Published: Mon, Jun 18, 2018
Type: Publication

Purchasing renewable electricity is becoming more attractive for companies across the world. In India, increasing grid power tariffs for commercial and industrial consumers, falling prices for renewable projects and renewable energy’s contributions to sustainability commitments have led to companies actively procuring renewable power for their operations.

One option for companies to buy renewable power is to use corporate renewable Power Purchase Agreements (PPAs). A PPA is a contract between a power buyer and a power producer to purchase electricity at a pre-agreed price for a pre-agreed period of time.

Corporate renewable PPAs help companies reduce current electricity costs, increase visibility over future electricity costs, while supporting a company’s CO2
or renewable targets. Power producers use them to diversify investments in renewable projects, enhance bankability and reach new customers.

On a stand-alone basis, renewable power is now economically viable in most parts of India. However, renewable projects require access to the grid, which is regulated and can have charges associated with it. Power sector regulations in India were originally designed with utility scale thermal power plants in mind, but there have been changes in recent years to accommodate an increasing share of renewable power.

These changes are still in progress. As a result, some Indian states are further ahead in support and integration of renewables than others. State level support - or lack thereof - impacts the ease of adoption and viability of projects built for commercial and industrial consumers.

Corporate renewable PPAs in India have developed significantly over the past year and corporate buyers and power producers as well as intermediaries are working to standardize contracts. Commonly used terms will enable counterparties to faster agree on the commercial, legal and operational aspects of the project.

Supply-demand dynamics make corporate renewable PPAs a buyer’s market. To ensure reliability and availability of power as per contracted terms, companies should carefully choose the developer of their corporate renewable PPA considering their experience in executing quality projects, assessing their long-term interest
in operating power plants and judging their financial strength to build and operate these plants.

This report discusses options for renewable power procurement in India and examines key terms of PPAs, regulatory landscape and market barriers. It also delves into financing options and concludes with recommendations for corporate buyers.

This report is meant to be an important resource for companies considering corporate renewable PPAs in India.

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