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Getting the Most “Bang for Your Buck”: 3 Considerations for Corporate Renewable PPA Contract Management

2021 marks a new era in the renewable energy industry. A number of utility-scale wind and solar projects will begin to come online, setting many corporate power purchase agreements (PPAs) into action. Simultaneously, the disruptive impacts of COVID-19, a new U.S. administration, and market volatility in regions like the Texas ERCOT market that will drive future legislation, continue to increase market complexity and bring new challenges—and opportunities—to corporates managing their renewable energy contracts.

Let’s take a closer look at the top three key considerations in the evolution of renewable energy management.

Author: Keith Frederick leads Schneider Electric’s Renewable Energy Performance Services (REPS). He has over seven years of experience analyzing energy markets and consulting with corporate buyers on renewable energy.

1. Integration of Renewables into Your Portfolio

The biggest opportunities—and the biggest risks—with renewable energy contracts are anchored in their scale, complexity, and overall dynamic nature. Integrating renewables into a broader energy portfolio means energy managers must take on a range of new responsibilities, including;

  • Collecting, checking, and understanding new types of invoices to ensure the company has been billed correctly under its renewable energy contract, in consideration of crucial elements such as settlement pricing point, strike price escalators, and emerging risk-mitigation mechanisms. Under some contracts, the slightest undetected error in an invoice could lead to the loss of tens or even hundreds of thousands of dollars. And, to an untrained eye, these errors can be difficult to catch.
  • Managing Energy Attribute Certificates (EACs) on a global scale. Many energy managers have likely relied on brokers, utilities, and suppliers to manage their previous unbundled and bundled EAC purchases—or perhaps they have never purchased EACs before. But now, they must take an active role in receiving, verifying, and ultimately retiring the EACs.
  • Managing new key contract terms, such as availability guarantee, force majeure, delay damages, and capacity shortfall. For PPAs specifically, these factors affect a range of outcomes and, ultimately, the final financial settlements of the contract. A slight discrepancy can translate to a significant difference in contract yield.

The performance of renewable energy contracts is dependent on both external factors and the details of the contract, so the aforementioned tasks have become even more complex.

Learn more about how Schneider Electric helped a client save $30,000 on a single invoice.

2. Portfolio Digitization

While some energy managers may still be relying on spreadsheets to capture and manage their data, the growing complexity of the energy market makes this increasingly more difficult. Data has become the currency of energy management and its accuracy and real-time availability is what enables organizations to obtain insights and make informed decisions about their energy and sustainability portfolios.

Collecting energy data and transforming it into a single-source digital footprint has become central to energy management. This empowers energy managers to visualize a company’s electricity footprint, including both renewable energy contracts and traditional power contracts. It also allows energy managers to easily track performance against organizational goals and targets.

Energy managers will realize efficiencies and maximize contract performance if they leverage a central, sophisticated platform and take action on digital portfolio insights.

Announcement: Schneider Electric announces multi-million dollar investment in AI and machine learning technology to drive next-generation digitally-enabled services.

3. Transparent Communication

Renewable energy contracts can have significant impact on an organization’s financial and operational performance over their multi-year duration. Regular communication to C-suite stakeholders is often required, including clear messaging around how the performance of these contracts may affect actual and forecasted results. This task can quickly become daunting, given the longer contract duration and volatile nature of wholesale electricity markets. 

An energy manager with traditional energy market experience may be less familiar with the effects of increased renewables penetration into the company portfolio, while an energy manager with deep renewables experience may struggle to form a holistic view as it relates to the company’s traditional energy supply. Analyzing, managing, and communicating contract performance transparently, across both traditional and renewable energy market dynamics, requires significant cross-dimensional expertise.

Renewable Energy Performance Services

As the renewable energy landscape evolves, it becomes more important to remain dynamic in how you view it.

Our enhanced Renewable Energy Performance Services (REPS) offering aims to help organizations accelerate the seamless integration of renewables, digitization, and transparent communication into contract performance management. Schneider Electric’s team of experts serve as a partner to help deliver maximized value throughout the lifetime of renewable energy contracts—especially in the face of ever increasingly complex market dynamics.

Contact our REPS team to explore how we can assist you in maximizing your renewable energy contract performance.