Thursday 23 July 2020
How Power Purchase Agreements support the growth of renewables
Generators of fluctuating renewable power need to ensure the profitability of the business. Renewable energy from wind and solar depends on natural conditions that vary widely. In addition, changes in supply and demand in wholesale energy markets are causing prices to fluctuate a lot.
Therefore, it can be difficult to predict the revenue from renewable production. However, renewable energy producers must ensure a consistent level of income to guarantee short- and long-term profitability for their plants, as banks and investors demand a certain level of income and planning security.
This is where the conclusion of a Power Purchase Agreement can support the building of a new renewable plant: Statkraft for example has recently entered into a long-term Power Purchase Agreement with Seagreen Wind Energy Limited to purchase 50% of the output from the project.
Construction of the 1,075 MW project is expected to be completed in 2022/23 and once fully operational Seagreen will become the largest wind farm in Scotland, providing power to the equivalent of 1 million homes from the project’s 114 10 MW wind turbines.
Statkraft is one of the most active off-takers in the UK market with a substantial portfolio of offshore wind, onshore wind, solar, biomass and other technologies. The first Statkraft PPA in the UK was signed in 2010 and the portfolio has since expanded to 230+ long-term PPAs.
John Puddephatt, Head of Long Term PPA Origination, at Statkraft said “once operational this PPA for 50% of the output from Seagreen will become the largest in our UK PPA portfolio, substantially increasing upon the 10 TWhs currently under contract. We wish Seagreen well during the construction phase and look forward to working with them for many years to come.”
