Corporate renewable purchasing glossary

Familiarize yourself with the key jargon

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If you’re new to corporate renewable energy purchasing, it can seem like everyone is talking a foreign language. The glossary below will help you familiarize yourself with the key jargon of the corporate power purchase agreement (PPA) world – so you can start planning your renewable energy purchasing strategy with confidence.

Abbreviations

Abbreviation	Name	Description
BoP	Balance of Plant	The supporting components and systems of a power plant in addition to the generating unit. Information on the civil and electrical BoP is required when submitting a project to tender in Instatrust.
COD	Commercial Operation Date	The date a power plant starts commercial operation. This key milestone is defined in the PPA.
DSO	Distribution System Operator	The organization responsible for operating and developing the distribution system.
EIA	Environmental Impact Assessment	The analysis and evaluation of the possible environmental impact of proposed decisions or activities.
EPC	Engineering, Procurement and Construction	A common approach to realizing renewable energy (and other major infrastructure) projects. An EPC contract includes terms and conditions for the design, engineering, procurement of materials and equipment, construction and commissioning of the power plant. It is signed between the EPC contractor and the project developer.
FiT	Feed-in-Tariff	A policy mechanism supporting renewable energy projects. Generators are paid a cost-based price for the renewable electricity they supply to the grid.
GO	Guarantee of Origin	Certification that electricity is from a renewable energy source (European Union).
I-REC	International Renewable Energy Certificate	Certification that electricity is from a renewable energy source (Brazil).
O&M	Operations & Maintenance	A common business model for running a renewable energy power plant. An O&M service contract is an agreement between the project developer and an operator who operates and maintains the power plant.
PPA	Power Purchase Agreement	A bilateral contract between a power producer and a buyer covering the supply of electricity.
REC	Renewable Energy Certificate	Certification that electricity is from a renewable energy source (United States).
REGOs	Renewable Electricity Guarantees of Origin	Certification that electricity is from a renewable energy source (United Kingdom).
RfP	Request for Proposal	A request from a potential offtaker for interested developers to submit proposals on potential projects.
TSO	Transmission System Operator	The organization responsible for operating and developing the transmission system.

PPA terminology/features

	Terminology/feature	Description
General	Corporate PPA	A long-term, bilateral contract between a renewable energy producer and a corporate buyer (offtaker) covering the supply of electricity from renewable sources.
	Tenor/Term	The length of the PPA, i.e. the period over which the buyer is obliged to buy electricity.
	Bankability	The financial viability of a project, i.e. whether lenders and investors are willing to provide financing.
	Tender	Another name for a Request for Proposal.
	Delivery point	A specified point in the electricity grid where the power is delivered to the buyer.
	Additionality	New renewable energy generation that is added to the grid due to the PPA, i.e. without the PPA, this generation capacity would not exist.
PPA parties	Buyer/Offtaker	The organization buying the renewable electricity agreed on under the PPA.
	Project developer	The company developing the renewable energy project under the PPA. Also referred to as the producer, generator or seller.
	Third-party	Any organization, such as a utility, involved in a corporate PPA in addition to the seller and the buyer.
	Investor	Any party that provides financing in return for a stake in the project. Their financial return on investment will be a proportion of the profits from the project.
	Lender	A party, typically a bank, that provides a loan to finance a project. Their return on investment will be the interest on the loan.
	Sleeving agent	An intermediary, typically a utility, that takes the energy from the project and transfers it to the buyer at its delivery point, usually for a fee, in a physical PPA.
Contractual structure	Sleeved/Physical PPA	A PPA structure where electricity from the seller is physically supplied to the offtaker through an intermediary (known as a sleeving agent).
	Synthetic/Virtual PPA	A PPA structure where the developer sells its electricity to the grid at market price while agreeing a price with the corporate buyer. The developer and buyer agree to make up the difference between the market price and the agreed price. The buyer buys power from its utility, but the price is hedged by the PPA.
Contractual structure: Volume	Pay-as-produced PPA	A PPA structure with no volume commitments where the buyer pays for the amount of electricity produced by the developer.
	Baseload PPA	A PPA structure where the developer commits to a minimum volume of power delivered to the offtaker. Also called a fixed volume or firm volume PPA.
Contractual structure: Pricing	PPA price	The price to be paid by the buyer for the electricity produced and possibly additional elements such as renewable energy certificates. The price can be fixed or flexible.
	Fixed pricing structure	A PPA structure where the price per unit of electricity is agreed upfront – either with or without agreed escalations, for example, to account for inflation.
	Flexible pricing structure	A PPA structure where the price per unit of electricity can vary according to market fluctuations. It may include either a fixed percentage discount or a cap and floor.