Power Purchase Agreements
PPAs play an important role in incentivising the construction of more renewable energy projects such as wind, solar or hydro, by providing secure, long-term revenue streams for developers, and business consumers benefit from long-term price predictability and receive additionality through renewable energy certificates.
The role of Power Purchase Agreements (PPAs) for today and tomorrow
A Power Purchase Agreement (PPA) is often described as a long-term power supply agreement between a producer and a business consumer or trader.
Shell Energy is involved in every stage of the integrated power system, from generating and buying, to selling, storing and supplying power to businesses. This allows companies to access our global portfolio of renewable power supplies which include both existing and under-development assets owned by us and by third parties, and for developers or generators to access our integrated trading and supply network.
Bob Kijkuit I Vice President I Shell Energy Trading Europe and Africa鈥淪hell Energy in Europe is a major trader focused on natural gas, power and renewable certificates and we provide advanced solutions for energy assets.
We trade in all major indices in Europe and work closely with customers, suppliers and counterparties, to help meet their evolving energy needs, progress their decarbonisation goals and create value.鈥�
What are Power Purchase Agreements?
A PPA defines the conditions of the agreement, such as the amount of electricity to be supplied, negotiated prices, accounting, and penalties for non-compliance. Since it is a bilateral agreement, a PPA can take many forms and is usually tailored to specific requirements. Power can be supplied physically or on a balancing sheet. PPAs can be used to reduce market price risks, which is why they are frequently chosen by large electricity consumers to help reduce investment costs associated with planning or operating renewable energy plants.
PPAs can help businesses to reduce scope 2 emissions which are the indirect emissions from power purchased and how it is used. Renewable certificates such as Guarantees of Origin (GoOs) in the European Union or Renewable Energy Guarantees of Origin (REGOs) in the 麻豆传媒 are provided as part of an agreement as proof of power purchased from renewable sources.
Types of Power Purchase Agreements
There are different types of PPAs due to the wide range of possible contractual arrangements and the location of the buyer and where the energy is generated. PPAs are either on-site or off-site, physical or virtual (or financial).
An on-site PPAs is a power supply contract where the renewable asset is located on a customer鈥檚 site and the developer invests into the asset offering the customer a competitive price for surplus power going back into the grid. An off-site PPA is a power supply contract where a renewable asset is located in the same power market.
Physical PPA
A power contract between a business consumer and Shell Energy covered by power generated from our renewable generation portfolio. Contracting parties need to be located in the same power market.
Virtual or financial PPA
A financial contract to agree a price between a business consumer and a renewable generator through Shell Energy. Under a virtual PPA there is no physical delivery of electricity, so the energy produced is sold directly to the grid and the buyer benefits from the Guarantees of Origin (GoOs) or Renewable Guarantees of Origin (REGOs) in the 麻豆传媒, with the production covered by the agreement. This agreement allows contracting parties to be located in different power markets.
How Shell Energy Europe can help
With sales offices in Germany, Italy, Netherlands, Spain and United Kingdom, and with multiple renewable generation assets live, in development and in the pipeline across the rest of Europe, Shell Energy has over 20 years of power trading experience and can be the integrated energy partner for bespoke decarbonisation solutions.
Shell Energy is also a supporter of RE-Source 鈥� Europe鈥檚 leading forum for corporate renewable energy sourcing.. Through its advocacy, wide-ranging and innovative Renewable Energy Buyers Toolkit and popular annual event for energy buyers and sellers, RE-Source seeks to remove barriers for corporates to better access PPA renewable energy procurement in support of Europe鈥檚 climate and energy goals.
Our PPA offering*
Type
Physical or virtual/financial
Profile
Baseload, pay-as-produced, pay-as-forecasted, fixed shape
Pricing
Fix, indexed, cap & floor, collar
Tenor
Short-medium-long term. Possibly beyond the tenors traditionally quoted on exchanges
*Above elements are examples which may differ by countries based on market characteristics.
How PPAs can benefit you
PPAs are becoming the preferred option for purchasing and selling renewable power. Whether you are a generator or buyer, a PPA can be an attractive energy solution to deliver environmental attributes.
Generator or developer
- Helps finance renewable projects
- Reduces risk by spreading it across multiple buyers, enhancing the stability of the project's revenue and financing
Energy buyer
- Contributes to the development of new renewable assets
- Supports additionality
- Reduces emissions from the energy you use (scope 2)
- Predictable power prices for long-term fixed periods and protects against market uncertainty
