Shaping And Hedging Renewable Power Purchase Agreements


Physically processed hedging operations are most frequently used by speculative counterparties who are able to resell the energy provided to them by the project owner. For companies that do not have this resale capacity, financially regulated security contracts are ideal, as the hedge counterparty is not required to unload the physical delivery of power. For small producers or consumers, it is more often preferable to designate a third party who provides training services as part of their activities for a fee. There is a basic hedging agreement between a project owner and a financial institution or financial corporation (the “hedge counterparty”), in which the proponent and counterparty agree that the proponent will receive a stable and stable unit price for this benefit for a predetermined amount of electricity produced by the proponent. This is obtained by the promoter and the financially hedge-adverse counterpart “Settling” the variable market price for such a power against such stability, fixed by unit price. Specifically, the hedge counterparty agrees to pay the project owner if the sale price of electricity is below the stable and fixed unit price over an agreed term. Conversely, the project owner agrees to pay the consideration if the market price is higher than the stable and fixed unit price. In the main part of the agreement, the developer physically supplies electricity in accordance with the contract and the Offtaker pays for the electricity at the agreed price. Excess electricity is sold to the grid. In addition, the transfer of original warranties (GoOs) usually takes place. If this service is to be acquired by the consumer, it needs a third party with sufficiently flexible sources of production, such as hydropower, that can be used to meet needs. Another type of security contract is a physically regulated security contract. Under a physically concluded security contract, the delivery of a project is “physically” provided to the consideration of coverage.

This physical delivery is made by (i) a sale of distributors at the project meeting point and (ii) a simultaneous transaction at the agreed delivery point where (1) the project owner buys power at the place of delivery, (2) that power transferred from the project owner to the point of guarantee mooring at the point of delivery (or “delivery”) and (3) the acquisition of that power by the author of the guarantee. The hedge counterparty pays the project owner the agreed unit price for the goods delivered to the place of delivery. This physical transaction usually takes place in a liquid trading center for such a product. Canadian customers, employees, investors and other stakeholders are increasingly calling for progress in sustainable development – and proving that positive change is being made.