Community Wind Handbook/Secure Power Purchase Agreements
Secure Power Purchase Agreements
Total project cost and the strength of the wind resource will dictate the power purchase agreement (PPA) price ($/megawatt-hour) that will be needed to ensure project profitability. PPAs are contracts between energy producers (such as large community wind farms) and buyers (utilities or other large consumers) that specify transaction details, including the amount of electricity to be delivered and the price that will be paid for the energy produced. The term is usually between 15 and 25 years.
There are multiple ways to secure a PPA, including:
Competitive solicitations offered from:
- Utilities power buyers
- Standard RFP process (bidder’s experience and price are evaluated)
- Auctions (occurs after bidders have been qualified. Price is the determining factor)
- Non-utility buyers/power off-takers (example: Amazon and Google)
Private negotiations (a.k.a. Bilateral contracting)
- Utility power buyers
- Non-utility buyers/power off-takers
PURPA contracting (securing a qualifying PPA contract with a utility at the utility’s avoided cost)
Merchant Sales (selling the project’s output on the open market)
Other details that are often included in a PPA are curtailment agreements, transmission specifics, schedule milestones, delay damages, insurance, and environmental attributes or credits.
Windustry’s Community Wind Toolbox includes a chapter dedicated to details that should be considered during the PPA process that can provide further insight into this integral step.