Up to now, RES projects in Greece have been supported by operating aid schemes in the form of Feed-in Tariff (FiT) and Feed-in Premium (FiP) operating aid agreements.
Following the implementation of the target model, PPAs are meant to substitute the abovementioned operating aid schemes by offering an alternative way of delivering renewable energy to the grid.
A private RES Power Purchase Agreement (PPA) is usually a long-term bilateral contract (up to 20 years) concluded between a seller such as RES production companies and a buyer i.e. a large consumer, energy suppliers or retailers. The PPA provides for the obligation of the seller to offer the contracted energy, at a pre-determined time, to the buyer, in exchange for a predetermined price.
Basic types of a PPA
* Physical PPA
A physical PPA provides for the physical delivery of energy via a private cable or network. The buyer will pay the seller an agreed-upon price per MW supplied. The most common type of a physical PPA is the sleeved PPA which constitutes a trilateral agreement concluded between the seller, the buyer and an energy supplier (acting as the party responsible for the respective energy transactions).
* Virtual PPA – Contract for Difference (“CfD”)
A virtual PPA is a financial CfD which does not include physical delivery of energy. The seller and the buyer agree on a pre-determined fixed price for the supply of energy. In case the stock market price is lower than the said fixed price, the buyer pays the seller the difference between the stock market price and the fixed price. However, in case the market price exceeds the fixed price, the seller pays the difference to the buyer.
At a national level, up to now, there is no unified legislative framework governing the conclusion of PPAs and their respective structures and only certain provisions provide for such type of agreements. In particular, Law 4425/2016 provides for the conclusion of PPAs outside the stock market whereas the conclusion of virtual PPAs is established pursuant to the Ministerial Decision ΥΠΕΝ/ΓΔΕ/84014/7123/2022 (M.D) as amended and in force, which provides for the prioritization for the assessment of the applications for granting Connection Terms Offer (CTO) including also RES stations for which producers wish to conclude bilateral PPAs with an end customer or an electricity supplier.
According to the abovementioned M.D, RES and CCHP stations which are granted a final CTO are categorized into priority groups/subgroups (from A to F) and their inclusion into such groups/subgroups is determined in line with the general conditions defined in the said M.D and the special terms and conditions provided for each group/subgroup. Such categorization means that prioritization with regards to granting final CTOs by the Administrator is provided in principle from one group/subgroup to another. RES stations for which the Producer wishes to conclude a bilateral PPA are included under Group B’.
Generally, PPAs provide for the protection from volatile prices thus the reduction of market price risks. However, there are certain barriers to be overcome in order for the conclusion of PPAs to be promoted, which can be outlined as follows:
* The lack of a specified legislative framework governing such agreements.
* Certain limitations of the RES station’s production capacity (capacity deviation) might be imposed for the inclusion of these stations under Group B.
* Pursuant to 4425/2016, it is stipulated that a maximum transaction amount for PPAs with physical delivery may be determined concerning physical PPAs concluded inside and outside the stock market.
* By virtue of the RAE’s decision no. 928/2022, it is provided that, for the year 2023, large suppliers with a market share of 40% are entitled to cover up to 30% of the quantities they supply their customers through the conclusion of physical PPAs.
In addition, by virtue of L.4951/2022 in conjunction with the Ministerial Decision ΥΠΕΝ/ΔΗΕ/69734/2413, it was foreseen that, part of the revenues which participants in the Day Ahead Market are entitled to is withheld. However, such barrier has been overcome, since pursuant to the decision no. 163/2023 issued by RAE, the latter stipulated that the said provision will not apply for transactions concerning quantities of electricity sold and cleared in the Next-Day Market, which are provided by each obliged participant (either a producer or an aggregator) to energy-intensive electricity industrial consumers through the conclusion of physical PPAs, the latest as of 10.03.2023.
The editorial team