3 ways to make money from your power
18th January 2019
Businesses across the UK are reaping the benefits of Power Purchase Agreements (PPA). We examine three options that have proved popular with Haven Power’s customers.
Broadly speaking, a Power Purchase Agreement (PPA) is a contract between a generator of electricity and an individual or organisation that wants to buy it.
However, if you’re generating your own electricity, there are a variety of PPA options in the marketplace. In addition, your selection will depend, to some extent, on your risk appetite and level of in-house expertise.
Here, we look at Haven Power’s three most popular PPA options, which can help you to get the most from the electricity you generate.
This option gives you the freedom to benefit from favourable market prices by trading your import and export energy. So, if your company both generates and uses its own electricity and draws additional power from the grid to consume, a flexible PPA gives you two options. And the easiest way to understand this choice is to look at an example:
Let’s assume you require 3MW of power, while also exporting 0.5MW of your own power. The first option allows you, when market conditions are right, to sell your 0.5MW of exported power at a higher rate, before (or after) buying your full 3MW requirement of import energy at a lower market price.
However, should market rates not be conducive to this approach, you can instead choose to ‘sleeve’ your 0.5MW of exported power into your 3MW of import energy purchasing. Doing so would mean you’d only need to trade for 2.5MW of your import energy requirement. In turn, this could help you save money by avoiding the bid/offer spread on electricity prices, while also reducing exposure to unfavourable market conditions. The 0.5MW that you sleeved is essentially delivered at a net zero wholesale cost.
System sell-price PPA
This option allows you to sell all the power you generate during a given period to Haven Power, without forecasting the volume in advance.
At the end of each month, we calculate how much power you’ve provided and pay you an amount based upon a weighted average of the system sell price during the periods in which you exported.
This is a good PPA option if your self-generating capacity is small or depends on intermittent technology such as wind turbines or solar photovoltaic (PV) panels. What’s more, if a variable, monthly rate isn’t a concern, it gives you complete flexibility on the amount of electricity you generate without any volume variance penalties.
All of this makes a system sell-price PPA an attractive choice if you’re a new entrant to the market. That’s because any uncertainty about how much power you’ll be able to provide initially is tempered by knowing you won’t be penalised. This applies to delays in commissioning and to when generation conditions aren’t favourable for your chosen technology, such as the sun not shining if you have solar panels. A System sell-price contract is also a great way to build an export history on a new installation. This makes it easier, in future, to explore Fixed Price and Flexible PPAs with suppliers.
Fixed Price PPA
In contrast, a Fixed Price PPA gives you a degree of price security. You agree to provide a certain amount of electricity, over a certain period, for a fixed price per kWh. As long as the cost of producing your electricity remains stable, and your exported energy outputs are predictable, you can predict your budgets – and margins – with a greater degree of accuracy.
All of the Haven Power PPA options discussed above also include provisions for any embedded benefits associated with the energy you export.
To discover how Haven Power can help your business benefit from PPAs, please get in touch.Submit Contact Form
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