Renewable Energy Procurement (PPA)

Our experience suggests that many businesses could switch to 100% grid renewable electricity upon expiry of the current electricity retail contract at an overall budget saving, while fixing electricity prices at low rates for up to ten years in the process.   We find that success-fee driven electricity procurement business models typically drive customers onto short-term electricity deals which need re-brokering in 1-3 years’ time; this can lead to high recontracting risk with significantly higher costs than those available from a stable, long-term agreement based on offtake from renewable projects.

 Our suggested procurement approach is based on the following principles:

  • That electricity procurement, typically subject to substantial price volatility, is best handled with long-term contracting from sources not subject to input cost volatility.
  • That electricity procurement can and should support the transition of the National Electricity Market to an integrated system based largely on renewable energy.

For these reasons, our participation in electricity procurement on behalf of our customers is always based on securing electricity offtake from new, local renewable electricity projects, over a term sufficient to help make those projects bankable.  Happily, this approach has resulted in much lower electricity costs for our customers than business-as-usual procurement, and fixes those low prices in place for a long term, typically seven to ten years.

Please note that Presync is technology- and vendor-agnostic.  We do not take commissions or trailing fees when negotiating supplier agreements on behalf of our clients.

Renewable Power Purchase Agreements

It is becoming increasingly common for businesses, governments and institutions to procure renewable electricity supplied via an electricity retail energy supply agreement, or power purchase agreement (PPA).  Renewable PPAs are common overseas and are now emerging in the Australian market, with recent examples at UTS, UNSW, CBA, Telstra, Sydney Opera House, various resources sector companies and group purchasing initiatives such as the City of Melbourne’s Melbourne Renewable Energy Project and WWF’s Renewable Energy Buyers’ Forum, which has now transitioned into the Business Renewables Centre – Australia (BRC-A).  The BRC-A provides a range of information, support and tools to simplify, streamline and accelerate corporate purchasing of large-scale wind and solar energy plus storage.  Presync’s Ben Waters has been chair of the Renewable Energy Buyers’ Forum since early 2015 and is a member of the inaugural Business Renewables Centre Technical Advisory Panel.

Renewable PPA Models

Aside from the reputational and social licence benefits, there are good commercial reasons, such as price certainty, to commit your electricity load to a long-term renewable energy purchase arrangement.  To negotiate an attractive offtake price with a renewable energy project developer, it is typical to commit to a ten-year supply period. This is much longer than normal business electricity supply agreements, so many organisations see this as a risk; we suggest that isn’t the case.

While electricity prices used to be stable, that has demonstrably changed since the middle of last decade. This volatile recent history suggests that the typical electricity procurement approach – continually conducting market procurement for terms of 1-3 years – is no longer low risk.  Locking in long-term electricity price certainty in this environment is a strategy worth considering.

Unlike local renewable generation installed “behind” the electricity meter, purchasing grid renewables does not reduce network and fixed supply charges or most environmental charges.  It replaces the wholesale electricity retail charges and, in some cases, a portion of the environmental charges on your bills.

There are many types of renewable PPA and we will work with you to achieve the best outcome according to your requirements, particularly risk appetite and sustainability and financial objectives.  

Modelling the business case

Presync will develop a bespoke, spreadsheet-based model based on the aggregated load which computes the future electricity bills for ten years under a variety of scenarios, as well as a business-as-usual scenario.  We will work with you to agree a set of assumptions to be used in the modelling.  This model will be based on the 30-minute interval load profile from the most recent 12-month period available, with the ability to vary this to simulate future load changes.