Moratzka, Martin & Bergan Discuss Corporate PPAs

Attorneys Drew Moratzka, Jennifer Martin and Sara Bergan authored an article for pv magazine titled “Purchasing Power.” The article discusses the use of power purchase agreements (PPA), which are generally an agreement between an energy provider and a utility for the procurement of electricity, although similar agreements are increasingly being used by corporations to directly obtain energy. 

The authors note that the growth in electricity demand has declined since the late 1990s and early 2000s, and with growth now stagnant utility procurements have become less frequent and more competitive, forcing independent power producers to have to offer increasingly low prices for a winning bid. Combined with uncertainty over the fate of the federal clean power plan the extent of utility procurement in the future may be unclear. 

The authors also discuss other options available to utilities, including owning generation and even in some cases participating in the development and construction of energy projects, work that in the past would have been the responsibility of a developer. They point out that the 2015 extension of the credits for developing renewable energy has provided incentive to act before the credits expire. 

PPAs are used in different forms to accomplish the goals above. The authors discuss several variations of these agreements: one in which a company essentially takes the place of the direct buyer of the power and the parties arrange for transmission of that power for use by a corporation; a “virtual” PPA, in which a generator sells power into a competitive marketplace at market-based rates and the corporate buyer buys power directly from that marketplace; or by using a green tariff or agreement, where a customer enters into a renewable energy contract with a utility for a particular generation facility, and the utility acts as the intermediary between the customer and the developer. 

The authors conclude: “In addition to new entrants to traditionally regulated states are the established large load customers in those states. In an increasingly global marketplace, many of these customers are extremely sensitive to increasing utility rates and may seek various avenues to allow greater control over long-term energy costs. These customers are numerous, their load is extensive, and either aggregated or individually, they may be the new frontier for corporate procurement of renewable and low carbon energy.”