.webp)
Manually managing all the necessary data related to your Power Purchase Agreements (PPAs) is resource-intensive, making it hard to ensure sufficient oversight for effective monitoring of these contracts. This approach can lead to missed contract breaches, unexpected portfolio performance, and human errors, exposing organizations to various risks.
To remedy this, companies can use software tools for PPA management and automate their PPA data collection. In doing so, they can improve visibility into price and volumetric risks related to PPA renewable energy contracts, enable data-driven decision-making, and optimize resource allocation. With real-time insights into contract performance, EAC portfolios, and cash-flow projections, energy buyers can anticipate potential risks ahead of time, such as liquidity risks, volume underperformance, or deviations from agreed-upon generation availability.
This blog will introduce you to what is a PPA, along with the basics, and dive deep into how automating PPA management can enhance financial and risk management within organizations.
What is a PPA?
Power Purchase Agreements (PPAs) refer to long-term, renewable energy contracts between a power producer, typically a renewable energy generator, and a power purchaser, which can be a utility company or a larger corporation. These contracts outline the terms and conditions for buying and selling a specific amount of electricity over a predetermined period. By having a direct agreement with a power producer, companies can have a much clearer, direct impact on stimulating more supply of renewable electricity. It also provides more price stability for the buyer as they are entering into a long-term contract with a predefined price for the supply of electricity.
PPA Types and Models
There are several different physical PPAs, within which some overlap. These PPAs share a key characteristic: the sale and delivery of a predetermined amount of electricity. Their delivery methods, however, may vary. Here’s a breakdown:
- On-site PPA
Located on the consumer's site, on-site PPAs enable the direct physical supply of electricity, eliminating the need for the public grid. This arrangement simplifies balancing and can reduce grid costs and energy taxes. Plant size is tailored to consumption, making all on-site PPAs also Corporate PPAs.
- Corporate PPA
Corporate PPAs are a specific type of power purchase agreement where the power purchaser is a corporate entity, often seeking to meet sustainability or environmental targets. These agreements allow businesses to buy a certain amount of renewable energy from a power producer. Corporate PPAs can be structured as physical or virtual PPAs.
By entering into a corporate PPA, the purchasing company can secure a long-term supply of renewable energy at a predetermined price, providing stability and often cost savings over the contract duration.
- Off-site PPA
Off-site PPAs, on the other hand, deliver generated electricity to consumers via the public grid, without direct connection. While consumers buy grid power, they contractually agree to purchase a specific amount from the producer, requiring settlement between their balancing groups. This offers flexibility in plant location, allows multiple PPAs per plant, and provides long-term price certainty for all parties. Grid fees are paid separately, and Guarantees of Origin are typically transferred to the consumer.
- Sleeved PPA
A sleeved PPA is simply an off-site PPA, meaning an energy service provider takes over various processes and acts as an intermediary between the electricity producer and consumer. Energy service providers simplify energy management by handling balancing, portfolio management, forecasting, Guarantees of Origin trading, and risk mitigation for producers and consumers.
- Synthetic or Virtual PPAs
Synthetic PPAs offer flexible, financially settled energy contracts by decoupling physical electricity delivery from pricing agreements. Generators sell power to their energy service provider (e.g., on the spot market), while consumers' suppliers procure equivalent energy. A Contract for Difference ensures price certainty by compensating for spot price variations, simplifying administration, and eliminating the need for direct physical delivery or balancing group management.
Read our blog on choosing the right PPA for your business here.
4 Benefits of Automating PPA Management
Organizations that lack clear visibility into the performance of PPAs will find it difficult to monitor contract performance and manage cash flow fluctuations. Avoiding these outcomes requires a robust, comprehensive platform like Flexidao’s that can automate PPA accounting and monitoring processes. Here’s how:
1. Avoid costly invoicing errors with deeper oversight
Managing virtual PPA contracts and estimating cash flow commitments can be complex, requiring diverse data sets from multiple sources. Our solution simplifies this by providing detailed reports and dashboards that cover key KPIs such as cash flow performance and quantitative forecasts for both near and long-term periods. Streamline accounting for Power Purchase Agreements with timely and accurate invoice validation and tracking of financial settlements. Gain critical insights into the historical and projected financial performance of your PPA and effectively manage liquidity risk.
2. Save valuable time in periodic data collection and processing
Manual tasks associated with data collection, consolidation, and standardization consume significant time. By automating these processes, our digital platform ensures seamless and accurate data handling, allowing you to focus on strategic decision-making rather than tedious manual work and quality assurance. Real-time updates and automated monitoring of KPIs enhance productivity, operational efficiency, and accuracy.
3. Ensure contract performance by enforcing availability guarantees
Ensuring compliance with contract terms, especially concerning availability guarantees, demands reliable access to historical and real-time data. Our platform allows you to monitor project operational performance and automate availability calculations to assess whether availability guarantees and contractual performance clauses are being met. Gain deep insights into historical hourly generation, price values, and outage reports to ensure your expected generation volumes are met.
4. Optimize your reporting with streamlined management of EACs
Efficient management of the Energy Attribute Certificates (EACs) related to your PPA renewable energy contracts is crucial for compliance, transparency in reporting, and ensuring that you receive the EACs. Our platform automates the tracking, retirement, and documentation of EACs, maintaining a clear chain of custody. By keeping a historical record of all certificates and their official documentation, you can easily manage country-level claims and group audits, ensuring all stakeholders have timely access to the required information.
Why Choose Flexidao
Flexidao’s software provides high-resolution intelligence for PPA performance optimization by the automation of invoice settlement verification, cash-flow projections, and data collection. This data is automatically input into our intuitive platform. Here, you can monitor the volumetric, financial, and environmental performance of your PPA contracts, helping you to identify key volumetric and liquidity risks. Flexidao’s platform also tracks and updates EAC portfolio balances, ensuring a clear chain of custody for all received and expected EACs issued by your contracts for optimal energy emission reporting.
Want to know how to maximize your PPA returns and minimize risks with Flexidao's platform? Contact us today.
