Powering tomorrow Navigating the energy transition landscape 2024 - Flipbook - Page 10
Renewable
power purchase
agreements:
Navigating the
fast-growing
and rapidly
changing market
Around the world, business leaders’
enthusiasm for green energy continues
apace, with corporate clean energy
procurement deals hitting an all-time high
in 2022, according to S&P Global. Renewable
energy projects are primarily supported
through power purchase agreements
(PPAs), a long-term contract between an
electricity generator and an offtaker, be it a
government, utility, or company.
Renewable energy PPAs help mitigate risks
associated with market 昀氀uctuations and relieve
o昀昀takers of operations and maintenance
responsibilities. It follows, then, that their
popularity will only grow as decarbonization
e昀昀orts ramp up, fossil fuel prices rise, and
governments look to phase out renewable subsidies
and feed-in tari昀昀s.
Amid surging demand, however, regulators,
developers, investors, and executives will have to
adapt to a rapidly changing market. Here’s what
they need to know.
Connecting renewable energy projects to
the grid remains a signi昀椀cant obstacle for
players on both sides of a PPA. For instance, in the
United States (U.S.) alone, over 2,000,000 MW of
generation and storage—more than 95 percent of
which is for zero-carbon resources—are currently in
interconnection queues across the U.S., with wait
times increasing by 40 percent in 2022. A recent
report from the United Kingdom’s (UK) National
Audit O昀케ce re昀氀ects similar problems in the UK.
Fortunately, regulatory reform appears
to be on the horizon. In the U.S., the Federal
Energy Regulatory Commission is working
“feverishly” on reforms that would shift the
interconnection process from a “昀椀rst-application-in,
昀椀rst-in-place” system to a “昀椀rst-ready, 昀椀rst-served”
one. And, in Germany, o昀케cials earlier this year said
they will push four major grid companies into a
merger to better facilitate transmission upgrades.
Band 1
Corporate/M&A:
Highly regarded, Mexico
Chambers Global, 2023
10
More broadly, the European Union (EU) has
proposed revisions to its internal market design
aiming to “make it easier for corporates to buy
renewable power, create long-term contracts,
and provide 昀氀exibility for consumers.” Emerging
markets, from Brazil to Vietnam to South Korea,
are also developing reforms to better enable
corporate PPAs.
Hogan Lovells | Powering tomorrow: Navigating the energy transition landscape
