The wait continues for the government’s final decision on the temporary measures to tackle soaring energy prices. We don’t know yet when the price cap might be introduced or at what level and ultimately how the renewables industry will be impacted.
But whether a new tax is introduced on revenues above a certain price cap or not, securing the best price on your PPA still ensures you maximise the profits from your export power sale.
And how do you do that? In this series of posts, we take a close look at each step in the process of securing the best PPA for your assets.
We previously talked about how to capture the best PPA price, when to go out to tender to maximise results and how to structure the contract. Now, let’s look at understanding the results of your tender and the things you need to consider.
Reviewing tender results on the Renewable Exchange platform
If you use the Renewable Exchange platform, it’s easy: all the bids will be analysed for you and presented in a like-for-like format in the tender results tab.
You can review multiple indexed and fixed bids and select the most appropriate product for your needs. You’ll see a load- and volume-adjusted total price estimate for fixed contracts. Each bid accounts for the wholesale power price, any additional embedded costs and benefits, the value of your green certificates and any fees charged by the offtakers.
The bids will be grouped by contract length and ordered by the total price value.
You’ll be able to see a detailed breakdown of every bid, too. Renewable Exchange offers you complete transparency of the results.
Contract-wise, where offtakers use the Lightning PPA – our standardised contract – you can review it at any time through the account settings. Otherwise, if you’d like to see the details of a contract, our PPA Team can obtain the draft agreements for you prior to accepting a bid.
If you’d like to learn more about the Renewable Exchange platform and the services we offer, reach out to our team at [email protected].
Reviewing bids of a tender outside of Renewable Exchange
If you’ve run a tender in-house or via a broker, you’ll need to analyse the bids yourself. Here are a few tips to keep in mind:
1. Don’t just compare bids equally. Consider the length of the contract, the power price type and value and the rate or price of embedded benefits and green certificates, where applicable.
2. When analysing indexed pricing, adjust the calculations for the generation profile of your asset and consider the variability of the index pricing – do the peak price times correlate with your asset’s peak generation periods? Will you be able to maximise the revenue in those times or would your asset mostly capture the lowest price points?
3. Review the contract terms. Make sure you fully understand how each of the contracts differ, especially with regard to clauses on downtime alerting and non-delivery fees.
Depending on the process you’ve used, there may be a few more bits to bear in mind. If using a broker or third-party intermediary:
- Check which companies they’ve gone out to for quotes to ensure your tender was seen by all potentially interested offtakers.
- Ask for full details of their fees before committing – for example, is it a one-off upfront fee or a fixed fee per MWh deducted through the supplier? Is the fee included in the prices quoted or would it be charged separately?
- Review every bid in detail, including the price offered for embedded benefits and green certificates.
- Confirm each bid’s expiry date to ensure you have enough time to accept the best one. Make sure the bids you review are based on the same market conditions.
Beware of automated bid-acceptance auctions or services where someone can finalise a contract on your behalf. Make sure you fully understand the risks and the terms of the service before you commit.
Switching suppliers – is a different offtaker better?
In the past, some of our clients had chosen to stay with the same offtaker for many years, automatically renewing contracts or only getting revised offers from the one supplier. They feared the complications that could arrive from switching between suppliers.
Fortunately, with the efficient new systems in place, switching suppliers is an easy process that requires little work and can be completed seamlessly. Make sure you allow at least 2 weeks between contracting a new PPA and the end of your existing contract (you may need more time depending on the notice period specified in your contract).
Upon signing a PPA with a new supplier, you’ll be sent a form requesting your details – the supplier can then complete the switch process on your behalf and you should start receiving payments from your new offtaker at the contract start.
Running a tender and inviting bids from all suppliers, increases the competitive tension of the process and ensures you receive the best bids from all participants. It is likely that the bid you get from your existing offtaker in a tender process will be higher than what you might get from them directly as a renewal price. You’ll also get a much better view of where the market’s at if you compare bids from multiple offtakers. With Renewable Exchange, whether your current supplier comes through with the best price or not, you can still contract with them. There’s no downside to tendering a PPA and getting a full view of the market.
Coming up next…
We’re nearly at the end of the series on PPA contracting now. In the next part, we’ll look at the steps involved in executing a new PPA. Stay tuned!