A PPA (Power Purchase Agreement) is a contract between a power producer and buyer. It outlines important conditions, such as how much power will be supplied, prices, and non-compliance penalties.
These contracts can be complex and lengthy documents, so you want to get them reviewed to ensure that they’re legally sound.
Read the rest of this article to understand PPA agreements and reviews and know when to hire a lawyer for assistance.
What are the Types of PPAs?
There are various types of PPAs to know about. Here’s a quick rundown of them.
Physical PPA
This agreement involves a power supplier agreeing to deliver a specific amount of electricity generated to the consumer who will purchase it at a specific price.
Virtual PPA
In this agreement, there is no physical electricity delivery. The consumer agrees to buy a certain amount of energy at a certain price, and then the electricity is sold into the grid. This agreement is typically seen when businesses want to meet their sustainability goals.
Block Delivery PPA
If a consumer requires electricity to be supplied at specific times instead of all the time, depending on their requirements, they will make use of this agreement.
On-Site and Off-Site PPAs
- On-site: the electricity is generated and used in the same location.
- Off-site: the electricity is generated in a separate location than where it’s used. This is more suitable for large-scale projects.
Portfolio PPA
This agreement enables a consumer to gain electricity from various providers instead of being limited to one.
What are Key Terms in a PPA?
A PPA usually contains some essential terms and information. These include the following:
- Contract Term. This specifies how long the contact lasts.
- Delivery. This can be physical or virtual.
- Pricing. The pricing structures need to be outlined, such as if it’s a fixed or index-based price.
- Energy. This explains the capacity and minimum output to be expected.
- Metering. This outlines how energy is measured and who will monitor the data.
- Risk allocation. Force majeure events and changes in the law can result in sudden costs, so this section outlines who is responsible for them.
- Default. The contract needs to explain what counts as a serious breach and how it will be handled.
- Termination. How parties can end the contract and any costs that are associated with termination.
What Should You Look for in a PPA Review?
When reviewing a PPA, you’ll want to carefully read the entire agreement and spot any red flags. Here are some things to look for:
- Check the price. Although the deal might be affordable, you should check that it doesn’t escalate unfairly. You might also be paying for volume you don’t need.
- Get details about force majeure. The contract shouldn’t force the buyer to take on risks that are unfair.
- Check construction terms. For new projects, you’ll want to check that you’re protected if there are delays and that all permits have already been secured before construction begins.
- Look at termination payments. These shouldn’t be so high that they put you at a financial loss if you want to end a contract that isn’t suitable for you.
- Consider dispute resolution. The contract needs to include clear dispute-resolution methods in the case of disagreements between parties.
- Confirm volume requirements. You should verify if the agreed supply meets what you need.
- Spot regulatory compliance. Check that all PPA terms are aligned with local and regional regulations.
- Check industry benchmarks. By comparing the terms and pricing of your PPA against industry benchmarks, you’ll see how efficient it is or isn’t.
- Think about curtailment rights. You want the PPA to state what happens if power production stops and who is responsible for the costs involved.
How Can a Lawyer Help You With a PPA Review?
It’s advisable to contact a lawyer if you need a PPA document reviewed because the terms can be quite complex with huge risks. Here is how they will help you.
- They will spot any hidden risk allocations that benefit the other party.
- They will question the terms, such as by asking what happens if construction is delayed or the supplier isn’t performing.
- They will check all termination clauses to ensure that you won’t have high fees to pay or other unfair consequences.
- They will eliminate vague language that can be misinterpreted, resulting in disagreements.
- They will use their legal expertise to ensure the contract is valid in the governing jurisdiction.
- They will check that the agreement is aligned with all financial requirements.
- They can negotiate the agreement on your behalf.
- They will confirm dispute resolution methods are fair to both parties, while representing you if the dispute goes to mediation, arbitration, or court.
Do you want to hire a lawyer for a PPA review?
You should contact a lawyer on ContractsCounsel, an online legal network that connects clients with experienced, skilled lawyers who have been vetted on the platform. They will be able to review your PPA to ensure a thorough analysis that minimizes your risks and is legally compliant.
To get a PPA review from a lawyer on ContractsCounsel, follow these steps:
- Post your project for free. Include some details about the project so that lawyers will know what’s required.
- Receive multiple bids from lawyers on the platform. They are interested in your project and ready to help you with a thorough review.
- Review the lawyers’ profiles. After receiving bids, you can select the best lawyer for your requirements by reviewing their credentials, years of experience, client ratings, and previous projects they’ve worked on.
- Select your preferred lawyer. Start working with them to get your PPA reviewed.
