The PPA model contract for municipal utilities and SMEs is here

07.02.2024


Source: Energy & Management Powernews

The Dena Market Offensive Renewables is opening up the market for direct long-term green electricity supplies to small and medium-sized companies with a first model contract for PPAs.

The German Energy Agency's (Dena) Renewable Energy Market Initiative published a model contract for Power Purchase Agreements (PPA) on February 6. What is new about the 18-page text compared to the PPA model contract of the European Energy Traders Association Efet ("Efet CPPA") is that it is embedded in German law. And, according to Dena, it is deliberately kept leaner and simpler so that municipal utilities and small and medium-sized enterprises (SMEs) with little expertise in PPAs and electricity market effects can also use it.

"The market offensive also opens up the market to smaller customers," explains Tibor Fischer, spokesperson for the association of 50 companies. It also fulfils a central requirement of the EU Renewable Energy Directive RED III to achieve this through the standardization of contracts. This should accelerate the expansion of renewables and facilitate the integration of PPAs into corporate decarbonization strategies. The German government recently formulated review mandates for the strengthening of the PPA instrument called for in RED III.

Baseload deliveries instead of "pay-as-produced"

In order to easily integrate a PPA into existing power purchase agreements of municipal utilities and SMEs, the model contract is based on a baseload delivery. This means that the buyer receives the same amount of wind or solar power every quarter of an hour throughout the delivery period, regardless of how much the contractually linked systems actually generate.

The seller is responsible for delivering the remaining electricity to the buyer's balancing group (or alternatively to the market location) in the event of reduced production, curtailment or failure of the system. The "pay-as-produced" or "pay-as-nominated" principles, which are based on the actual or actually balanced generation, are otherwise common in the PPA market.

The sample text also assumes normal delivery via the general electricity grid (offsite PPA) and explicitly not via a direct line (onsite PPA = commercial tenant electricity).

Rules on guarantees of origin, compensation and more

The issue of German green electricity certificates of origin (HKN) to the buyer in the amount of the energy volumes sold is also part of the model contract, as is a lump-sum compensation if the commissioning of the wind energy or PV systems is delayed, which may at best be under construction when the contract is concluded. Alternative solutions are also outlined.

The model contract also contains provisions for:

- the redispatch (compensation for curtailment by the electricity buyer, in redispatch 2.0 the remote control authority and the balance sheet compensation by the grid operator or its financial compensation in the BDEW transitional solution, replacement HKN, distribution of market roles),

- Deliveries to the buyer's or direct marketer's balancing group and their design options,

- the electricity tax debt,

- the optional proof of business liability insurance,

- Transparency messages according to EU regulation Remit (only from 600 MW),

- the exclusion of force majeure

- as well as a right of termination in the event of banks entering into an investment or in the event of insolvency of the contractual partner in conflict with German law.

Efet and three law firms assisted in drafting

Efet Germany and the law firms Von Bredow Valentin Herz, DLA Piper and Gunnercooke were involved in drafting the PPA model contract.

The Renewable Energies Market Offensive is a corporate initiative founded three years ago by Dena, the Association of German Chambers of Industry and Commerce (DIHK) and the association "Climate Protection Companies".

The 18-page PPA model contract can be downloaded as a Word file from the market offensive website , as can the 13-page explanatory notes (Guidance Notes) on individual paragraphs.

Author: Georg Eble