10 Steps to Becoming a Carbon Neutral Business

Page 25 YOUR ORGANIZATION THE POWER GRID RENEWABLE ENERGY PRODUCER STEP 07: SWITCH TO RENEWABLE ENERGY / Option 2: Power Purchase Agreements In simple terms, a Power Purchase Agreement is a long-term contract for the sale of electricity. The contract is negotiated between your company and a renewable energy project owner, for instance a wind farm or solar system owner. When entering into a PPA, the developer owns the project, meaning that they will take care of designing, permitting, financing and installing the project. The developer will then sell a certain volume of energy to you against a set price that is often lower than the market price. In contrast to RECs, when entering into a PPA you are actually purchasing electricity. As electricity sourced from the PPA will also be delivered through the grid, you cannot prove that the energy consumed is from a renewable source without the RECs. The PPA comes with the RECs bundled to the electricity, proving you are buying renewable energy. PPAs usually last between 10 and 15 years and are most commonly used by organizations that have a concentrated load in a specific location - sufficient to facilitate a new renewable energy project. As a rule of thumb, the larger your electricity consumption, the more attractive a PPA will be. You need a critical mass to secure interest from developers and the larger the volume you bring, the better prices you can negotiate. Generally speaking, PPAs cover a minimum volume of around 15 MW. With PPAs, you are changing the way in which you source renewable energy, which is a more compelling story than purchasing RECs. Furthermore, PPAs should deliver cost savings from the moment your contract goes live, due to the lower tariffs available under a PPA structure. 1. Your organization purchases an amount of RECs that equals its electricity consumption, allowing you to claim 100 percent renewable electricity use 2. The RECs are transferred from a renewable energy producer or trading company to your organization, but not the underlying electricity 3. The renewable energy producer feeds the electricity into the grid 4. Your organization continues to buy electricity from the grid , separately from the RECs purchased 5. Electricity is delivered through the grid to your organization How do RECs work?