Development of Power Purchase Agreements needed to enable decarbonisation at pace

17 Oct 2023

Grid connected solar

Power Purchase Agreements (PPAs) between corporate energy users and renewable energy developers can enable investment in new, lower cost renewable electricity generation and drive electrification at pace, Transpower says.

However, in an insight paper released today, Transpower said work is needed to deliver a more liquid PPA market that can play a role driving the investment in renewable electricity generation needed to decarbonise Aotearoa New Zealand’s economy.

Transpower General Manager Strategy and Customer Chantelle Bramley said PPAs make renewable generation projects more attractive by de-risking investment and accelerating the financing and building of renewable electricity generation.

“Large electricity users can play a significant role in underwriting the business case for investment in lower cost new renewable electricity generation,” she said. “As long-term renewable electricity generation costs continue to fall and environmental reporting standards and targets for emissions are introduced, PPAs are likely to play an increasingly important role in the toolkit for driving renewable energy investment.

PPAs come in several shapes and forms but are typically long-term agreements where a corporate buyer purchases electricity from a renewable generator at an agreed price.

Ms Bramley said the New Zealand corporate PPA market is still developing, and more work is needed to develop a liquid PPA market that can help boost renewable generation and drive electrification across the economy.

“Establishing a mature PPA market will require a collective effort from regulators, policy agencies, infrastructure providers, renewable developers, intermediaries and corporate buyers across electricity and financial markets.” she said.

The insight paper identifies international approaches to developing a deeper and more active PPA market to support the energy transition, particularly in European and North American electricity markets.

Examples of practices in these markets that could assist with enabling a PPA market in Aotearoa include: a matchmaking platform for potential buyers and sellers; an information portal providing advice and tools for corporate buyers; improved market information on PPA contracts; and an industry-wide standardised corporate PPA template.

“If we get this right, the potential benefits are significant,” Ms Bramley said. “A mature PPA market will increase competition, accelerate renewable electricity supply, meet government and corporate emissions goals, and help drive down electricity prices.”

The paper is part of Transpower’s wider Whakamana i Te Mauri Hiko (Empowering our Energy Future) work programme, which is designed to support industry discussions.

For further information, please contact:
Senior Communications Advisor Laura Ackland on 021 394 042.