Direct Trade PPA

Abstract

In the Netherlands more wind farms are constructed and energy is contracted in long-term Power Purchase Agreemenats (PPA) to guarantee a steady revenue stream for the wind farm owners. However, until now only large corporates closed PPA contracts to obtain the Renewable Energy Credits (RECs) from a wind farm and claim to be renewable. A new type of PPA is designed that has a direct link between the corporate and wind farm and transfers both power and the RECs. This direct trade PPA is analysed by applying an economic theory, the property rights theory, on the energy sector and by modelling the financial consequences. The result is a framework with the transactions, the risk allocation and the economic incentives of the actors involved. It shows more incentives to invest in renewable energy, moreover the corporate takes more volume risk on the energy production in order to obtain benefit which can be reduced by contracting a service provider. Furthermore, the financial model shows a significant financial benefit for a direct trade PPA compared to a traditional contract and shows a positive eect on the match between supply and demand. Moreover, the match and benefit can be increased by 25% by adding solar capacity in combination with wind energy. The next step is to further investigate this direct trade PPA and to promote this PPA type to corporates that want to invest in renewables and use this as a preferred contract type.