Renewable Energy Power Purchase Agreements (2 days)

With the opening-up of electricity markets to allow independent power producers and buyers, bespoke power purchase agreements allow both generators and buyers who may be the grid operator to address their individual circumstances and risks.

This workshop provides insights into analysis, application and negotiation of power purchase agreements and the contractual context.

1. Introduction

  • The physical infrastructure of the grid: generators, transmission and distribution system
  • Characteristics of different generation technologies: capacity factor, dipatch mode, load-following capacity, intermittency, firm capacity.
  • Market infrastructure: monopoly, independent power producers (IPPs), single buyer, power exchanges and power markets
  • Types of power purchase agreements (PPA): direct agreement, sleeved agreement, synthetic agreements.
  • The role of storage and its impact on power purchase agreements
  • The role of environmental attributes such as carbon credits or renewable energy certificates and their treatment in PPAs.

2. Price and Volume

  • The underlying economic terms in a PPA: term, tariff, traiff during commission, penalties, currency, indexation, billing cycle, capacity cap, operator curtailment.

  • Discussion of pricing strategies that are applicable depending on application and market: feed-in tariff, auctions, regulatory asset base model (RAB) and bilateral negotiations.

3. Risk Assessment

  • Risks for sellers and buyers (also if buyer is grid operator) that can be addressed or controlled in a PPA. Discussion of what these risks are and how and to what extent a PPA can help manage those risks.

  • Risk categories include market risk, force majeure, currency exchange risk, buyer's and seller's risk of default, change in law, supplier default, risk of completion and technical underperformance.

4. Financing of Projects with a PPA

  • Discussion of principles of financing power plants including lending and investment decisions.
  • What makes a power purchase agreement "bankable"?
  • Linkage of power purchase agreement with other contracts such as direct financing agreement.
  • Re-financing and PPA provisions.

5. How to negotiate a PPA

  • Defining the elements in a power purchase agreement that are non-negotiable and those that are negotiable. We also look at the potential role of the regulator.

6. Other PPA Clauses

  • Dispute resolution and arbitration
  • Termination: circumstances under which agreement can be terminated by either side and what compensation, if any, would have to be paid.
  • Metering
  • Testind and commissioning
  • Operation
  • Conditions precedent

7. Related Agreements

  • In this section we look at other agreements that are closely interlinked with a PPA and certain provisions must be synchronized. Those agreements include the equipment, procurement and construction contract (EPC), operations and maintenance contract (O&M), supply contracts, land lease and re-organiztion agreement.

7. Market Overview

  • Overview of PPA markets in the European Union (including UK), North America, Africa and Middle East and Asia.

During the workshop we will be examining power purchase agreements to link the course content to practice.

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