PPA Terms Clause Samples

PPA Terms. As described above, there is evidence that, notwithstanding the contribution of a number of new entrants and the emergence of the end user segment, PPA terms have deteriorated over the last three years, as set out in Table 8 below. Discounts General All of the independent generator responses stated that the offers that are being made by PPA providers have higher discounts when compared to historic terms. Figure 2: Reported discounts across Power, ROCs and LECs It is worth noting that while the change in discounts for LECs shows the largest move, LECs only represent a very small proportion of the overall project revenues.4 Price Floors A limited number of offtakers are willing to provide a floor at sufficient value to support target leverage. Where floors are offered, offtakers have tended to limit it by setting it at a conservative level, stepping it down over time or not indexing it to inflation. Index / Profile Risk PPA providers have started to offer PPAs indexed to the day-ahead or intra-day market index rather than season or month ahead as was more common historically. This exposes generators to the medium term risk of lower captured value as a result of cannibalisation of the electricity prices in periods of correlated output of intermittents (primarily wind). Imbalance risk Generators have reported a move by offtakers to shift imbalance risk back onto the generator through: More onerous data access and reporting requirements (although generators conceded that these requirements were probably not beyond the capabilities of a Reasonable Prudent Operator); An annual or periodic re-opener clause on the discount applied to the brown power in respect of increase in imbalance costs (although this was not consistently reported); Indemnities in respect of failure to deliver output (although this seems to a relatively rare requirement). Change in law The consistent message from both generators and PPA providers in consultation responses is that change in law clauses are becoming increasingly difficult to negotiate. Key areas in which greater change in law risk is being pushed back onto 4 2013 electricity prices of approx £50/MWh, ROC buy-out (which sets the theoretical floor on the ROC price) is £42.02MWh and Climate Change Levy (that sets maximum LEC price) is £5.24/MWh. generators are: Inclusion of a termination right in the event of a material change in law; Widening of definitional scope, in particular in relation to change in law that affects imbalance c...