It’s no secret that corporate demand for renewable energy is strong and growing. For committed organizations, power purchase agreements (PPAs) are playing a critical role in addressing Scope 2 emissions, and despite rising PPA prices over the last three years, demand continues to climb. As regulatory requirements tighten and climate imperatives mount, there’s little doubt that even more entities will look to leverage PPAs. According to the Clean Energy Buyers Association (CEBA), 55% of PPA offtakers were new to the market in 2022 — an indicator of just how fast this buyer segment is growing.
This exploding corporate appetite for PPAs is welcome news, but many market entrants are embarking on a procurement journey that can be complex and challenging. This is all the more true in today’s rapidly evolving market, with often lengthy procurement timelines that leave counterparties exposed to market shifts that can necessitate renegotiating terms and re-pricing PPAs. Some buyers’ inability to quickly adapt to changing conditions and demonstrate the flexibility today’s developers need can even lead to sellers withdrawing from negotiations altogether.
Developers are also facing immense challenges brought by steep rises in costs for connecting projects to the grid and interconnection queues that are expanding dramatically in length. These problems have no simple or quick solutions. What’s more, these risks generally add to PPA costs, constrain available project supply, and can extend project development timelines substantially.
The Big Picture for PPA Buyers
This leaves today’s PPA buyers in a unique position. They face a market with a limited supply of risk-mitigated clean energy projects from which to procure. Just over their shoulder, the pool of PPA buyers competing for this limited renewable capacity is growing rapidly. In their immediate market surroundings, North American PPA prices are showing signs of stability for the first time since the onset of the pandemic.
Buyers must view this moment of relative price stability as a metaphorical “weather window” — a period that won’t last forever, and a superb time to move forward with decisiveness and secure the PPAs they need to hit their goals. With the convergence of the aforementioned challenges, it is difficult to argue that waiting to procure will provide any upside whatsoever.
Take the Fast Lane
LevelTen and our robust network of advisory partners are here to provide buyers with the counsel they need to procure with confidence and efficiency. Offtakers must be flexible on terms, prioritize stakeholder alignment, and communicate with sellers promptly and with clarity. And now more than ever, we encourage buyers to thoroughly assess projects’ risks around interconnection approval timelines and costs. After all, getting stuck waiting in line to connect to the grid also maroons PPA buyers’ sustainability goals.
Finding alignment on PPA parameters can be challenging, and takes time — something many organizations simply don’t have. This is why LevelTen announced PPA Auctions earlier this year: a procurement fast lane that brings advanced-stage projects with minimal development risk straight to buyers. This streamlined, simplified process eliminates the need for buyers to sift through and process lists of projects to find the proverbial “needle in a haystack.” For committed offtakers serious about hitting their sustainability goals on time and with certainty, PPA Auctions offer a direct route to reaching their objectives.
Buyers are already taking advantage of this new route to market with great success — and in doing so, are leaving their anxieties around hitting their commitments in the rearview mirror. For organizations who want to avoid getting stuck in slow procurement processes and the risks presented by growing interconnection backlogs (and other development obstacles), your ideal solution is here, and is already being leveraged successfully by other corporate buyers. The time to procure is now, and PPA Auctions are a terrific way to seize this unique market moment and ensure your company’s place as a climate leader.