Imagine powering your organisation with clean, renewable energy while keeping costs under control. Well, a Solar Power Purchase Agreement (PPA) could help you achieve that.
A Solar PPA is a long-term contract allowing your business to procure electricity directly from a renewable power generator. This can consist of solar energy generated from on-site panels or offsite grid connected solar farms. This allows solar to be purchased as a commodity at a relatively low generation cost compared to forward energy market prices.
There are many different types of Solar PPAs–which I’ll discuss a little later in this article–so you can choose which type works best for your organisation.
Types of Solar PPAs
There are many different types of Solar PPAs, so you can choose which type works best for your organisation.
On-Site PPAs
Commercial Solar PPA: This contract typically lasts 15 to 20 years and requires no upfront investment from you. The solar company takes care of everything—from designing and financing to building, operating, and maintaining the solar system at your site. You simply pay a fixed rate per kWh for the electricity generated, which is usually lower than the rates from the grid. This arrangement helps you reduce your reliance on carbon-intensive energy sources, maximise energy savings, and gain better control over your costs.
Private Wire PPA: Similar to the Commercial Solar PPA, this type utilises ground-mounted solar panels installed on nearby land. Electricity is transmitted directly to your site through a “private wire.” Like the Commercial PPA, it typically lasts 15 to 20 years and allows you to decrease your reliance on grid power while cutting costs and carbon emissions.
Offsite PPAs
Offsite PPAs are sourced from grid-scale generation assets, commonly categorised as “sleeved” or “virtual” PPAs. They offer several advantages over onsite PPAs:
- The solar system can be built in optimal locations, ensuring higher efficiency.
- Energy purchase amounts aren’t limited by your site’s capacity.
- Contracts can be flexible, adapting to multiple sites or relocating if necessary.
Sleeved PPAs: Also known as corporate PPAs, these agreements involve you, an energy retailer, and an offsite renewable generation source. Typically, they are take-or-pay contracts, where you commit to purchasing a fixed volume of energy at a predetermined price. The retailer takes delivery of the renewable energy and incorporates it into your supply contract, often allowing up to 70% of your demand to be met by renewable sources. These contracts can range from 10 to 20 years, with shorter terms usually carrying a premium.
Virtual PPAs: Virtual PPAs, or synthetic PPAs, are structured as contracts-for-difference. They include a strike price for the generated electricity; if market prices fall below this price, you pay the generator the difference, and vice versa. This structure offers flexibility in the amount and location of energy supplied and can support multi-site models.
The New Zealand Energy Market
In New Zealand, the energy market is largely shaped by a handful of key players, with Contact, Genesis, Mercury, and Meridian accounting for around 90% of the electricity supply. This has historically limited options for large businesses seeking to secure energy directly from generators, as most businesses are seen as too small for generators to take notice. As a result, they have to deal with retailers where the cost of generation is defined by the market.
However, a wave of independent renewable energy companies is shaking things up. Collaborations like the recent partnerships between Ryman Healthcare, Mercury, and Solar Bay, or The Warehouse Group and Lodestone Energy, or Inghams and Lodestone Energy, are paving the way for organisations like yours to lock in long-term contracts at competitive rates.
How Total Utilities Can Help
Total Utilities offers PPA consultation services as part of our broader energy procurement solutions. As an independent advisor, we assess a wide range of options without bias, ensuring that we recommend the most suitable PPA strategy for your organisation.
To learn more about investing in an onsite or offsite Solar PPA, speak to our experts today.