PPA structures and parties involved

Aside from retail PPAs, agreements involving other third parties are possible, although such PPA structures remain novel at present and less commonly used. In third party PPAs an insurer may be engaged to hedge electricity by taking on the risk associated with the spot price and the volume generated by the vendor, and then entering into a fixed-volume/fixed-price derivative arrangement with the corporate offtaker. 

Information not publicly available.

The amount of parties involved depends on the type of corporate PPA chosen. When it comes to on-site PPAs, for example, besides the generator and the consumer, there will usually also be an electricity supplier/utility involved, purchasing the surplus green electricity not consumed locally and selling it onwards via the grid, as well as supplying any residual electricity required by the offtaker (and in that case also being responsible for the balancing of the grid connection of the offtaker).

When it comes to physical PPAs, besides the producer and the consumer, an electricity supplier/utility will usually be involved, in particular for purposes of grid balancing and to supply any residual electricity required by the offtaker. Where the seller of the green electricity does not intend to obtain the required supply permit(s) itself, the utility may take a greater role and actually act as an intermediary in the purchasing and selling of the electricity (sleeved PPA).

Synthetic PPAs, on the other hand, function with a derivative contract structure where the offtaker and the generator agree a defined 'strike price' for power generated by a renewable energy facility. Each party will then enter into separate agreements with their electricity supplier/utility to sell/acquire (as applicable) electricity at the spot price.

There are no other third parties commonly party to the PPA structure.

Most corporate PPAs are between generators and offtakers. However, the development of the power sector enabled a trend in the market that involves an energy broker taking part in the agreement to enable better risk allocation. The energy broker may undertake risks that the other parties are not willing to take (such as submarket and production/consumption profiles risks), since its diversified power portfolio allows it to better allocate and mitigate them.

Other agreements are required to enable the physical delivery of the power to the offtaker, such as agreements for the use of the distribution/transmission system, entered with the relevant distribution/transmission utility company.

Utilities are also a common party in PPAs, however the structure is different since those PPAs are entered into after a public bidding process in which generators present competitive offers to supply energy to end users subject to regulated price. In this sense, management of the network and commercialization to end consumers are performed by distribution concessionaires in a vertically integrated manner.

Not normally; sometimes guarantors are involved.

Agreements involving third parties are possible, the law does not restrict it in any way. In such PPAs, the third party usually acts as an intermediary between the manufacturer and the buyer. Renewable energy produced by the generation site is not delivered directly to the point of demand or consumption of the business, but via a third party (usually the energy company) to the existing energy grid.

No, but the law does not prohibit an arrangement like this.

No, parties to the PPA are the generator or the IPP and the offtaker.

In practice, it is most common that parties to a PPA are only the generator and the offtaker/buyer.

Agreements involving third parties are possible, notably when it comes to sleeved PPAs, in which the “sleever” (i.e., the intermediary) is responsible for intermediating the different processes between the generator and the end user. The intermediary is free to deliver the electricity to an end user, transforming the Corporate PPA in a B2B2C scheme.

Within such contractual schemes, the risk and hazard of intermittency are borne by the intermediary.

The legal constraints of an indirect PPA are as follows:

• the intermediary must have an administrative authorization as described in Article L. 333-1 of the Energy Code (purchase for resale of electricity);

• the intermediary’s activity is subject to obligations of communication and information;

• installations marketing their production via a PPA must be attached to a balance perimeter; and

• there are obligations to participate in the capacity mechanism.

To date, there have been few corporate PPAs deployed in Germany and there is little publicly available information on the specifics of relevant transactions. As a result, it is difficult to comment on common PPA structures and it is unclear, for example, how frequently intermediate marketing companies and/or third parties providing balancing services become part of PPA structures. Still, it seems not to be uncommon that utilities or trading companies become intermediaries to renewable energy installation operators and corporate offtakers.

In the context of the Green Pool scheme that is currently under way, the eligible electro-intensive industrial users will be signing long-term PPAs with RES producers to decarbonise their energy consumption and add up to 4 GW of new RES electricity generation capacity in Greece. For this purpose, a dedicated aggregator (Green Pool Operator) will be appointed through a competitive bidding process to undertake all shaping responsibilities and supply the electro-intensive industrial users with a supply that matches their consumption requirements.

