Work

Green on demand? Offtaker preferences for corporate power purchase agreements

Year: 2024

Type: article

Abstract: Corporate power purchase agreements (CPPAs) have emerged as an additional instrument for accelerating renewable energy deployment. By facilitating the financing of projects, CPPAs offer numerous benefits to power producers and corporate offtakers. However, despite their growing popularity, risk allocation among these counterparties remains challenging. This study investigates risk perceptions and preferences for CPPA design based on insights from 91 corporate offtakers who made 860 hypothetical green-power-procurement decisions in the Swiss context. Our results show a strong interest in CPPAs with lower prices and shorter tenors. The latter is especially important for SMEs, who would be willing to pay considerably more for a five-year contract than a longer one. While large companies would pay hefty premiums for local power production, SMEs impute more importance to the type of technology. However, long-term commitments and the complexity of contractual obligations are major drawbacks. While our findings show that CPPAs have the potential to play an important role in complementing public support for renewables, they also point to the need to implement framework conditions that contribute to lowering risks and complexity for counterparties. Further, they highlight distinctive preferences within this consumer segment, which could inform CPPA negotiations and foster mutually beneficial agreements. • 860 experimental green power procurement choices by 91 Swiss companies. • Companies have a strong interest in CPPAs with a tenor of 5–15 years. • Large companies would pay premiums for local power, SMEs for solar energy. • Hedging against price risk and cost savings are key CPPA drivers. • Policies could be designed to reduce risk and complexity for counterparties.

Source: Energy Policy

DOI: 10.1016/j.enpol.2024.114408

Authors: Sabrina Mili, Elizabeth Côté

Institution: University of St.Gallen

Language: English

Topic: Renewable Energy and Sustainability

Subfield: Renewable Energy, Sustainability and the Environment

Field: Energy

Domain: Physical Sciences

SDGs: Affordable and clean energy, Climate action, Industry, innovation and infrastructure

Open Access status: hybrid

Estimated APC paid: $3,650