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Pros and cons of buying electricity through a PPA

On Behalf of | Dec 11, 2023 | Energy Law |

As a site owner or manager, you might be thinking about buying electricity through a power purchase agreement (PPA) to power your site. A PPA is a long-term contract between a place that makes electricity (like a solar or wind farm) and the person or business that buys the electricity. The buyer gets to buy electricity at a fixed price for a set number of years. Here are some things to think about when deciding if a PPA is right for your site:

Identifying the pros and cons

Below are some of the advantages of purchasing electricity through a PPA:

  • It provides a fixed price for electricity over the term of the contract.
  • It allows you to purchase renewable energy. This is useful if you are inclined to reduce your carbon footprint and contribute to a more sustainable future.
  • It provides long-term predictability and stability for your energy costs, which can help you plan and invest in your site’s operations.
  • It offers potential for cost savings, depending on the terms of the PPA.

However, this approach also has its own share of drawbacks:

  • It is a long-term contract, typically ranging from 5 to 20 years.
  • Once you enter into a PPA, you may have limited flexibility to change your energy usage or switch to a different energy provider.
  • The generator may experience technical issues or failures that can impact the supply of electricity, which can be a risk for the purchaser.
  • The price of renewable energy can be volatile, and the price of electricity under a PPA may fluctuate over the term of the contract.

These are just some of the pros and cons of purchasing electricity through a PPA. However, do not forget that this is not your only option.

What are your other options?

There are several alternatives to a PPA that a site owner or manager may consider when looking to purchase electricity. Here are a few options:

  • Purchase electricity from a traditional utility provider under a standard retail contract
  • Energy management contract
  • Energy aggregation
  • On-site generation of renewable energy systems, such as solar panels or wind turbines, at the site itself
  • Green tariff, a special electricity rate offered by some utility providers that allows customers to purchase renewable energy at a fixed price.

It is important to note that each option has its own pros and cons, and the best one for a site will depend on its specific energy needs, budget and goals. But a PPA can be a good choice if you are looking to purchase renewable energy at a fixed price over a long period of time. It may be helpful to consult with an energy expert or lawyer to fully understand the terms and implications of a PPA and your other options before deciding.