As mentioned above, for physical PPAs, a licensed supplier will typically buy the generator’s electrical output, pass it through the SEM and sell it to the corporate offtaker. For this purpose, there will typically be back-to-back PPA arrangements. The licensed supplier will be appointed as the generator’s intermediary, allowing it to interact with the SEM on the generator’s behalf and to receive all payments from the SEM associated with the relevant generator. The licensed supplier will also have the Corporate Offtaker’s meter point registered to it. Depending on the commercial arrangement, there may be a need for a separate agreement between the generator and offtaker or between all three parties.

The party to which balancing risk is allocated under the arrangements may also look to engage a specialist energy trader to manage balancing risk on its behalf, whether under a settlement reallocation agreement or otherwise.

In the absence of the generator or corporate offtaker holding a supply licence which reduces the need for third-party involvement, these physical PPA structures can add complexity to delivery of physical cPPAs and for this reason virtual PPA structures can be favoured in the Irish market.

Yes. Utilities entities are generally party to the PPA structure.

In a PPA with KPLC, the parties to the agreement are the power-generating company (KenGen or an IPP) and KPLC itself as the offtaker. 

EPRA is required to approve the PPAs but is not a party to the agreement itself.  

The Kenyan Government is not party to these PPAs and does not give any sovereign guarantee of such PPAs, but in some cases will provide a Letter of Support to the lenders and sponsors to cover the perceived political risks in the project.  However, the scope of these Letters of Support has been reduced over time and is now subject to strict government guidelines.

Yes, marketing companies or suppliers are necessary if the electricity is to be wheeled through the National Transmission System. If there is no need to use the National Transmission System (distributed generation or local generation) the use of third parties may not necessary.

As previously indicated in point 2 above, no direct wire projects can be implemented pursuant to Law No. 13-09. The operators of renewable energy production installations will need therefore to access the national medium-voltage, high-voltage and very-high-voltage grids in order to commercialize the electricity produced from renewable energy sources and this subject to the available technical capacity of the grid. 

In practice, two agreements are entered into between the generator and the national electricity transport grid operator in order to access the national grid:

• a grid connection agreement pursuant to which the operator of renewable energy production installations connects its facility to the national grid;
• a network access agreement pursuant to which the operator is granted the right to inject electricity into the grid in compliance with certain technical and financial conditions.

In Mozambique, cPPAs are commonly concluded between the generator and the off-taker with no involvement of third parties.

In the Netherlands, cPPAs often involve more than just the generator and the offtaker. Except for in the case of an onsite cPPA, a transport arrangement will be necessary with a grid operator as grid operators cannot, due to the “group prohibition principles,” be part of a corporate group that includes companies generating, supplying, or trading energy, which affects the structure of most cPPAs.

Generally, common third-party involvement includes the following participants:

• Utilities as facilitators: Utilities often act as intermediaries, especially for offsite or sleeved cPPAs. They smooth out fluctuations in electricity production and supply, providing a level of stability that both generators and offtakers often need.
• Aggregators: These entities bundle smaller producers to offer a more substantial and stable energy supply to corporate offtakers, facilitating financial viability for smaller renewable projects
• Financial institutions: Particularly in synthetic or virtual cPPAs, banks or other financial institutions may offer hedging or credit enhancement services, particularly if the offtaker lacks strong creditworthiness.
• Consultants and advisors: While not direct parties, these professionals often play crucial roles in structuring and negotiating cPPAs, particularly for newcomers to the renewable energy landscape.
• Grid operators: Though not usually a formal party to the cPPA, their role is vital for the transport of energy in offsite cPPAs, even more so due to the “group prohibition” that requires separate arrangements with grid operators for transportation.
• Regulatory bodies: Organisations like the Netherlands Authority for Consumers and Markets (ACM) are not parties but play a critical role in ensuring compliance with national and EU regulations.

Typically, corporate PPAs are between the generator and the offtaker. In the context of solar development, it is common to see a tripartite PPA between the development special purpose vehicle, the ultimate owner of the facility and the offtaker.

In practice it’s most common under the PPA structure (at least for larger PPAs) that only the generator/seller and the offtaker/buyer are direct parties to the PPA, without any third-party involvement.

Generators and offtakers are commonly in the PPA structure.

