12 Feb 2020, 13:27
Sören Amelang

Green PPAs can boost renewables, pay off – German energy agency

Clean Energy Wire

Long-term company contracts for the supply of renewable energy – also called corporate green power purchase agreements (PPAs) – are already often cheaper than conventional electricity contracts in Germany, according to the country's energy agency (dena). "In view of rising costs for electricity and CO2 emissions, as well as the increased demands on their own sustainability strategies, this topic is of interest to many companies," dena said in a press release accompanying the release of a PPA market report compiled in cooperation with consultancy Aurora Energy Research. "According to dena's analysis, PPAs will be the most economical alternative in direct cost comparisons in all cases examined."

However, the agency also says that total PPA costs remain higher for industrial consumers with very large power consumption because of the benefits they gain from compensation payments. "For electricity-intensive industries, the current tax and levy system offers no incentives to purchase direct green electricity under a PPA," the agency said. It added that policy should make green PPAs more attractive in order to boost a demand-led renewables roll-out. Dena head Andreas Kuhlmann said renewable power will be key to decarbonising the business sector either through direct use or making renewable fuels such as hydrogen. "This is why policy has to create an attractive and reliable framework facilitating the supply of green electricity at low prices via PPAs," Kuhlmann said. 

The power prices paid by industry are one of the most contentious aspects of Germany's energy transition and its economic impacts. Many companies keep a keen eye on green power purchase agreements (PPA) in order to get a better handle on power prices. These contracts between a power generator and a consumer – for example, between a wind park and a factory – specify the terms for the sale of electricity and guarantee long-term price security. But the volume of new renewable energy projects backed by PPAs in Germany trails that of other European countries, partly because wholesale power prices are relatively low in the country. However, the contracts could help Germany reach its target of increasing renewables' share in national power consumption to 65 per cent by 2030.

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