What is a wind PPA? Understanding wind power purchase agreements and pay-as-produced structures
Electricity costs and access to renewable power have become increasingly important considerations for many industrial companies. As demand for renewable electricity grows, more businesses are exploring long-term procurement solutions that can support both business and sustainability objectives. One such solution is a Wind pay-as-produced power purchase agreement (PPA).
What is a Wind PPA?
A Wind PPA is a PPA agreement combined with Guarantees of origin for wind power. In addition to guarantees of origin some companies and regulations also require additionality. In such cases, the customer commits to buying electricity from a specific wind farm that will be newly built bringing additional power to the system This gives the customer a reliable long-term supply of renewable power with a clear link to a new wind asset. Fortum’s pipeline of onshore wind and solar projects in the permit process across the Nordic countries reaches approximately 8 GW, making Fortum well prepared to grow with our customers.
Understanding pay-as-produced PPAs
One of the most common renewable procurement structures is the pay-as-produced PPA. Rather than receiving a fixed volume of electricity, the contracted volume changes according to wind conditions and the plant's production performance.
When the wind farm generates more electricity, the buyer receives more volume. When generation decreases due to lower wind speeds or operational factors, the contracted volume decreases.
Why are businesses choosing wind PPAs?
Wind Pay-as-produced PPA is designed for industrial companies and data centres that want to secure long-term access to renewable electricity and demonstrate that their power demand supports new renewable generation.
In the Nordics, favourable wind conditions and a growing number of projects have made wind power a widely available source of renewable electricity. However power generation from wind farms is volatile and hence requires flexibility from the demand side or being combined with other flexible power generation assets.
Electricity buyers
Companies choose wind PPAs to achieve predictable electricity costs and a long-term source of renewable electricity with competitive pricing. Increase in the use of renewable electricity can also support sustainability targets.
Renewable energy developers
A wind PPA can support the development of new wind farms. Long-term agreements provide developers with greater certainty about future revenues, making it easier to secure financing and invest in new projects.
Benefits of a pay-as-produced wind PPA
A pay-as-produced structure can offer several benefits. It gives buyers access to electricity generated by a specific wind farm and can support sustainability targets through long-term renewable electricity sourcing. It can also help support the development of new renewable energy projects.
At the same time, buyers should understand that electricity production from a wind farm varies depending on weather conditions. This means the amount of electricity generated may not always match a company's electricity demand.
As a result, part of the company's electricity consumption may remain exposed to market prices. The impact of this exposure depends on factors such as the company's consumption pattern and the structure of the agreement.
Considering a wind PPA?
Contact our experts to discuss how a wind PPA could fit your company's energy procurement needs and to learn more about onshore wind investment or co-operation opportunities
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