Yes, often a trading company acting as the balancing responsible party (BRP) is a party to the agreement (in trilateral form or in B2B agreement with respective counterparty when independently appointed) and takes the role of balancing deviations in generation/consumption.

Utilities or energy suppliers may be third parties to a cPPA depending on the type of PPA chosen. 

In physical PPAs the utility supplier can act as an intermediary in the sale/purchase of the energy. 

In other instances, electricity suppliers or utilities purchase surplus energy, which is then sold to the grid.

The PPA model used by Senelec on behalf of the state of Senegal does not include third parties other than the generator and the offtaker. However, the generator may conclude agreements with subcontractors for instance for the construction of the power plant, but they won't be part of the PPA.

As outlined in Structures, the parties to a CPPA commonly tend to be the IPP and the corporate. Third party involvement is perhaps less common in this market other than in cases of wheeling which, as above, often requires the involvement of the grid operator.

Other than generator and offtaker, it’s common for a market representation agent to be party to the PPA. It can be a supplier. In physical-offsite PPAs, the generator sells the energy to end users through a supplier that provides both the energy from the facility and the missing energy from its generation portfolio.

No, the usual parties to a PPA will only be the generator and the offtaker.

In Sweden electricity producers have three main options as to what to do with their generated electricity: (i) it can be sold to electricity traders or users, (ii) it can be sold via the electricity market Nordpool or (iii) they can use it for their own purposes.

The electricity being produced will need to be transferred to the grid and a PPA structure will include a grid connection agreement and an electricity transmission agreement. Local or regional operators own and run the grid and are responsible for transporting the electricity from production sites to users – the Swedish grid is divided nationally, regionally and locally. The 400 kV national grid is owned and operated by Svenska Kraftnät and three grid companies, E.ON Distribution, Vattenfall Distribution and Ellevio own the majority of the Swedish 10-130 kVs regional grids with other local operators completing the picture.

In addition to the generator and the offtaker, there are other bodies that can have an impact on the conclusion of a PPA, without necessarily being a contracting party. These bodies are:

• The Superior Commission of Independent Electricity Production: a public body that has as its attributions to make decisions on any question related to each project of independent electricity production. (Art.5 of the decree n°96-1125).
• The Ministry of Industry through the Interdepartmental Commission of Independent Electricity Production.
• The special commission to the General Assembly of the People's Representatives (Commission of Industry, Energy, Natural Resources, Infrastructure and Environment), through which, pass obligatorily the contracts of sale to STEG of the surplus of electricity produced from renewable energies for self-consumption. (Art. 10 of Law No. 2015-12).
• The specialized authority responsible for examining issues relating to projects for the production of electricity from renewable energy.  (Article 39 and following of the decree n°2016-1123).

This is uncommon. The PPA is signed between the generator and off-taker. However, the PPA and particularly the tariff must be approved by the sector regulator (The Electricity Regulatory Authority/ERA).

Under the net metering schemes seen in the region, a standardised electricity connection agreement is entered into between the purchaser and the utility.  Under the terms of that connection agreement, the utility’s meters record the purchasers usage and generation.  In the utility’s billing cycle, the two figures are netted-off.  The lessor / supplier of the power generation plant has a bilateral contract with the purchaser.

Agreements involving third parties are possible. In such PPAs, the third party typically acts as an intermediary between the generator and the buyer (also referred to as an offtaker). The renewable power produced by the generation site is not directly delivered to the corporate's demand or consumption location, but through the third party (typically a utility company) on the existing power grid. Since renewable generators (especially wind and solar) cannot guarantee output as it fluctuates with weather conditions, corporates require a "sleeving" arrangement with an energy utility company whereby the supply from the renewable generator is topped up with other energy. This structure provides a stable energy supply and is, therefore, commonly used in GB.

No. Independent power producers sell to traditional utilities, municipal utilities or regional cooperatives at wholesale who then engage in separate retail transactions with customers. IPPs in some markets can also engage in wholesale transactions directly to corporate buyers or to aggregators representing a group of retail customers.     

Yes, the utility ZESA as outlined above. Currently, there is no government support given by the government of Zimbabwe. There is, however, proposals to involve those government entities who can guarantee balance of payments in foreign currency, eg the Ministry of Finance and Economic Development, and/or the Reserve Bank of Zimbabwe.