Power and renewables

Corporate renewable purchasing glossary

Instatrust energy purchasing glossary

Contact us:

Caroline Brun Ellefsen

Caroline Brun Ellefsen

Founder/ Global Head Instatrust, New Energy Ventures

Familiarize yourself with the key jargon

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

AbbreviationNameDescription
BoPBalance of PlantThe 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.
CODCommercial Operation DateThe date a power plant starts commercial operation. This key milestone is defined in the PPA.
DSODistribution System OperatorThe organization responsible for operating and developing the distribution system.
EIAEnvironmental Impact AssessmentThe analysis and evaluation of the possible environmental impact of proposed decisions or activities.
EPCEngineering, Procurement and ConstructionA 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.
FiTFeed-in-TariffA policy mechanism supporting renewable energy projects. Generators are paid a cost-based price for the renewable electricity they supply to the grid.
GOGuarantee of OriginCertification that electricity is from a renewable energy source (European Union).
I-RECInternational Renewable Energy CertificateCertification that electricity is from a renewable energy source (Brazil).
O&MOperations & MaintenanceA 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.
PPAPower Purchase AgreementA bilateral contract between a power producer and a buyer covering the supply of electricity.
RECRenewable Energy CertificateCertification that electricity is from a renewable energy source (United States).
REGOsRenewable Electricity Guarantees of OriginCertification that electricity is from a renewable energy source (United Kingdom).
RfPRequest for ProposalA request from a potential offtaker for interested developers to submit proposals on potential projects.
TSOTransmission System OperatorThe organization responsible for operating and developing the transmission system.

PPA terminology/features

Terminology/featureDescription
GeneralCorporate PPAA long-term, bilateral contract between a renewable energy producer and a corporate buyer (offtaker) covering the supply of electricity from renewable sources.
Tenor/TermThe length of the PPA, i.e. the period over which the buyer is obliged to buy electricity.
BankabilityThe financial viability of a project, i.e. whether lenders and investors are willing to provide financing.
TenderAnother name for a Request for Proposal.
Delivery pointA specified point in the electricity grid where the power is delivered to the buyer.
AdditionalityNew 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 partiesBuyer/OfftakerThe organization buying the renewable electricity agreed on under the PPA.
Project developerThe company developing the renewable energy project under the PPA. Also referred to as the producer, generator or seller.
Third-partyAny organization, such as a utility, involved in a corporate PPA in addition to the seller and the buyer.
InvestorAny 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.
LenderA party, typically a bank, that provides a loan to finance a project. Their return on investment will be the interest on the loan.
Sleeving agentAn 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 structureSleeved/Physical PPAA PPA structure where electricity from the seller is physically supplied to the offtaker through an intermediary (known as a sleeving agent).
Synthetic/Virtual PPAA 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: VolumePay-as-produced PPAA PPA structure with no volume commitments where the buyer pays for the amount of electricity produced by the developer.
Baseload PPAA 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: PricingPPA priceThe 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 structureA 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 structureA 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.

Contact us:

Caroline Brun Ellefsen

Caroline Brun Ellefsen

Founder/ Global Head Instatrust, New Energy Ventures