"We are launching our third generation of PPA"

By ENGIE - 23 December 2021 - 13:12

The « Power Purchase Agreements », or “PPAs”, first appeared 10 years ago as a tool to support the energy transition and have enabled major companies to make long-term investments to build up their carbon-free roadmaps while securing supplies, at a set price. Rapidly growing and adopted by major companies, PPAs are becoming accessible to (almost) everyone. Let’s hear more from Jérôme Malka, a member of the “Global Energy Management” executive committee, one of ENGIE Group’s global entities, which helps to draft these complex contracts. 


Has the PPA played a key role in the energy transition?

Jérôme Malka: It is certainly a significant tool. Major companies, such as the Tech Giants (GAFAM) have already seized the opportunity. These contracts make it possible to develop renewable energy production installations, giving visibility on energy prices over the medium to long term. In the past, only public support mechanisms played this role. Another way of seeing it is that PPAs support and complement public authorities. 
Continued advances in the performance of renewable production technologies have been mirrored by a continued downward trend in costs.  
Throughout the world, public authorities have kick-started the renewable sector using incentives and setting roll-out targets for renewable capacity. As a consequence of this direction, renewable energy costs have been falling in many different countries over the last 10 years. We are seeing lower risk premiums on these technologies (solar, wind, etc.) as well as intense competition in equipment manufacturing (wind turbines, solar panels, etc.).
At the same time as costs are decreasing, we are seeing an increase in sustainability policies within companies. 
This last decade has taught us a lot about the climate and biodiversity. A significant number of companies have acted upon these issues to assert their sustainable development targets with their stakeholders, including controlling their carbon emissions.
In summary, over these past 10 years, we have seen an increase in PPAs in addition to public assistance with renewable energy, a decrease in the cost of renewable electricity and a corporate commitment to sustainability. This combination has led ENGIE to offer long-term green energy contracts to its customers - Green PPAs-, which play a key role in the energy transition. 


>> Also read: What are PPAs? << 

25 billion

This is the overall value of PPAs in 2020, compared to 12 billion in 2018 
(source: La transition énergétique accélérée : le nouveau pari des GAFAM, Matthias Lelièvre, CEO ENGIE Impact [The accelerated energy transition: Big Tech’s new gamble, Matthias Lelièvre, CEO ENGIE Impact])

Who are these pioneering companies? 

J. M.: The early adopters of Green PPA were the digital giants – Google, Amazon, and Microsoft etc. They have been involved in PPAs for over ten years. Then came major companies such as Solvay, General Motors, Unilever and Philips. Initially, we structured these contracts for major companies who have experienced with energy markets. They have dedicated their teams to manage these contracts, including the risks related to the intermittent supply of renewable energy. This familiarity with the world of green electricity is a gradual and complex process and has, until now, been reserved to the largest groups, whose energy costs have had a major impact on their business. As, for example, digital companies who operate huge Data Centers, and are major electricity consumers.
The Tech Giants (GAFAM) and major companies have incorporated Green PPAs into their economic model as this meets their environmental aspirations and expectations of their stakeholders - customers, employees, investors, etc.


Are PPAs available to new, smaller companies?

J. M.: Yes, smaller companies also have high expectations for green energy consumption. And, a major challenge for us, particularly for ENGIE “Global Energy Management”, is to offer adequate solutions. We are talking about small manufacturers, service companies and local authorities. They all want to switch to zero or low-carbon activities as this is now economically viable and the environmental challenge is now a reality. However, they require offers that are appropriate for them, and we must be able to offer our expertise to all types of electricity consumer.
ENGIE has already structured complex long-term energy contracts, tailored to the needs of tech giants and manufacturers with experience in energy markets. We must also offer this expertise to all other companies, who make up the bulk of the market. 

Discover how ENGIE supports major companies in the digital, medial and telephone sectors, using PPAs: Microsoft, Google, Amazon, Netflix, Orange etc. And also major manufacturers such as BASF, L’Oréal, and public organisations such as the University of Boston.

How is ENGIE supporting this movement?

J. M.: We are working to simplify the offer to convince SMEs and local authorities, etc. to adopt long-term green energy contracts. These stakeholders, who are very enthusiastic but sometimes have limited teams or resources to roll out major PPA contracts, are key as they represent the bulk of economic activity. That’s why our Group has developed new types of PPA for them, such as PPA for all, more standard products, which are more user-friendly and easier to understand. Ultimately, simplifying the offer means granting easier access for companies to this green electricity, making it even more competitive. For example, among the customers who are benefiting from the new photovoltaic solar power plant at Fanjeaux (Aude, France), are the Océanopolis de Brest (Finistère) an ocean education centre and the campus of the Charente Formation Chamber of Commerce & Industry (CCI) (see the video below).
Our customers are increasingly demanding regarding the authenticity of their green energy supply. They require more stringent guarantees, such as energy production close to the locations or countries in which they operate. We must be able to provide these guarantees, for example with TEO, our digital solution to collect data in real time. 

Alongside the simplification of PPAs, we will succeed by simplifying the renewable energy market in operational terms : by investing massively in combining renewable energies, to reduce their intermittent supply, by developing storage and new renewable technologies - green gas, geothermal energy, green hydrogen, etc. -, by supporting the adaptation of electricity, distribution and transport networks with solutions offering flexibility. 
We must double our efforts to design a PPA offer for all types of company. We will get there thanks to new, digital tools and data analysis, and by strengthening renewable energies at all levels of the value chain.