The customer has the right to change the retailer depending on how open the market is. In Europe specifically, the retailer can be changed at any time for both options: physical PPA and financial PPA. For the former, the energy contracted in the PPA will be made available by the seller to the new retailer, while payments will remain between the original parties through a third-party agreement. For the latter, the long-term CFD structure will stay in place, while the physical supply will switch to another retailer.
Is a long-term PPA a real price hedge?
A financial PPA can be a perfect price hedge if the price of the retail contract for the physical supply is indexed at the market price. In contrast, if the buyer decides to enter into a VPPA without any adjustment to its physical retail supply fixed price contract, it will be a valuable price hedge, but it cannot be considered a perfect one.
Power purchase agreement: what are the guarantees and start date?
Supplier/Buyer, Supplier/Buyer Parent Company or Supplier/Buyer Guarantor (as agreed between the parties) shall provide a parent guaranty to guarantee the Supplier’s/Buyer’s payment obligations under the PPA. If the acceptable credit rating of the Parent Guarantor drops below a required level, a Bank Guarantee will be issued.
Generation from renewable energy can be sold in different ways: as generated, take or pay, or pay as consumed. The underlying volume structure can be baseload, peak-off peak, block of hours, solar or wind profile, or client load profile. Everything depends on the customer’s needs and risk appetite.
Will the energy produced by the renewable power plant be equivalent to consumption?
The PPA provides a grace period for delays in COD, during which time the seller will pay delay damages. If COD is not achieved within the grace period, the buyer has the right to terminate the agreement.
Before signing the contract, an energy assessment of the facility is done with the buyer. After the construction phase begins, a periodic construction report is shared with the buyer as well. And once the plant is operational, the seller can provide ongoing information and data about production.
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