Warning as generators hit by hidden costs in power purchase agreements
1st August 2021
Hidden costs in power purchase agreements (PPAs) are leaving some generators out of pocket, despite the promise of a higher purchase price. Valpy Fitzgerald, renewables and sustainable commodities director, Drax,
Hidden costs in power purchase agreements (PPAs) are leaving some generators out of pocket, despite the promise of a higher purchase price. Valpy Fitzgerald, renewables and sustainable commodities director, Drax, explains what to look out for.
Power purchase agreements (PPAs) are contracts that allow people to sell their excess generated power to a licensed energy supplier. They form an important part of the UK’s energy mix, supporting local communities through the supply of renewable energy, helping to reduce pressure on the grid and improve energy efficiency within the region.
They also provide businesses with an additional revenue source and a means to build upon their sustainability credentials.
Every supplier is different, but there are a few core features that all good PPAs share. They should reflect the current market price, have clear payment terms, be easily understood, and have a point of contact for any issues. Embedded Benefits are also important differentiators, as these usually make up around 30 per cent of a total PPA rate and can be fixed or variable.
There are lots of suppliers to choose from, and while this gives generators a greater choice of potential contracts, not all suppliers charge in the same way. This can lead to generators being stung by hidden costs.
One charge that generators need to watch out for is Data Collection and Data Aggregation costs. This charge, which covers the cost of onsite data collection, is often not reflected in the initial price, and can be around £200–300 per annum.
Generators should also be aware of Distribution Network Operator costs, which are charged for use of, and connection to, the distribution system. These tend to be standard across the board but it’s worth looking out for these in the small print.
Price and reliable payment are still the most important considerations for generators. But without cost transparency, they risk losing out in the longer term. Good suppliers will provide this information upfront. But in all cases, it’s advisable for generators to do their research into potential hidden costs and the level of customer service as these will ultimately result in the best deal.
To find out more about what Drax offers visit: www.energy.drax.com/ppaguide
