Brokerage service puts more power in energy purchase agreements
Date of Article
Aug 30 2013

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30 August 2013, A new, independent brokerage service offered to operators in the renewable energy sector has been launched by the specialist Energy Team in Carter Jonas.

Feed in Tariffs (FiTs) attract a lot of the headlines when it comes to renewable energy projects, however they are not the only aspect that operators need to consider when it comes to maximising returns from a project developed under that tariff mechanism.

While FiTs focus on total generation, the balance of income that operators can expect to receive from an operational asset also includes income from sale of the exported electricity.  As it stands, the operator can choose to source this revenue from one of two options.

One option offered to operators generating electricity is a fixed export tariff under the FiT which is tied to at an index-linked base rate of 4.64p/kWh. 

The second option is to negotiate a Power Purchase Agreement (PPA) with an energy supplier directly.

In the present market there are significantly higher premiums – up to 1.5p to 2p/kWh - available through marketing the electricity generated through a direct PPA route and this is where the power of independent brokers can prove itself in negotiations with the energy supplier.

The level of PPA offered is influenced  by a number of factors such as  technology type, project scale, annual output, term of contract and the percentage of benefits (such as LECs and REGOS which are traded on the open market) that are passed back to the operator.

Yet the Carter Jonas Energy Team sees significant variations in PPA levels being offered by energy suppliers for technologies which are of similar scale – such is the pervading perception of the energy supplier’s dominance. 

Rates can vary by over 1p/kWh which, on a 500kW turbine, can equate to £15,000 per annum and so, according to Carter Jonas, it’s vital that landowners and developers seek third party advice on setting up the initial PPA or negotiating its renewal throughout the asset’s lifecycle.

Taking into account the range of technologies and combining generating capacity of the operational assets, the Carter Jonas Team is able to achieve enhanced rates over those afforded to individual operators, thus helping maximising returns.

Claire Allsop, Energy Specialist at Carter Jonas, comments: “For the majority of renewable energy generators, the FiT is the primary focus.

“However, we see our position when it comes to negotiating PPAs as an important added-value service to clients. We offer the ability to secure enhanced revenue stream for clients through a route which many will be unaware exists.

“Developers or operators with sites under development at the moment or whose annual PPA contracts are due for renewal are well placed now to take advantage of an opportunity to broker an enhanced return from their projects.”