Onsite power purchase agreements (PPAs) are contracts that allow businesses to buy electricity from renewable energy sources located on your facility. They offer several benefits, such as reducing greenhouse gas emissions, lowering energy costs, and improving energy security.
Onsite Power Generation
Understanding Onsite Power Purchase Agreements (PPAs)
If you are looking for a way to save money on your electricity bills, reduce your environmental impact, and increase your energy security, you might want to consider an onsite power purchase agreement (PPA). An onsite PPA is a contract between you and a renewable energy developer, who will install and operate a renewable energy system (such as solar panels or a wind turbine) on your property. You will pay the developer a fixed price for the electricity generated by the photovoltaic system, which will be lower than the market rate. Here are some of the benefits and key components of an onsite PPA.
Benefits of Onsite PPAs
– Price Stability: the price for electricity for the duration of the PPA, which can be 10 to 25 years. This will protect you from volatile and rising electricity prices in the market.
– Energy Security: have a reliable source of electricity on your premises, which will reduce your dependence on the grid.
– Sustainability: reduce your greenhouse gas emissions and support the transition to a low-carbon economy by using clean and renewable energy.
– I-recs: Generate your own Irecs onsite, not far away from your facility.
Key Components of Onsite PPAs
– Parties: clearly identify you as the buyer of electricity and the developer as the seller and owner of the renewable energy system.
– Electricity Specifications: define the amount of energy the developer will sell you.
– Price and Payment Terms: specify the fixed price per kilowatt-hour (kWh) that you will pay to the developer and the frequency and method of payment.
– Delivery: outline how the electricity will be delivered to you, through a direct connection to your facility because is onsite.
– Term and Termination: establish the length of the contract, which can range from 10 to 25 years, and the conditions for ending or renewing the contract. In most cases your can buy the solar system after the termination or even at any time.
– Maintenance and Repair: define who is responsible for maintaining and repairing the renewable energy system, usually the developer. It depeneds on the situation.
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How Onsite PPAs Differ from Offsite PPAs
Depending on your needs and preferences, you can choose between an onsite PPA or an offsite PPA. In this blog post, we will explain the main differences between these two types of PPAs and how they can benefit your business.
Onsite PPAs: Generating Electricity on Your Own Property
An onsite PPA, also known as a behind-the-meter PPA, is a PPA where the renewable energy project is located on your property. For example, you can install solar panels on your rooftop or wind turbines on your land7roof and enter into a PPA with the project developer. The main advantage of an onsite PPA is that you can use the electricity directly from the source, without relying on the grid. This can help you avoid grid fees, transmission losses, and price fluctuations.
An offsite PPA, is where the renewable energy project is located away from your property. For example, you can buy electricity from a large-scale solar farm or wind farm that is connected to the grid and enter into a PPA with the project developer. The developer will sell the electricity to you through the grid, while you will pay a fixed price per unit of electricity. The main advantage of an offsite PPA is that you can access more diverse and scalable sources of renewable energy that may not be available or feasible on your property.
Offsite PPAs: Buying Electricity from Remote Projects
Key Distinctions between Onsite and Offsite PPAs
The following table summarizes the key distinctions between onsite and offsite PPAs:
Feature
| Generation Location |
| Project Ownership |
| Electricity Delivery |
| Pricing Structure |
| Maintenance Responsibility |
| Tax Benefits |
Onsite PPA
| Buyer’s premises |
| Project developer |
| Direct connection to buyer’s facility |
| Fixed price |
| Project developer |
| Potential tax incentives for renewable energy systems |
Offsite PPA
| Remote generation facility |
| Project developer |
| Through the electricity grid |
| Fixed price or indexed price |
| Project developer |
| Limited tax benefits |
There are two main types of PPAs: onsite and offsite. An onsite PPA involves installing a renewable energy generation facility on the buyer’s property, such as solar panels or wind turbines. An offsite PPA involves purchasing electricity from a renewable energy project located elsewhere, such as a solar farm or a wind park.
How do you decide which type of PPA is best for your business? Here are some considerations to keep in mind:
- Space: Do you have enough space on your property to host a renewable energy facility? Onsite PPAs require a large amount of land or roof space, which may not be available or suitable for some businesses.
- Savings: How much can you save on your electricity bills and carbon footprint? Onsite PPAs can help you reduce your dependence on the grid and lower your greenhouse gas emissions. Offsite PPAs can also help you support renewable energy development and diversify your energy sources.
- Control: How much control do you want over your electricity generation and consumption? Onsite PPAs give you direct access and ownership of the electricity you produce and use. Offsite PPAs rely on the grid to deliver the electricity you purchase from the seller.
- Grid: How reliable and efficient is the grid in your area? Onsite PPAs may be more attractive in areas where the grid is congested or prone to blackouts. Offsite PPAs may be more beneficial in areas where the grid is stable and has low transmission losses.
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Key Elements of Onsite PPA Contracts
Onsite PPAs: A Strategic Tool for Sustainable Electricity
Businesses and organizations that want to secure reliable, cost-effective, and sustainable electricity supplies can benefit from onsite power purchase agreements (PPAs). These are contracts between a project developer, who installs, operates, and maintains a renewable energy generation facility on the buyer’s premises, and a buyer, who purchases the electricity generated on-site.
Onsite PPAs have several advantages over traditional PPAs, which involve the physical delivery of electricity from a remote generation facility. Onsite PPAs reduce transmission losses and enhance energy efficiency by delivering electricity directly to the buyer’s facility. They also offer predictability and financial stability by specifying a fixed price per unit of electricity and a payment schedule for the duration of the contract, which can range from 10 to 25 years.
Schemes for onsite PPA according with regulation of Mexico
| Capacity | Generation Scheme | CNE Permit | Institution | Type of contract |
| <0.7 MW | Distributed Generation | No | CFE | Net metering / Net Billing |
| 07-20 MW | Isolated Generation | Yes | CNE/CENACE/CFE | Generation Permit / Interconection / Study Impact in the System |
| >20 MW | Utility Scale Generation | Yes | CNE/CENACE/SENER | Specific for each case |
Essential Terms in Onsite PPA Contracts
If you are considering an onsite PPA contract for your renewable energy project, you need to understand the essential terms that govern the relationship between you and the project developer. Here are some of the key terms to look out for:
- Contract Duration: This is how long the PPA lasts, usually from 10 to 25 years.
- Electricity Quantity: This is how much electricity the project developer has to produce and deliver to you over the contract period.
- Payment Terms: This is how and when you pay the project developer for the electricity you receive, usually in monthly.
- Performance Guarantees: These are the minimum standards of performance that the renewable energy facility has to meet.
- Maintenance and Repair Responsibilities: These are the roles and duties of each party for maintaining, repairing, and restoring the facility in case of any issues, avoiding potential conflicts and ensuring optimal performance.
- Insurance Coverage: This is the insurance policy that covers the facility, its parts, and the electricity it generates, protecting both parties from financial losses due to unexpected events.
- Dispute Resolution Mechanisms: These are the methods and procedures for resolving any disputes that may arise from the PPA, such as mediation or arbitration, avoiding expensive legal actions.
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