If you are a person who has worked in the solar power industry for a long time, you will surely know about the PPA contract (Power Purchase Agreement) – Solar power purchase contract. This is a solution that helps businesses receive many benefits from rooftop solar power projects in an effective and sustainable way.
If you are wondering what a PPA Contract is ? What benefits do businesses receive? What are the necessary and sufficient conditions for a business to participate in a PPA contract? As well as the PPA contract implementation process, VREnergy has implemented more than 120+ projects over the past 5 years to share with businesses.
Let’s find out with VREnergy!
A Power Purchase Agreement (PPA) is a legal agreement between an electricity supplier (usually a renewable energy producer such as solar or wind power) and an electricity buyer (usually an organization or business). or individuals) to supply and purchase electricity from renewable sources such as solar energy, wind, hydropower… The PPA determines specific conditions for the purchase, sale and supply of electricity, including price, time term, electricity volume and other terms.
PPA usually has a long term, usually from several years to several decades to ensure stability for both buyers and electricity suppliers. During the contract period, the buyer will commit to purchasing a specific amount of electricity from a renewable energy source at a pre-agreed price. This helps protect buyers from fluctuations in market electricity prices.
PPA contracts also often come with:
- Warranty, maintenance, performance terms.
- Legal conditions related to the supply and use of renewable energy electricity.
- I-REC Certificate (International Renewable Energy Certificate), to ensure transparency and reputation in the use of clean energy sources.
Why should businesses access PPA contracts?
Businesses should approach a PPA Contract because it brings a series of important benefits. Here are some reasons why businesses should consider participating in the PPA model:
Save electricity costs
PPA allows businesses to buy electricity from solar energy sources at pre-agreed prices. This helps ensure stable prices and is less affected by market electricity price fluctuations. Over the long term, using solar energy helps reduce electricity costs, creating positive financial performance for businesses.
Ensure stable supply
With a PPA Contract, businesses can ensure a stable electricity supply without having to worry about variations in electricity supply from traditional suppliers. Avoid sudden power outages that affect business operations.
Achieved “green certification” with clean energy
Participating in PPA is a way to demonstrate a business’s commitment to using renewable energy and reducing greenhouse gas emissions into the environment. This contributes to creating a positive environmental impression and building a good image with customers and the community.
Managing electricity price risks
PPA helps businesses avoid risks from changes in market electricity prices, especially during periods of unpredictable price fluctuations. This helps stabilize costs and facilitates financial and business planning.
Create brand value
Participating in the PPA model demonstrates the spirit of innovation and creating sustainable value for businesses. This can create trust and create a positive image for the business in the eyes of customers, partners and the community.
Ability to participate in the energy market
PPAs can provide opportunities to enter the energy market, even the renewable energy market, and trade I-REC certificates. Opens up opportunities to develop energy-related businesses and create secondary income sources.
Which businesses should participate in PPA contracts?
PPA contracts are suitable for a range of businesses and organizations with the ability to use renewable energy:
- Large businesses
- Manufacturing industry
- Hotels and resorts
- data center
- Pioneering businesses in environmental protection
What are the necessary and sufficient conditions for a business to participate in a PPA contract?
|Large demand for electricity
|Businesses need to have large enough electricity consumption needs to be able to participate in a PPA. This ensures that participation will bring economic benefits and is appropriate to the scale of operations.
|Ability to utilize renewable energy
|Businesses need to be able to utilize renewable energy, such as solar or wind, to be able to participate in a PPA. This includes having an area large enough to install renewable energy systems.
|Ability to negotiate with power supply
|Businesses need to enter into agreements with suppliers of electricity from renewable sources, usually solar or wind energy producers. Agreement on price, term and other terms need to be negotiated.
|Participating in a PPA may require an initial investment to install a renewable energy system. Businesses need to have financial capacity to ensure the implementation and operation process.
|Committed to renewable energy and environmental protection
|Businesses need to be committed to the use of renewable energy and demonstrate environmental protection in their business operations.
|Legality and land ownership
|Businesses need to ensure that they own land or can lease land to install renewable energy systems. In addition, they also need to ensure compliance with legal regulations related to the supply and use of electricity.
|Strategic thinking and long-term commitment
|Participating in a PPA requires strategic thinking and long-term commitment on the part of the business. Contracts often have long terms, so businesses need to be willing to commit for a long time.
|Infrastructure and engineering
|Businesses need to have the infrastructure and technical knowledge to deploy and operate renewable energy systems.
