2018: Year of the PPA
2018 will be a very important year for renewable energy. The main reason for this is not regulatory nor even political, but rather economical: the reduction in the price of renewable generation technologies and storage systems will result in an exponential increase in the use of renewable energy systems.
One of the most important tools in shaping this development will be bilateral contracts for the sale and purchase of energy, known as PPAs (Power Purchase Agreements). PPAs will decisively contribute to the development of new projects, favoring their bankability due primarily to the ability of installations to diversify their income streams. This in turn allows for producers to remove, partially or totally, their exposure to volatile market prices in the ‘pool’.
In fact, yesterday 22 January 2018 we participated in the UNEF Working Group for PPAs. During the session Piet Holtrop, founding partner of HOLTROP SLP Transaction & Business Law, and Luis Castro, partner in the firm Osborne Clarke, gave presentations regarding the opportunities and possibilities that PPAs offer within the Spanish legal system. In addition, there are already three new events planned in which Piet Holtrop will expand upon the regulations applicable to PPAs. The first will be the General Assembly of EolicCat, on 25 January 2018, the second in the conference ‘Wind Power and the Market’, organized by the Wind Power Business Association on 21 February 2018, and the third, on 7 March 2018, at the Igualada Energy Expo. You can obtain further information on these events by visiting the Agenda section of our blog.
A good indicator of the relevance of a particular issue in a given sector of the economy is the number of conferences and speeches that are dedicated to it. In this respect, the past year has been telling: for example, on 16 May 2017 the ‘Ateneo de la Energía’ organized a conference dedicated to PPAs: “The unknown of which everyone speaks”, in which Piet Holtrop spoke on the topic: “What can go wrong with a PPA?” Indeed, in 2017 PPAs were spoken of a great deal in the sector. During the APPA annual conference which took place on 23 and 24 October 2017, Piet Holtrop again spoke on the issue, this time in a presentation titled “Regulatory framework for PPA contracts”. For this presentation, we prepared a PowerPoint of 70 pages, in which we detailed the legislation applicable to PPAs. PPAs were also a focus of discussion in the IV Solar Forum of UNEF, on 21 and 22 of November 2017. In this conference, Piet Holtrop participated along with other lawyers, experts in the sector, in a round table entitled “What sectors offer the best opportunities for photovoltaic self-consumption?”, which inevitably ended up discussing self-supply and PPAs. Lastly, Piet Holtrop again spoke on the topic in a session that took place in Can Muntanyola, regarding energy in industry, specifically a round table entitled “Industrial self-consumption: alternative, remote or virtual”.
The industrial sector’s interest in PPAs is consolidating. Additionally, self-supply, or remote self-consumption, offers, through PPAs, interesting and innovative alternatives for all those entities that want to produce and consume their own energy. Further information on this topic is available via articles written by Piet Holtrop, available here and here.
Our group of specialist lawyers in PPAs is made up of the lawyers Christopher Smith, Jordi Pujol Puente and Jorge Andrey Sterner, who work closely with the other members of our firm to deepen our knowledge of PPAs, as well as preparing different varieties of PPAs for our clients.
It is true that the development of the projects that ‘won’ the Spanish electricity auctions in 2017 will develop significant activity in the sector, as it is also true that self-consumption will continue contributing to the installation of new renewable capacity in Spain. However, and this is what we really want to emphasize with respect to 2018, PPAs will consolidate their standing as a key tool for the promotion of renewable generation. This means of contracting demonstrates the competitivity of these technologies as compared to traditional energy, given that they make it clear that in the free market, without any need of Government support, they are the most profitable option available.