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Volume X, Number 194

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Six Takeaways: Shifting Market Dynamics in Corporate PPAs

On Thursday, May 7, McDermott Partners Ed Zaelke and Carl Fleming were joined by Christen Blum, head of the Renewable & Analytics Advisory practices at Edison Energy, to hear her thoughts on the current effects of COVID-19 on the corporate power purchase agreement (PPA) market.

Below are six takeaways from this week’s webinar:

  1. Despite COVID-19, there is still a strong appetite for corporate renewable procurement: market leaders (such as tech, pharma, and food and beverage companies) have been less impacted by COVID-19 and remain interested in renewable procurement. On the other hand, companies that have been hit the hardest by COVID-19 (such as services and hospitality businesses) have traditionally demonstrated limited interest in renewables; but industrial companies have seen the largest effect of COVID-19—they remain interested in renewables, but are delaying their procurement as they focus on their core business.

  2. Although the trend for buyer-friendly PPA terms remains strong, the market has seen a recent uptick in prices over 2019 such that they no longer remain as buyer-friendly as they have been in the recent past, but the impact of COVID-19 on these prices remains to be seen.

  3. In order to maintain more competitive PPA prices, developers are employing a number of price mitigation strategies, including price collars, upside sharing and developers bearing more merchant risk.

  4. Most corporate buyers are less time-sensitive than more traditional buyers; as such near-term wind projects are often losing out on opportunities to cheaper solar projects which are coming online later.

  5. Force majeure terms have become a major emphasis in PPA negotiations now.

  6. The best advice for developers is to treat their relationships with corporate partners as a long-term partnership and to act accordingly in negotiations.

Listen to the full webinar here.

© 2020 McDermott Will & EmeryNational Law Review, Volume X, Number 129

TRENDING LEGAL ANALYSIS


About this Author

Edward Ed Zaelke Energy Lawyer McDermott Will
Partner

Edward (Ed) Zaelke is the head of the Firm’s Global Energy Project Finance group. He focuses his practice on project finance and private equity in renewable energy transactional matters. With more than 30 years of experience, he advises clients on all elements of alternative energy development and finance, including equity and debt financing, merger and acquisition transactions, equipment purchase and sale agreements, power purchase agreements, siting and other real property issues, governmental approvals, and engineering, procurement and construction (EPC) contracts....

310 788 4147
Partner

Carl J. Fleming focuses his practice on mergers and acquisitions, project development and project finance, predominately in the renewable energy industry. He leads energy, infrastructure and PPP transactions throughout the US and in more than 40 countries worldwide. Carl represents private equity investors, Fortune 500 companies, foreign governments, and a broad range of leading renewable energy developers and sponsors.

Carl provides legal and commercial advice for the development, construction, operation, purchase and sale, and financing of projects and infrastructure, including wind power, solar power and other alternative energy projects. He counsels clients in all aspects of equity purchases and sales, debt and equity financings, power purchase agreements, concession agreements, and project development, including construction contracts for solar and wind farms, equipment supply contracts for solar panels and wind turbines, equipment services and warranty agreements, operations and maintenance agreements, asset management agreements and construction management agreements. His work has been featured in The Wall Street JournalWashington Lawyer and Africa Insider. Carl is recognized as a “Rising Star” and one of the “Top Rated Energy & Natural Resources Attorneys in Washington, DC”.

202 756 8917
Seth B. Doughty Associate Los Angeles Corporate & Transactional  Energy  Renewable Energy
Associate

Seth Doughty focuses his practice on transactional matters in the energy industry. He has in-house experience at one of the largest Southern California utility companies. There, he gained experience drafting and negotiating a large variety of contracts, amendments and consents for supply and power procurement agreements.

In the power procurement area, Seth has drafted and negotiated a wide variety of power purchase agreements and other purchase and sale agreements, including for energy, capacity, energy efficiency and distribution deferral products. He is also experienced in...

310-788-6001