Publication, now available for download, shows advantages and financing opportunities for corporate clean energy purchase agreements (PPAs)
Rio de Janeiro, May 14, 2019. The Brazilian Business Council for Sustainable Development (CEBDS) launched this Tuesday a guide that presents the trends, opportunities and risks of corporate clean energy purchase and sale agreements (PPAs, acronym in English for Power Purchase Agreements), seen worldwide as one of the main forms of financing renewable sources in the coming decades. Now available for download on the CEBDS website (www.cebds.org), the Guide is intended for both developers of renewable energy projects and potential buyers (commerce and industry).
“Buying clean energy is the best solution for companies to reduce energy costs, reduce their carbon footprint, increase energy efficiency and help achieve their sustainability goals,” said Marina Grossi, president of CEBDS, during the launch, which took place in the first of a series of debates on Energy Transition, held by CEBDS in partnership with Agência EPBR, this Tuesday (14/05), in Rio.
The PPA financing model presents advantages both for corporate buyers seeking to increase the use of renewable energy in their matrix, as well as for developers and financiers of energy projects. One of these advantages highlighted in the guide itself is the general term of a PPA contract, which varies between 8 and 20 years, a longer term than contracts negotiated on the free market, which generally range from 1 to 5 years. This makes it possible to meet the criteria for financing new projects and provides greater security for developers and financiers of the project, as well as predictability of energy costs in the long term, protecting the company from market price volatility.
Also in the Guide, developed by CEBDS in partnership with its international parent company, the World Business Council for Sustainable Development (WBCSD), the trend of rapid growth worldwide of this type of contract is highlighted, driven by the decreasing cost of renewable energy generation technologies. In Brazil, developers have been seeking new ways to carry out renewable energy projects, and the corporate purchase of renewable energy presents itself as an opportunity with great potential for growth.
Global companies purchased a record 13.4 gigawatts of clean energy in 2018, showing the growth in demand for renewable energy worldwide. And according to international estimates, 50% of global electricity in 2050 will be from solar, photovoltaic and wind, which represents a volume of US$ 10 trillion to be invested in these sources worldwide over the next three decades.
In Brazil, the free market already represents one third of all energy consumed in the country, having grown by more than 10% in the last four years. At least half of the renewable energy generation in Brazil is already traded on the free market. At the same time, the costs of renewable energy, especially wind power, have been falling. “It is an inexorable trend for Brazil to move in this direction, which should contribute to further increasing our already ambitious goal of reaching 45% of renewable energy by 2030,” said Marina Grossi.
Corporate purchasing of renewable energy provides greater security for project developers and financiers, as well as predictability of long-term energy costs for buyers, protecting the company from market price volatility.
What is PPA?
PPA is an electricity contract, similar to a regular contract in the free market. These agreements are signed between the buyer, also called off-taker, and the project developer and contain all the negotiated conditions (prices, volume, energy delivery period, payment term, guarantees/insurance, etc.)
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