Overcoming the shortfalls in the PPA market

UrbanChain’s Dr. Mo Hajhashem addresses solutions to the problems with PPAs

Corporate PPAs can play a bigger role in bringing renewables to the mainstream. Let’s say a corporation has a PPA in place for 3GWh with a renewables asset but the asset doesn’t necessarily provide all the required energy of the corporation as the total consumption is 10GWh. As a result this corporation ends up going back to the expensive tariffs of their current supplier for the remaining 7GWh! 

Current PPAs have been designed to secure the generator’s PPAs. However, considering the current market situation and since the current PPAs are mainly between generators and one off-takers (which are mostly energy suppliers), any given supplier could go bust tomorrow as their financial backers could pull out. Many energy suppliers have wound up during this ongoing energy market crisis and generators all of a sudden end up out of contract! The risk is likely high and the rate of return for long-term traditional PPAs are relatively low.

It’s also important to note that current PPAs aren’t attractive for newly built renewable assets as they don’t cover subsidies. And that the current practice in the PPA market is layered with multiple agents in the middle – increasing costs. We believe these issues can be fixed through our P2P PPAs. In P2P PPA arrangements, instead of one to one matching of assets and corporations, we match many assets to many generators at the same time. This way, a corporation might get the energy from many generators in each half hour or a generator might sell the energy to a combination of multiple corporations at the same time. In this model we aim for 100% energy coverage through P2P PPA and to minimise the exposure to the suppliers’ supply tariffs.

Let’s say a building has a consumption of 10GWh. We look at the renewables assets that are registered in our system. We look at the corporation’s consumption pattern, we look at the renewables generation profile and pattern and we find the best match in order to minimise the imbalance risk, as imbalances cost a lot right now. We make a shape and block from the appropriate ‘complementary renewables assets’ and directly connect them to the matched corporations. 

Why do I say complementary? Because we need to make sure that when the wind is not blowing or the sun is not shining, that the hydroelectric is working. They are all then complementing each other which ensures we have a solid, reliable and accurate piece of work.