Corporate PPA Outlook

Corporate PPA outlook

February 18, 2021 | By Keith Martin in Washington, DC

Fewer corporate PPAs were signed in the United States in 2020 compared to 2019 after three straight years of increases, as COVID and other factors took a toll.

US corporations signed 11,900 megawatts in new power purchase agreements in 2020 compared to 14,000 megawatts in 2019, according Bloomberg New Energy Finance.

Most corporate PPAs are “virtual” PPAs that operate as hedges to lock in a fixed electricity price over a long period, typically for 10 years. The corporate buyer pays a fixed price in exchange for floating payments tied to current spot prices. The corporation uses the floating payments to buy electricity from the local utility. Meanwhile, the renewable energy developer entering into the PPA for a new wind or solar project sells the physical electricity into the local market. (For more details, see “Corporate VPPAs: Risks and Sensitivities” in the June 2020 NewsWire.)

IHS Markit, a consultancy, predicts that between 44,000 and 72,000 megawatts of new corporate PPAs will be signed in the United States through the rest of the decade. Bloomberg New Energy Finance says the 285 corporations that belong to the RE100 will collectively have to sign PPAs through 2030 that could lead to as much as 93,000 megawatts of incremental new wind and solar projects.