The last few years have been both exciting and challenging for the power purchase agreement (PPA) market. A massive increase in corporate PPA appetite is excellent news for our fight against climate change — yet this growth in demand has occurred right as the renewable industry has encountered a wide array of powerful development headwinds.
Supply chain disruptions, regulatory uncertainty, labor shortages, historic inflation, and many other obstacles have collectively created a challenging development journey for clean energy facilities. To bring projects to operation, developers must employ extensive expertise across several phases of development and persevere through lengthy interconnection queues, a complex permitting landscape, and a strained supply chain environment.
Developers of coveted, advanced-stage projects — which offer buyers much-needed delivery certainty to meet sustainability commitments — are seeking creative new approaches to securing the optimal PPA buyer as efficiently as possible. Needless to say, mature projects are in high demand, and competition for PPAs with near-operational facilities is strong. In this environment of immense opportunity for renewable energy presented by the Inflation Reduction Act, developers require next-generation tools that enable them to scale efficiently and stay ahead of the market. At the same time, there is a burgeoning need for new, faster routes to offtake that remove excessive contracting back-and-forth given the outsized value mature projects provide.
Buyers’ needs, too, are evolving. The traditional RFP approach is a tried-and-true method for soliciting the market, but it is also undoubtedly a time- and resource-intensive endeavor that often takes more than a year to complete. And while price is always a key consideration in PPA negotiations, contracting with advanced projects that have a high likelihood of reaching operation is also of paramount importance for buyers with fast-approaching sustainability targets. For organizations at certain stages of their sustainability journey, RFP-based procurement timelines are simply inadequate. These buyers need ways to transact faster, and with projects they feel confident will be operational by their organization’s target sustainability dates.
With mature projects’ strong value and these evolving market dynamics in mind, LevelTen has developed a new way to facilitate high quality PPAs far more rapidly than through traditional means. The result? PPA Auctions: a streamlined, simplified, and transparent approach that allows buyers and developers to connect and contract rapidly.
PPA Auctions In Action
How do PPA Auctions work?
- Developers initiate a PPA Auction by engaging LevelTen to review their project and jointly outlining desired PPA terms that accurately reflect current market conditions, including volume and contract structure.
- LevelTen markets the PPA to its extensive buyer network, which includes the largest corporations, more than 45 energy advisors representing hundreds of buyers, and energy resellers. Developers can also invite their network of buyers to participate. Gathering experienced and motivated buyers around a high-quality project creates the ideal conditions for developers to receive competitive bids.
- Buyers participate by submitting a notice of interest, reviewing the PPA terms, and submitting a bid along with critical details, including their credit rating and PPA experience. Once a bid is selected, both parties can confidently move forward to finalize the deal.
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Reduced Timelines, Expanded Benefits
For developers, PPA Auctions bring forward ideal, more experienced buyers who are ready to transact quickly to hit their goals. What’s more, they provide PPA terms that reflect market conditions and provide fair value for developers’ most mature projects. PPA Auctions are a scalable solution to maximize expanding market opportunities.
For buyers, PPA Auctions provide a procurement fast lane that brings them to their decarbonization milestones faster than traditional methods of soliciting the market. This simplified and accelerated process reduces the risks associated with prolonged negotiations, providing the certainty companies need to satisfy their pressing decarbonization pledges. With 2025 target dates approaching quickly, PPA Auctions are already proving invaluable to committed offtakers looking to ensure they make good on their commitments to a sustainable future.
As the PPA market continues to expand and evolve, PPA counterparties will require new routes to market that accommodate their varied organizational needs. LevelTen and our robust developer, buyer, and advisory networks are committed to continuing to develop innovative ways for more clean energy deals to get done, faster.
To learn more about how PPA Auctions can help your organization achieve its business goals, contact info@leveltenenergy.com.
