Sleeved Power Purchase Agreements

Sleeved Power Purchase Agreements: What Are They and Why Do They Matter?

In the world of renewable energy, power purchase agreements (PPAs) have become a popular way for companies to procure clean electricity. These agreements allow businesses to purchase the output of a wind or solar project, typically at a fixed price over a long-term contract. However, in some cases, the location of the renewable project may not be ideal for the company`s energy needs.

Enter sleeved power purchase agreements. This type of PPA allows a company to purchase the output of a renewable project located in a different location than the company`s facility, while still receiving the physical power from their local utility. In other words, the company is „sleeving“ the power from the renewable project through the local grid.

Why would a company choose a sleeved PPA over a traditional PPA? One reason is that it allows the company to support a renewable project in a more desirable location, such as a region with more consistent wind or solar resources. Additionally, the company can gain access to renewable energy without having to physically connect to the project, which can be costly and time-consuming.

Another benefit of sleeved PPAs is that they can provide additional revenue streams for renewable energy developers. By selling their power to companies through sleeved PPAs, developers can access new markets and potentially secure better pricing than they would through traditional power markets.

However, sleeved PPAs can also come with some complexities. Companies must navigate the regulations and policies of both the local grid and the renewable project`s location, which can vary depending on the state or country. Additionally, ensuring the physical delivery of the power can require coordination with multiple parties, including the renewable project`s owner, the local utility, and potentially a third-party transmission provider.

Despite these challenges, sleeved PPAs are an increasingly popular option for companies looking to meet their sustainability goals. According to the Rocky Mountain Institute, sleeved PPAs were the fastest-growing segment of corporate renewable energy procurement in the United States in 2019.

In conclusion, sleeved power purchase agreements offer a unique solution for companies seeking to support renewable energy projects located elsewhere. While they may require additional coordination and navigation of complex regulations, the benefits of sleeved PPAs can include accessing new markets for renewable developers and supporting more renewable energy in the overall grid. As such, they are an important tool in the transition to a cleaner energy future.