How can you differentiate between renewable energy contracts?

1 Power Purchase Agreements (PPAs)

A power purchase agreement (PPA) is a contract between a renewable energy generator and a buyer, usually a utility or a large consumer, that specifies the terms and conditions of the electricity sale. The PPA typically includes the price, duration, quantity, quality, and delivery point of the electricity, as well as the rights and obligations of both parties. PPAs can provide a stable and predictable revenue stream for renewable energy generators, as well as a fixed and competitive cost for buyers. However, PPAs also entail some risks, such as market fluctuations, regulatory changes, performance issues, and contract disputes.

2 Renewable Energy Certificates (RECs)

A renewable energy certificate (REC) is a certificate that represents the environmental attributes of one megawatt-hour of electricity generated from a renewable source. RECs can be sold or traded separately from the electricity itself, allowing buyers to claim the environmental benefits of renewable energy without directly purchasing it from the generator. RECs can also be used to comply with renewable portfolio standards (RPS), which are policies that require utilities or consumers to obtain a certain percentage of their electricity from renewable sources. RECs can create an additional revenue stream for renewable energy generators, as well as a flexible and cost-effective way for buyers to support green energy. However, RECs also have some limitations, such as the lack of transparency, verification, and standardization of the environmental attributes, and the potential for double counting or greenwashing.

3 Feed-in Tariffs (FITs)

A feed-in tariff (FIT) is a policy that guarantees a fixed price for electricity generated from renewable sources and fed into the grid. The FIT is usually higher than the market price, providing an incentive for renewable energy generators to invest and produce more electricity. The FIT is often funded by a surcharge on the electricity bills of all consumers, or by a subsidy from the government. FITs can stimulate the growth and diversification of the renewable energy sector, as well as reduce greenhouse gas emissions and fossil fuel dependence. However, FITs also have some drawbacks, such as the high cost for consumers or taxpayers, the distortion of the electricity market, and the risk of overcapacity or underinvestment.

4 Net Metering

Net metering is a policy that allows consumers who generate their own electricity from renewable sources to offset their electricity consumption and reduce their bills. Net metering works by measuring the difference between the electricity generated and consumed by the consumer over a billing period. If the consumer generates more electricity than they consume, they can either receive a credit for the excess electricity or sell it back to the grid at a predetermined rate. Net metering can encourage the adoption and integration of distributed renewable energy systems, such as rooftop solar panels or small wind turbines, as well as lower the energy costs and carbon footprint of consumers. However, net metering also has some challenges, such as the fairness of the compensation, the impact on the grid stability and reliability, and the allocation of the grid maintenance and operation costs.

5 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?