to-end solution for our clients; from initial assessment to financing through alliance partners.
Take the first step toward renewable energy today
A Power Purchase Agreement is more than just a financial tool – it’s a gateway to a sustainable cost effective, and energy-secure future for your business. If you’re interested in finding out more about PPA and how it can benefit you, get in touch with our team today - energysolutions@dowdsgroup.com