PPA/cPPA contracts – new forms of contracts

What are PPAs?

PPA/cPPA contracts are an increasingly popular way of obtaining energy from renewable sources. What is that? A PPA/cPPA, i.e. (Corporate) Power Purchase Agreement, is a formal, usually long-term commercial contract to which the parties are the electricity producer and the entity purchasing it. According to it, the manufacturer is obliged to provide a specified amount of energy (from a specified source and within a specified time). The recipient's task, in turn, is to purchase and pay for energy according to the price agreed in the contract.

PPA agreements enable entrepreneurs to purchase energy directly from producers, which allows them to become independent from traditional sources of electricity. This is one of the most effective ways to reduce CO₂ emissions. The European Union has noticed the opportunities offered by popularizing PPAs. Therefore, they were included in the RED II directive, which was implemented in Poland in 2023 (amendment to the RES Act of August 17, 2023). More precise regulations allow for further development of this business model by increasing the safety of producers and consumers.

Forms of cPPA contracts

The 2023 amendment to the RES Act enables the execution of the cPPA in two ways (technically). If the parties to the contract have already been connected to the national electricity grid, energy may be supplied on the basis of a contract for the provision of transmission or distribution services. The second way is to provide the contracted energy directly.

Market needs are extremely diverse. Therefore, cPPA contracts take many forms. Accordingly, we distinguish the following types of PPA contracts:

• on-site contract - the renewable energy installation (e.g. photovoltaic farm) is located on the property of the energy recipient, who buys energy directly from the source, thus avoiding additional fees,
• near site agreement - energy is supplied via a dedicated direct line (the condition is the close proximity of the installation and the recipient),
• off-site agreement - energy flows through a classic transmission or distribution network through a network operator (possibility of selling energy remotely).

In the case of off-site contracts, the following contracts are also concluded:

• physical - take into account the physical supply of energy,
• virtual - the producer sells physical energy on the market (not directly to the recipient), in turn, the recipient buys it on the basis of a separate purchase agreement (the producer does not physically deliver energy to the recipient, but it is possible to secure energy prices).

Benefits of a cPPA for the entrepreneur

cPPA contracts are a stable form of supplying an enterprise with green energy. Importantly, such an agreement with an energy supplier provides certainty not only of a specific energy price, but also a guarantee of constant supplies at the contracted level. What other benefits does it bring to businesses?

• reducing greenhouse gas emissions,
• security of supply by becoming independent from public suppliers,
• improving the company's image as an enterprise that cares about the natural environment,
• protection against market price fluctuations.

These types of contracts have many advantages, including: when using solar energy. What facilities do PPA agreements provide in this case? Photovoltaics is a cost-effective way of obtaining energy, which involves significant investment costs. However, you do not have to bear these costs by choosing a PPA contract, and the company can use the energy generated by panels located on the premises of the energy supplier.

PPAs are a key element of the strategy also for ESG reporting. They can help implement sustainable development goals by supporting the decarbonization of the company.

Green energy for your company

The need for energy transformation is becoming a fact, so it is worth joining companies receiving energy from renewable energy sources as soon as possible. How to do it? Veolia is a wealth of solutions tailored to your needs. We sell, deliver and buy energy, reducing the impact on the environment and reducing the costs incurred by your company. With us you will take care of the future of your company.