Rec Sale Agreement
The fact that companies can purchase unbundled REBs in one region of the country and apply them to their energy consumption in another region of the country makes it difficult to assess the environmental impact. There is an oversupply of unbundled RECs in the market, which has depressed THE PRICES OF CERs so much that they are not a major source of revenue for renewable energy project developers. Unlike a power purchase agreement with a new project (which we will discuss later), the purchase of unbundled RECs does not guarantee the construction of a new renewable energy project. In fact, most of the projects that now offer REBs would have been built without the REB market. Jessica Johnson leads business negotiations for LevenTen buyers and supports them throughout the termssheet and power purchase agreement process. Jessica joined LevelTen after a 16-year stint at Avangrid Renewables, where she most recently served as Director of Origination for Western Markets. Jessica received a Bachelor of Arts degree from Bennington College in Vermont. It takes a lot of analysis to estimate what the company will pay for REBs obtained through a PPP, as this depends on the increase in wholesale market prices for the next 10 to 20 years. That`s where LevelTen Energy comes in. We calculate more than a billion data points per day to give our customers an understanding of the most likely expected billing value for a particular wind or solar PPA.
At best, a PPA provides a huge amount of REBs for a company and makes money for the company. In the worst case, the company pays much more than expected each month, or the project is not built at all, which means that no REBs are delivered. Compliance buyers are utilities or utilities that are required by government regulations called Renewable Portfolio Standards (RPS) to obtain a certain percentage of their electricity generation or revenue from renewable sources. These buyers meet RPS requirements either by purchasing REBs or by generating them in their own renewable energy projects. In a PPP, companies do not pay a specific price for the REBs they receive, as they would when purchasing unbundled REBs. PPAs are called fixed swaps for floats and are usually “billed” on a monthly basis. The amount that the company pays at settlement depends on the difference between the fixed price agreed in the PPA and the variable price of the wholesale market for which the promoter actually sells the energy. For example, if the price of the PPA is $15, but the developer sells the energy for $25, the developer will give the extra $10 to the company. On the other hand, if the developer sells the energy for $10, the company has to pay the developer $5 to make up the difference. Essentially, regardless of the wholesale price of energy over the next 15 years of the contract, the proponent will receive exactly $15 per megawatt hour: no more and no less. The data shows that the sale of green electricity is driven by businesses and thanks to companies` sustainability commitments, sales will continue to grow.
Ultimately, increased demand for REBs means increased demand for clean megawatt hours, so we recommend that all companies purchase REBs, regardless of where they come from. Unbundled REBs are REBs that are not matched with the undercurrent (see our Article Introduction to REBs for more information). These types of REBs are not bound by a power purchase agreement. While there are many utilities and other providers that sell REBs, it is recommended that companies use a Green-e certified broker to ensure that REBs are not counted twice. According to 2017 data from the National Renewable Energy Laboratory, PPAs, unbundled REBs, and renewable utility contracts are typically purchased in bulk from large non-residential electricity customers. As a result, these products account for about 68% of green electricity sales, but only about 4% of customers (Figure 1 below). In contrast, CCAs, competitive providers and green utility pricing programs primarily serve small electricity buyers such as residential and small commercial customers. These products account for about 96% of green electricity consumers, but only about 32% of green electricity sales. If your business is large enough, you may be able to negotiate a long-term contract with your green electric utility under a “green tariff” or “sleeved” PPA. In this agreement, the utility enters into a power purchase agreement with a specific renewable energy project and then provides you with the RECs. Execution times are usually shorter than direct PPAs with project developers; They are often 3 to 7 years old, compared to more than 10 years old.
This type of contract allows you to support the development of a new renewable project and obtain RECs without having to sign a power purchase agreement yourself. These types of programs are sometimes available in regulated markets where a direct PPA with a supplier is not an option for a corporate buyer. A power purchase agreement (PPA) is a contract between a “buyer” (such as a company) and the developer of a renewable energy project. There are two main types of PPAs: physical and virtual. Although mechanics differ in all types, the contract ensures that for every megawatt hour (MWh) of energy sold, the developer receives a fixed price (up to a certain number of MWh), and in return, the company receives the associated REBs. PPAs are long-term contracts that span 10 to 20 years. REBs will be delivered over time as the project produces and sells energy. However, because unbundled RECs are so easy to acquire, many companies start here before looking for other options that will have a greater impact on new green energy generation. .