Aggregation key to unlock corporate PPAs: WFW

  • Market: Electricity
  • 10/10/19

Aggregating electricity demand from small and medium-sized enterprises (SMEs) has been identified as the single most important factor to unleash growth in corporate power purchase agreements (CPPAs), international law firm Watson, Farley & Williams (WFW) said today in a report on renewable energy.

The report was based on interviews with 150 senior level investors, financiers, developers and power producers in Europe and southeast Asia. Around 62pc of the European respondents consider the lack of power generators offering CPPAs that are suitable for SME offtakers as the main reason for lower uptake in that market.

Most renewable projects have capacities far exceeding the demand of individual SMEs, and potential costs and complications prevent generators from entering a large number of separate CPPA negotiations.

This has led to generators signing CPPAs with just a few major companies like Google, Amazon and Unilever, or agreeing long-term PPAs with a limited list of utilities, which then sell the electricity to several corporate buyers.

But while the latter has been a stable and growing market, the scope for significant increases for such contracts is viewed as relatively limited compared to that for the young CPPA market, WFW said.

This is more so as an increasing number of corporates now have internal "additionality" requirements — meaning they need to demonstrate that the PPAs they sign lead to the development of new renewable projects that would otherwise not be built. In other words, corporates would ideally offtake directly from the projects and not from utilities.

"An effective and broadly applicable aggregation model is urgently needed if CPPAs are truly to fulfil their potential," WFW senior associate James Harrison said.

One of the main aggregation models is the offtaker-consortium structure, whereby several buyers group together to benefit from a PPA. Norwegian state-owned utility Statkraft has recently entered into one such aggregated CPPA, through which it will supply electricity from its existing UK onshore wind assets to a group of universities.

A significant volume of corporate demand would not be accessed directly by renewable generators until in some way aggregated, WFW said.

There are challenges ahead though.

"Aggregation as an issue is only going to get more acute as the pathfinder corporate offtakers like Google and Facebook satisfy their immediate demands for power and take a step back from the market," Harrison noted.

Also, consortia are usually difficult to achieve as they require the formation of a stable partnership between like-minded members. SMEs could find it particularly hard to agree to the same power procurement and price conditions as their competitors.

"It remains to be seen whether consortia can function effectively with significant numbers of members," WFW said.

But the growth of energy aggregator LevelTen Energy in the US market suggests that a model of syndicated offtake may be feasible in Europe, the law firm noted.

The model would see a single aggregator negotiate a PPA structure with a generator for all or part of its project's output, take the PPA structure to market and fill it with a syndicate of offtakers. The aggregator would also be able to manage the syndicate, transferring offtakers in and out of it, over the life of the renewable project.

"Syndicated offtake is an enticing possibility," WFW global energy sector co-head Henry Stewart said. "In theory, the aggregator in that model would not even need to be an existing participant in the electricity markets."


Sharelinkedin-sharetwitter-sharefacebook-shareemail-share

Related news posts

Argus illuminates the markets by putting a lens on the areas that matter most to you. The market news and commentary we publish reveals vital insights that enable you to make stronger, well-informed decisions. Explore a selection of news stories related to this one.

