Energy Transition Handbook - Flipbook - Page 46
Hogan Lovells
46
Green corporate PPAs
A green power purchase agreement (PPA) or electricity supply agreement (ESA) allows
a business to directly purchase renewable electricity, equal to the power it consumes,
in place of the “brown” power it would traditionally purchase from its electricity
supplier. In doing so, the PPA or ESA directly supports the development of identified
renewable generating assets and evidences a corporate’s integrity and commitment to
the environment.
A number of different approaches can be used
to document a green PPA or ESA. These include
“sleeved”, “back-to-back”, “tripartite”, “virtual”,
“synthetic” or “guaranteed price” agreements
with the structure typically determined by the
corporate off-taker’s objectives and the identity
of the renewable generator and licensed supplier
involved in the transaction.
In negotiating a green PPA or ESA,
key issues will include:
•
successfully navigating the regulatory
framework to ensure that the corporate
off- taker does not engage in licensable
activities (such as the supply of electricity)
without a licence
•
creating a robust nexus between the corporate
off-taker, the renewable generator and the
green attributes that attach to the renewable
power, to defend against allegations of
“greenwashing” in the structure
•
ensuring that the corporate off-taker will have
an uninterrupted source of power at each of its
consumption sites for a reasonable cost
•
settling the tariff, allocating the financial value
of the green attributes between the parties and
preserving any required flexibility to forward
trade or hedge the wholesale power price
•
future proofing the agreement against change,
by allowing for changes to the demand curve
to accommodate changes to the corporate
off-taker’s footprint or power consumption
over the term and by providing for the impact
of changes to the green attributes attaching to
the renewable power
Case study
Hogan Lovells advised Mars on a 10 year energy
supply agreement to purchase green electricity
from Eneco’s new 20-turbine Moy Wind Farm,
located south of Inverness in the Scottish
Highlands. The Moy Wind Farm is owned
and operated by Eneco UK and will generate
the equivalent of 100% of the electricity required
to power all 12 Mars UK sites. The transaction
marked the latest step on Mars’ journey towards
making its global operations fully carbon-neutral
by 2040. The Moy Wind Farm has an export
capacity of 60 MW and an annual production
of over 125,000 megawatt-hours. The power
generated is equal to that used by 34,000 average
UK households.
‘Extensive industry knowledge
and valuable experience, also in
non-ordinary matters.’
Legal500 EMEA, 2021 (Energy)