Renewable Energy Offtake Agreements

An acquisition agreement is an agreement between the project company and the party that purchases the energy and related products that the project will produce and provide over time. These plans have traditionally been adopted by custom AAEs with 20 to 25 years of maturity. The costs and transaction risks associated with these long-term contracts have forced projects, utilities and investors to consider alternative methods that reduce costs, reduce risk and offer shorter maturities while ensuring revenue. Consideration should be given to available alternatives, such as business purchase contracts, on-bill credit contracts, renewable energy quota agreements and other forms of agreements, energy hedging agreements and proxy income swaps. Listen to how our panel provides an analysis of available non-traditional acquisition agreements, financing mechanisms, key conditions and provisions to minimise risk and other elements essential to the use of taketakes for renewable energy. ”The flexibility of the program has allowed us to bridge the gap between the annual LGC-Surrender cycle and the longer commitment that renewable energy developers need to support their project revenues. Project financing, as the name suggests, involves attracting capital to the construction of projects, whether through lenders (debts) or investors (equity). In general, lenders and some investors do not waive the project proponent (critical basis for project financing) only if they are assured that the project`s expected cash flow can be used to repay loans or obtain reasonable returns of equity. For large wind projects, future cash flows are guaranteed in a purchase agreement – an agreement between the project company and the party that buys the energy and related products that the project will produce and provide over time. The type of buyer depends on several factors – the situation, market conditions and the parties` appetite for risk, to name a few. In the United States, Amazon`s new solar and wind projects with ENGIE represent 569 MW in Delaware, Kansas, North Carolina, Ohio and Virginia.

Each year they will supply Amazon with approximately 1,850 GWh of electricity and the corresponding Renewable Energy Credits (REC`s) project. During construction, ENGIE will create approximately 300 jobs in each wind turbine and 210 jobs in each solar facility. Projects are expected to be commercially implemented between 2021 and 2022. This type of framework consists of having a market agent (a licensed energy supplier) representing the developer in the wholesale market. The market agent sells the energy of the project and reimburses the market price to the developer, net of administrative costs. Given the total exposure to market prices, some developers decide to supplement this agreement with a financial AAE, with the buyer agreeing to set the price for all or part of the project`s production. For many years, and in many European countries, onshore wind projects have relied on bilateral electricity purchase agreements (AAEs) to sell their energy to third-party customers, usually energy suppliers or licensed energy suppliers. Given the bilateral nature of the transaction, these AAEs can be structured in different ways, but are generally compatible with the renewable asset compensation system in place in each country. For example, in a cfD system where the project receives a variable premium from the state in addition to the reference market price, the PPP price is generally indexed to the reference price in order to avoid a basic risk and to set the total price (KKA plus premium).

In cases where renewable assets are divided by the issuance of renewable energy (REC) certificates such as green certificates, AAE parties have much more freedom to negotiate alternative structures, both on the legs of electricity and on the deductable legs of the REC. The effectiveness of any non-traditional acquisition structure and financing depends on a comprehensive understanding of key concepts, attributes and regulatory implications