News
28/03/24

Stalling climate finance an energy security risk : WRI

Stalling climate finance an energy security risk : WRI

London, 28 March (Argus) — The "best bet" to achieving global energy security is through mitigation funding and multilateral cooperation, according to the World Resources Institute (WRI). WRI highlighted that governments are funding more domestic renewable energy projects but have increased oil and gas production in the name of "energy security" at home in the years following the Russia's invasion of Ukraine. The recent rebrand of energy transition funding to energy security funding has allowed some developed nations to justify domestic oil and gas licences and drag their feet on multilateral financial commitments. This is causing "real worry" among climate-vulnerable developing nations, WRI chief executive Ani Dasgupta said. He said that although the initial "shock" to the world's energy markets after the invasion of Ukraine "quickly went away", it has triggered "real worry among poorer countries that when push comes to shove, it won't be an even game, or have a fair outcome." Developing countries have long complained about the lack of access to climate funding. Richer nations have only recently met the $100bn/yr target in climate finance to developing countries agreed in 2009, while discussions on setting a new climate finance goal for 2025 at Cop 29 in Baku in November could prove difficult. President of the Republic of Congo (Brazzaville) Denis Sassou-Nguesso said last year that the $100bn/yr in climate financing to developing countries promised by rich countries "never reached us", adding that the annual UN Cop climate conferences have become little more than a talking shop. "Just after the invasion of Ukraine, every country started to think about energy security," Dasgupta said. "In theory, good things could have happened, countries could have concluded that their best bet to getting energy security is by going renewable". But it was not the case in key consumer countries or regions, Dasgupta pointed out. China bought the majority of Russian gas following the EU's withdrawal, he said, and has since upped production at coal-fired power stations despite an "extraordinary" acceleration towards renewables set for 2023-28, according to Paris-based energy watchdog IEA . In Europe, the UK and Norway continue to award new oil and gas licences . "In the US, the fossil fuel lobby argues that the best route to energy security is to invest more in fossil fuels". But the best route is to invest in more renewables, he said. "Even if the US produces a large amount of oil and gas, it is still a traded commodity, and so you have to pay a price for it that is set globally." The US special presidential co-ordinator for energy security Amos Hochstein has also suggested in September that a widening climate finance gap could ultimately threaten global security. "We have seen the percentage of dollars spent on the energy transition outside the OECD, in developing and middle income countries actually go down instead of up…" By Madeleine Jenkins Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Read more
News

Japan’s Renova starts Miyagi biomass power plant


28/03/24
News
28/03/24

Japan’s Renova starts Miyagi biomass power plant

Tokyo, 28 March (Argus) — Japanese renewable power developer Renova started commercial operations today at its 75MW Ishinomaki Hibarino biomass-fired power plant in northeast Japan's Miyagi prefecture. The power plant is designed to consume an undisclosed volume of wood pellets and palm kernel shells (PKS) to generate around 530 GWh/yr of electricity. Renova originally targeted to start up the power plant in May 2023 but postponed the start-up multiple times. Renova has been forced to delay the start-up schedules at several of its power plants. It previously targeted to begin commercial operations of the 75MW Omaezaki biomass power plant this month but postponed it to July, as the final adjustment of boiler and turbine units is taking longer than expected. It delayed the launch of the 74.8MW Tokushima Tsuda biomass power plant in September before it began commercial operations in December 2023 . Japan imported 1mn t of wood pellets during January-February, up by 14pc from the same period in 2023, according to the finance ministry. PKS purchases fell by 24pc to 466,186t. By Nanami Oki Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

Electrification key to cut UK offshore emissions: NSTA


27/03/24
News
27/03/24

Electrification key to cut UK offshore emissions: NSTA

London, 27 March (Argus) — The UK offshore oil and gas industry must make "decisive emissions reduction actions now and on an ongoing basis", with asset electrification and low carbon power central to making cuts, regulator the North Sea Transition Authority (NSTA) said today. "Where the NSTA considers electrification reasonable, but it has not been done, there should be no expectation that the NSTA will approve field development plans", the regulator said in a new emissions reduction plan. The NSTA set out "four clear contributing factors to decarbonising the industry" — including asset electrification, investment and efficiency and action on flaring and venting. It will also look at "inventory as a whole", ramping up scrutiny on assets with high emissions intensity. Relevant companies must produce emissions reduction action plans for offshore assets, the NSTA said. New developments with first oil or gas after the beginning of 2030 must be either fully electrified or run on "alternative low carbon power with near equivalent emission reductions", the NSTA said. New developments with first oil or gas before 2030 should be electrification-ready at minimum. If electrification is not reasonable, other power emissions reductions must be sought, the regulator said. The offshore industry must from 1 June provide "a documented method of the split of projected flaring and venting figures into categories", and must from 1 June 2025 have a plan and budget to "deliver continuous improvements in flaring and venting", it said. New developments — including tie-backs — must be planned on the basis of zero routine flaring and venting, which every asset must reach by 2030. Industry flaring almost halved between 2018-22, the NSTA said. The regulator has flagged a particular focus on methane emissions. The NSTA may require developers to agree to cease production of assets with high emissions intensity "with reference to societal carbon values", it said. Societal carbon values are calculated by the UK government to reflect the marginal cost to society of additional CO2 emissions. It will discuss end dates for production for assets with greenhouse gas (GHG) emissions intensity 50pc over the average for the UK offshore, and which intend to produce oil or gas beyond 2030. This represents a slight watering down of the initial plan the NSTA consulted on last year. The North Sea Transition Deal, agreed in 2021, commits the UK offshore industry to reducing its production emissions of GHGs by 10pc by 2025, by 24pc by 2027 and by 50pc by 2030, from a 2018 baseline. Industry has itself committed to a 90pc reduction by 2040 and a net zero basin by 2050, the NSTA said. It "would welcome industry owning and delivering these reductions", it said, adding that its plan is focused on emissions cuts and "emissions offsetting will not be considered towards meeting the obligations." By Georgia Gratton Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

