In brief

In brief

  • The rise of renewables increases opportunities for power purchase agreements (PPAs) between generators and corporate and industrial (C&I) consumers.
  • Market growth for renewable PPAs has been slower than expected due to misaligned interests related to pricing and contract lengths.
  • Corporates and power generators want a more open, collaborative approach with greater give and take on contract terms for mutual benefit.
  • Corporates and generators can reap greater benefits together with restructured PPAs that compromise on price and PPA length.

Reliable funding for renewables

With the rise of renewable power generation, lower renewable energy prices and a greater desire to decarbonize, corporate power purchase agreements (PPAs) are becoming increasingly common. These agreements between a commercial and industrial (C&I) customer and a power generator commit the buyer to take all output from a renewable generation asset over an agreed period, cutting out the energy retail middleman.

PPAs benefit buyers, sellers and the greater community. The need for capital to fund new renewable generation assets continues to rise as consumers demand increased access to clean energy. Renewable PPAs allow generators to get projects funded and built by providing revenue certainty for new assets. PPAs also ensure a reduced carbon footprint for C&I customers via a secure and predictable supply of green energy with more consistent pricing.

The potential market for renewable PPAs is significant and growing. In the past 10 years, global deployment of renewable generation has skyrocketed from less than US$20 billion to US$300 billion a year.

Slower than expected growth

Despite the benefits, the take-up of corporate renewable PPAs has been slower than expected because of the gap between what corporates want to buy and what generators want to sell.

C&I buyers want flexible pricing and shorter-term contracts of around three to five years, as well as clarity about risk management. Ideally, they are looking for renewable PPAs that meet their needs across different markets under a single agreement. On the flip side, generators want fuller pricing to insure against market volatility and longer contracts of 10 years or more to provide greater revenue certainty and support ongoing project financing.

Closer than they appear

In reality, corporates and power generators are fundamentally looking for the same thing. They both want a more open, collaborative approach coupled with a readiness to give and take on contract terms with a view to generating mutual benefits.

In Accenture’s view, C&I customers and generators have an opportunity to reap greater benefits together, triggering a substantially higher take-up of renewable PPAs.

What could C&I customers do differently?

  • Explain renewable needs clearly
  • Share risks with generators
  • Understand timeline required to deliver electricity from newly built projects
  • Approach RFP process differently

What could generators do differently?

  • Communicate current energy supply and plans for future expansion
  • Increase pricing flexibility and transparency
  • Offer simpler contracts
  • Fairly allocate risks
  • Offer holistic contract management

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How Accenture can help

For many years, Accenture has helped renewable generators effectively and efficiently grow capacity, and supported C&I consumers of renewable energy in the development and implementation their sustainability strategies. By bringing together the buyers and sellers of renewable energy and leveraging Accenture’s digital capabilities, we support the matching of demand and supply, provide market intelligence, and help companies reduce search, transaction and aggregation costs.

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