A Power Purchase Agreement, otherwise known as a PPA, is a type of arrangement in which a developer will install, own, and operate an energy system on a property that belongs to a customer. The customer agrees to purchase the electricity that the system generates at a fixed rate for a predetermined period.
Many agree that the PPA market in Switzerland is still in its early stages, unlike other European countries. PPAs are gaining popularity among customers, but not many organizations have fully embraced the idea quite yet.
Axpo, on the other hand, is doing precisely that. As the largest energy company in Switzerland, Axpo has already seen the full potential of PPAs and long-term contracts and uses them whenever possible. The company sees them as particularly beneficial for advancing the energy transition for several critical reasons.
Investments Today Pay Dividends Tomorrow
One example of a PPA’s power in action is a recent agreement between Axpo and Swiss discounter Denner, the Alpine Solar project.
Under the long-term contract, Denner has agreed to purchase solar power generated by AlpinSolar at a fixed price for 20 years. From their perspective, this is great—regardless of what happens in the world, they know they have a certain amount of power available at a fixed price. This makes serving their customers far more predictable from a financial sense, which helps with everything from budgeting to forecasting for years to come.
From Axpo’s point of view, not only do they have a guaranteed partner for two decades with the AlpinSolar project, but they also know that a certain amount of energy will come from a sustainable source during that time. Naturally, they will continue to build from that moving forward to further the dramatic expansion of solar and wind energy in Switzerland.
The Path to a Brighter Future Begins Now
Overall, long-term contracts and PPAs are just examples of how organizations like Axpo are committed to the smoothest, most efficient energy transition possible. Axpo, in particular, has expanded its origination business to include many specialized services and products.
Every year, the company oversees renewable energy plants across Europe, Asia, and the United States that offer a combined capacity of approximately 16 TWh. This helps secure electricity reserves (or gas prices) for businesses worldwide. It also makes it easier to balance energy in wind farm investments.
Ultimately, all this action is taken in service of a simple idea: growth. The energy transition, by design, is supposed to help Switzerland and other countries around the world hit their renewable energy targets by as soon as 2030. But what happens when that day finally comes?
For the sake of argument, say everyone succeeds in creating a more sustainable energy sector by then. It doesn’t mean all activities empowering continuous improvement should suddenly cease—quite the opposite. New targets should be set that may seem aggressive at the moment but can be accomplished as a collective. Everyone should capitalize on opportunities to work more efficiently, eliminate waste, and create a more sustainable environment.
This will require an enormous investment over time, and for that to happen, entering the sector will need to be as attractive as possible for as long as possible. Power Purchase Agreements and other long-term contracts are examples of how to do that, and they will only continue to grow more vital in the coming years.