PPA (Power Purchase Agreement)
PPAs (Power Purchase Agreements) are long-term contracts between a buyer and a seller of electricity, mainly from renewable sources such as solar or wind.
Types of PPAs
1. Physical PPAs
This is an arrangement where there is a physical connection between the generation asset and the Offtaker’s point of consumption.
2. Virtual or Financial PPAs
These are agreements where there is no physical connection of energy between producer-consumer and settlements are made through the wholesale market. The generator sells the energy to the market, the consumer buys the energy from the market and, through the PPA, the price agreed in the long-term agreement is assured.
Main Characteristics
- Duration: 10-15 years.
- Fixed Price: The fixed rate is the most popular due to the possibility of providing stability to both the seller and the buyer.
- Sustainability: Facilitan la adquisición de energía renovable al venir acompañado de sus Garantías de Origen correspondientes.
Benefits
- Financial Stability: Helps manage energy costs.
- Renewable Investment: Guarantees a market for the electricity generated.
- Environmental Compliance: Reduce carbon footprint.
PPAs are becoming increasingly popular among companies seeking a clean and stable energy supply. At Magnus Commodities we are proud to have been a pioneer in Spain by signing one of the first PPAs in 2017.
