Multi-buyer Power Purchase Agreements

With the world of renewable energy continuing to evolve at speed, multi-buyer power purchase agreements (PPA) are emerging as a vital tool in many companies’ renewable energy ambitions. In fact, interest in these agreements has grown rapidly: they now comprise about 15% of corporate renewable energy procurement, up from less than 5% in 2017. In this article, Senior Originator Jeremiah Tops, explains what multi-buyer PPAs are, their benefits as well as challenges in implementation.

Multi-buyer PPAs can help make cost-effective renewable energy accessible to a wider range of businesses via the corporate PPA market and speed up adoption, thereby supporting organisations as they work towards their net zero targets. By pooling demand and mitigating risks, multi-buyer PPAs support innovation and more secure renewables projects. While not without their challenges, particularly in terms of contract negotiations and a complex regulatory environment, multi-buyer PPAs offer a promising option for future clean energy provision.

Multi-buyer PPAs in brief

Multi-buyer PPAs allow several buyers to come together and collectively purchase the power generated by a renewable energy project. This is done through either a single agreement shared by all parties, or through multiple separate agreements between each buyer and the project developer or generator, specifying their share of the electricity output.

Virtual multi-buyer PPAs involve an agreement to purchase the financial equivalent of renewable energy from a specific project – thereby supporting the generation of renewable energy without directly receiving or consuming the electricity generated.

Multi-buyer PPAs: the benefits

Businesses transitioning to renewable energy face significant financial, capability, regulatory and policy challenges on their journey to net zero. The collaborative nature of multi-buyer PPAs can help mitigate some of these challenges. By pooling resources and aggregating demand, buyers of these agreements benefit from lower procurement and financing costs, reduced individual risk exposure, and longer-term price stability.

Multi-buyer PPAs can help to:

• increase smaller buyers’ access to large scale renewable energy projects, making it easier for them to work toward their sustainability goals
• act as a catalyst for innovation, development and diversification across projects, geographies, and different renewable technologies
• encourage decarbonisation across supply chains 
• allow developers to achieve economies of scale and attract financing.

Overcoming multi-buyer contractual complexities  

Having several parties involved in each agreement comes with its own set of challenges that need to be carefully managed from the outset.

For instance, robust communication and coordination are needed throughout the complex negotiation process to best manage the individual parties’ unique requirements, objectives, risk tolerances and timelines – there is no ‘one-size fits all’. For example, each company is likely to determine its own hedging strategy to deal with significant fluctuations in energy prices, and these will all need to be accommodated within the contract.

In addition, some companies, particularly smaller ones, may struggle to commit to longer-term contracts – so clear exit and transfer clauses are key. Changes in volume requirements or production must also be accounted for as these could significantly affect the project at a later stage, and the number of parties involved can also increase the likelihood of credit risk and potential difficulties regarding financing.

Finally, negotiating policies, compliance with regulatory and legal frameworks across jurisdictions adds another layer of complexity – for example, getting Guarantees of Origin recognised in multiple regions.

Pioneering multi-buyer PPA projects 

In May 2024 Axpo signed a five-year PPA deal to supply 30 GWh per year of wind-generated power to the INEOS Oxide manufacturing site in Antwerp. This cluster site, hosted by INEOS, is also home to nine third party chemical companies, and INEOS is also supporting the sustainability objectives of these companies.

Moreover, at the end of 2022, Axpo Italia signed a five-year corporate PPA with Confindustria Alto Adriatico, part of Confindustria national association. Under the deal, currently renewed until 2036, Axpo is supplying another 30 GWh of green energy at a fixed price to nearly 50% of the more than 450 Confindustria Alto Adriatico member companies.

How Axpo can help

Comprehensive contractual agreements and risk management strategies play a crucial role in managing the challenges and risks associated with multi-buyer PPAs. As one of the leading marketers of renewable energy in Europe, Axpo manages and markets a portfolio of 93 TWh from wind energy, photovoltaics, biomass and hydropower on behalf of its customers. Axpo is well positioned to help organisations navigate the intricacies of multi-buyer agreements and can facilitate, coordinate, and provide energy trading services for relevant projects. This includes carrying out thorough risk analysis and implementing risk mitigation mechanisms to ensure successful outcomes.