Synthetic Power Purchase Agreement (SPPA)
About this good practice
Organisations are needing to reduce their carbon footprint. Equally, for the EU to meet its carbon targets deployment of renewables needs to be increased, particularly near to areas of consumption. Purchasing energy through a green tariff unless backed by a Power Purchase Agreement doesn’t provide a high enough price to stimulate renewable energy deployment. Another option is a Corporate Power Purchase Agreement, but this can negatively impact on the price for any remaining energy demand. Devon County Council wanted a way to stimulate additional renewable energy but to ensure this generation was in the locality to maximise the local socioeconomic benefits but also reduce the energy losses through transmission over the national grid.
A Synthetic Power Purchase Agreement is a financial agreement between a generator and an off taker. The off taker agrees a minimum price for the sale of the energy created by the generator. This enables the generator to draw down finance as their income is guaranteed over the length of the PPA (10-20 years). As the agreement is financial in nature, DCC doesn’t need to procure and can enter into an agreement with a local developer. DCC can argue that the extra cost of using a community-owned developer is outweighed by the additional socioeconomic benefits of it being in the locality and owned by the local community. As DCC can require that any renewable supplies making up the SPPA are additional it can then claim the carbon credits.
Resources needed
Set up costs of £20,000 and then DCC has calculated that a 30MWp SPPA over 20 years based on future energy price would be cost-neutral.
Evidence of success
A legally compliant route to enter into a SPPA with a local, community-owned, renewable energy generator has been determined.
Potential for learning or transfer
The SPPA model can be used in other countries had originated in the United States of America. An SPPA offers a different way to ‘purchase’ renewables and will be appropriate to those organisations who are looking for a simpler method and one that delivers maximum local benefits.