Jera delays Hekinan NH3-coal co-firing test: Correction


26/03/24
News
26/03/24

Jera delays Hekinan NH3-coal co-firing test: Correction

Corrects trial period in first paragraph Osaka, 26 March (Argus) — Japan's largest power producer by capacity Jera has pushed back a trial to co-fire 20pc of fuel ammonia with coal at its Hekinan power plant to after the end of March. Jera previously said the co-firing demonstration at the 1GW Hekinan No.4 unit will start on 26 March at the earliest . But the company has decided to push this back. The trial will begin sometime after the end of this month, Jera said on 25 March. It took more time to test run equipment ahead of the demonstration, with safety the main priority, it added. It is unclear when exactly the company will start the trial to co-fire 20pc of ammonia with coal. Jera aims to demonstrate 20pc co-firing of ammonia with coal ahead of planned commercial operations in the April 2027-March 2028 fiscal year. It also hopes to achieve a 50pc mixture on a commercial basis in the first half of the 2030s. By Motoko Hasegawa Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

Oil sands producers plan CCS network, hub


25/03/24
News
25/03/24

Oil sands producers plan CCS network, hub

Calgary, 25 March (Argus) — A group of Canadian oil sands companies are planning to build a massive C$16.5bn ($12.2bn) carbon capture and storage (CCS) project to decarbonize operations. Canadian Natural Resources (CNRL), on behalf of the Pathways Alliance consortium, filed plans for the project with the Alberta Energy Regulator (AER) last week to store 10mn-12mn t/yr of carbon dioxide (CO2) equivalent in the oil sands region of northeast Alberta. The Pathways Alliance also includes Cenovus, Suncor, Imperial Oil, ConocoPhillips Canada and MEG Energy, which account for about 95pc of the province's roughly 3.3mn b/d of oil sands production. Construction of the project is expected to begin as early as the fourth quarter 2025 with operations starting in 2029 or 2030. The main CO2 transportation pipeline will be 24-36-inches in diameter and stretch about 400km (249 miles). It will initially tap into 13 oil sands facilities from north of Fort McMurray to the Cold Lake region, where the CO2 will be stored underground. "When you have that concentration of emission sources, technologies like carbon capture and storage become very, very technically viable," Pathways Alliance president Kendall Dilling told the CERAWeek by S&P Global conference in Houston, Texas, earlier this month. Oil sands crude producers have been criticized for being particularly carbon intensive. The Pathways Alliance is their answer to driving operations to net zero by 2050. The CCS project and "a host of other technologies" represent Phase 1 of the Pathways Alliance's efforts and will reduce oil sands emissions by about 25pc by 2030, according to Dilling. The CCS project itself accounts for about half of this reduction. Phase 2 is planned for between 2031 to 2040 and would tie in at least another eight oil sands projects, while also ramping up alternative energy initiatives related to hydrogen, electrification and small modular nuclear reactors. By Brett Holmes Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Business intelligence reports

Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.

Learn more