PPA implementation process
The process of implementing a PPA contract usually includes the following steps:
Survey and design
The first step is to conduct a survey to assess the possibility of providing energy from a renewable source such as solar or wind. Experts will consider the location, direction, area and reasonable ability to install the energy system. Then, system design will be performed based on information from the survey.
Install the system
Once the design is complete, the installation of the renewable energy system will begin. This includes installing equipment such as solar panels, wind turbines, or other systems depending on the energy source used.
In this step, the buyer and supplier will discuss and agree on details of the PPA contract such as price, term, amount of electricity to be purchased, electricity price calculation and other terms. This step is important to ensure understanding and satisfaction from both parties.
Sign PPA contract and legal procedures
Once an agreement is reached, the PPA contract will be documented and signed by both parties. This step marks the formal commitment to perform the contract. At the same time, legal procedures related to energy supply and use also need to be completed.
Operation and handover
Once the renewable energy system has been installed and the PPA contract has been signed, operations will begin. The system will be monitored and monitored to ensure effective operation. Once the system has worked as planned, the handover process will take place, transferring all information, documents and operating procedures from the supplier to the buyer.
Sample PPA power purchase contract
The PPA power purchase contract form often includes many parts and provisions to stipulate the conditions, commitments and responsibilities of both the seller and the electricity buyer. Here are some important provisions that are often included in PPA contracts:
- Identification information
- General terms and conditions
- describe project
- Power supply conditions
- Payment conditions
- Commitment to performance and efficiency
- Maintenance and warranty
- Dispute resolution procedures
- Contract term
- Other provisions
I-REC Certificate (International Renewable Energy Certificate) is an international certification system for renewable energy. I-REC was created to increase transparency and traceability of renewable energy, helping to ensure that renewable energy is actually produced and used.
Specifically, each I-REC represents one MWh (Megawatt-hour) of renewable energy produced and sent to the grid. This allows businesses, organizations or individuals to purchase I-REC certificates to prove that they have used renewable energy in their operations.
I-REC certificates often come with information about the specific renewable energy source, including the type of source (e.g. solar, wind, hydroelectric, biomass, etc.) and location of production. This helps ensure the transparency and provenance of renewable energy.
I-REC certificates can be purchased and used to achieve renewable energy goals, especially in countries or regions with developing renewable energy systems.
ESCO is the abbreviation for the phrase “Energy Service Company,” which in Vietnamese can be understood as “Energy Service Company.” The ESCO model is a business form in which the company provides efficient and optimized energy services to customers, usually businesses, organizations or agencies with energy needs.
In the ESCO model, the company will take actions to improve energy efficiency and reduce customers’ energy consumption. This can include measures such as improving air conditioning systems, insulation, replacing high-energy-using appliances with energy-efficient ones, improving lighting systems, and many other solutions. other law.
Often, ESCOs will work on a “money first” or “money later” model. In the “cash first” model, the ESCO will be responsible for investing in and implementing energy saving measures, and customers will repay the ESCO a portion of the energy savings over a certain period of time. In the “pay later” model, customers make their own investments and then pay the ESCO based on the amount of energy savings actually achieved.
The ESCO model brings benefits to both parties. Customers enjoy improved energy efficiency, reduced energy costs, and can focus on core operations. Meanwhile, ESCOs have the opportunity to profit from providing energy efficient services and from sharing energy saving benefits with customers.
Above is all about the Solar Power Purchase Solution as well as information related to other PPA Contracts that you should know.
Hopefully this article will help you better understand what a PPA Contract is? As well as helping businesses find optimal energy solutions to achieve business goals.
If your business is interested in energy solutions, VREnergy can suggest you “OWN” solutions for your business such as:
Please share the problems your business faces, we will always accompany you with specific solutions and detailed plans to meet your business’s expectations in energy solutions.