The Power Purchase Agreement (PPA) signed by BASF and ENGIE will step up the leading chemical producer's decarbonisation process. The contract is an exceptional one in terms of duration, volume, and delivery conditions... Here we explain its extraordinary features in four key points.
"25 years is a standard period for gas supply agreements but much rarer for fixed-price renewable electricity supply contracts. This green PPA is totally unique! ", says Thomas Papazov, expert at Global Energy Management (GEM), one of ENGIE's Global Entities, which worked to secure the deal.
The goal was to set a fixed purchase price for green electricity for the entire duration of the agreement, by anticipating, as accurately as possible, fluctuations in available capacity and future costs of developing renewable capacity. Although the unprecedented contract period of this particular PPA may cause some problems, it is also an advantage: "The exceptional length of the contract gives us visibility and, with it, the opportunity to secure funding for new renewable electricity production facilities," says Thomas Papazov.
As of January, ENGIE will provide BASF with up to 20.7 terawatt hours of renewable electricity. To give you an idea of scale, this is the equivalent of a quarter of Belgium's annual electricity consumption! The low-carbon energy will be supplied through a large, diverse, and constantly growing portfolio of production plants. ENGIE's wind farms in Spain will supply the contract as of 2022. Then, within the next 15 years, ENGIE will be able to use new assets, including future onshore and offshore wind farms. These new assets will enable us to supply several BASF plants in Europe.
Another specificity of the agreement is ENGIE's commitment to delivering a "fixed band" of green electricity for 25 years. BASF will not encounter power supply problems because ENGIE will eliminate any intermittency risk associated with renewable production. Every year, BASF will be able to choose which of its European production plants will be powered by this green electricity supply.
As the largest chemical producer in the world, BASF aims to achieve carbon neutrality by 2050 and reduce its greenhouse gas emissions by 25% by 2030 (compared with 2018). Its key driving force being to replace fossil energy sources with renewable electricity to fuel production processes. To achieve this, BASF will apply two complementary principles: building its own portfolio of assets and buying green energy from third parties.
This green PPA will not only give a decisive boost to BASF's decarbonisation process but will also play a key role in the energy transition because the agreement will enable new renewable projects to be launched.