Corporate PPAs: walking the tightrope between opportunity and risk

Author Andrew Tipping

Date March 2019

Andrew Tipping, General Manager, Clients and Business Development at Energetics was interviewed by Infrastructure Investor in March for an article titled 'PPAs are exploding. But are they safe?'. In this brief article we provide an overview of the themes and a link to access the story in full. 

The renewable energy market on the East Coast of Australia has been booming for the last few years and corporate PPAs have supported the development of projects with a combined capacity of nearly 3600MW. Around 3000MW of this capacity enabled investment in new projects.  See Energetics' corporate renewable energy PPA deal tracker for the most up to date figures. 

In 2019, interest in corporate PPAs is running high. As Andrew states in the article, “..large energy users are having a good look at how they manage forward risk on energy price volatility and how they manage meeting their sustainability objectives…those two drivers have come together in the last couple of years, which is why you’re seeing a lot of transactions.”

Andrew adds, “There has always been a sustainability driver (for PPAs) but not much happened until the costs came into alignment with what people were willing to pay. The rubber doesn’t hit the road until the CFO says ‘yes’.” 

In Australia, we also know that a major driver is the opportunity to secure a hedge against price volatility in the National Electricity Market. However, this is an evolving market: large energy users, pursuing PPAs for the cost and sustainability benefits, must also understand and design deals that address a range of commercial, market and delivery risks. 

Certainly to date in Australia we have seen large deals written, while others have fallen by the wayside. Lessons have been learned as developers, investors and end users have sought to navigate the risks. As Andrew says, “...corporates need to better understand market volatility because essentially they were shielded by retailers before.  On the developer/investor side, they’ve got complexity in understanding how to navigate corporate buying behaviour.”

Overall, the corporate PPA market in Australia is both growing and attractive. With the outlook for the NEM being one of continued price volatility and large corporates increasingly pursuing net zero ambitions and science based targets, corporate PPAs are now a permanent feature of Australia’s energy procurement landscape.

You can access the article via the Infrastructure Investor website. Noting that this is a subscription service although free to join.