Maximising Energy Efficiency: Structuring and Negotiating Corporate Power Purchase Agreements in Greece

Greece has recently made a significant shift towards renewable energy, with 45% of total energy production now coming from sources such as solar and wind. This shift is partly due to electricity market liberalisation and the introduction of the target model, moving from state aid schemes to corporate PPAs. Historically, Greece used state support schemes, such as the feed-in tariff model, which provided guaranteed prices to renewable energy producers but was costly for the state and consumers. The financial strain led to the 2014 New Deal, reducing guaranteed prices. In 2016, Greece adopted the feed-in premium model, aligning with European Commission guidelines, where producers sell at market prices with state-paid premiums if market prices are low.

The evolution of the market, coupled with technological advancements and reduced development costs, has paved the way for corporate PPAs, which are long-term agreements between renewable energy producers and consumers like utility companies and industries. These agreements are not regulated by law and their terms are freely negotiated, providing predictable cash flows for producers and securing project bankability.

Greece has introduced measures to encourage corporate PPAs, such as priority grid connection terms for projects with corporate PPAs, especially for farmers and heavy industrial consumers, and options to suspend or terminate existing feed-in premium agreements for corporate PPAs.

PPAs can be divided between physical and virtual types and between predetermined and variable volume types. In physical PPAs, energy is physically delivered to the buyer, whereas in virtual one, financial contracts settle the difference between market and agreed prices. Fixed volume PPAs require delivering predetermined energy volumes, while variable volume PPAs involve selling actual production levels without specific targets.

Key terms and risks in PPAs include development risk, price risk, credit risk, performance risk, volume risk, change in law risk, force majeure risk, and termination clauses. Each risk involves careful negotiation to balance interests between developers, off-takers, and lenders. Developers seek to minimise delays and penalties, while off-takers and lenders focus on project viability and ensuring predictable cash flows.

In conclusion, the corporate PPA market in Greece is maturing, with expected growth as the government and banks support renewable energy projects. Measures under discussion aim to further facilitate corporate PPAs, including state guarantees and a special platform in the Hellenic Energy Exchange. Corporate PPAs are crucial for renewable energy project viability, requiring diligent legal advice to balance stakeholder interests and manage risks effectively.