What are the options for delivering a CPPA?
Well, it’s decided: you’re going to sign a CPPA. Everything is ready—you have a producer willing to sell you electricity from one of their renewable capacities, you’ve negotiated a price, duration, etc. The last question to settle: delivery.
If you already find it difficult to choose between home delivery and pick-up points when shopping online, the delivery terms for a CPPA might confuse you, especially since producers tend to shift this responsibility onto the consumer.
This article will explore the different delivery methods, along with their respective advantages and disadvantages.
Physical Delivery
This is certainly the most intuitive delivery method. The electricity produced is physically delivered within your supplier’s balancing perimeter, and the volumes you buy from the producer through the CPPA are "netted" from your electricity bill. While it seems simple, in practice, it’s not quite so straightforward.
To subtract the CPPA volumes from an invoice, the supplier must first receive the electricity and then account for the volumes received in its billing. One common way to achieve this is to attach the production site linked to the CPPA to the supplier’s balancing perimeter. The electricity produced is then directly integrated into the supplier’s perimeter. If the consumer changes suppliers, they must remember to change the attachment agreement for the production site to the new supplier.
However, this solution has a drawback: the supplier must "balance" the production site. Renewable production volumes are variable, must be forecasted, and incur imbalance costs due to forecast errors. Not all suppliers are capable of balancing a renewable portfolio, which limits your choice of supplier.
Another option is to involve a third party—specifically, an aggregator—to handle the balancing. The aggregator is linked to its own perimeter and delivers a predetermined volume of electricity to the consumer’s supplier, often in the form of a "block" via the submission of PEBs (Electricity Exchange Notifications between two balancing perimeters). In this case, the supplier’s task is simplified, as they no longer manage the balancing.
In both cases, the CPPA must be explicitly provided for in the supply contract and will incur balancing fees for the consumer. Even in the second option, finding a supplier willing to integrate a CPPA into their contract and billing isn’t easy for a small or medium-sized enterprise (SME). Supply contracts for mid-sized consumers are often highly standardized, and a CPPA adds complexity, especially when it’s not easy to find a supplier in the first place.
Financial Delivery
Financial CPPAs, also sometimes called virtual CPPAs (though the term "financial" is more accurate, so we’ll use that here), are a bit less intuitive than physical CPPAs. As their name suggests, they only involve a financial settlement and are independent of the physical supply handled by the consumer’s supplier.
In a financial CPPA, the producer sells their production at the spot price, typically via an aggregator, and the consumer buys at least the part of their consumption corresponding to the CPPA’s forecasted production at the spot price.
If the CPPA price is lower than the spot price during a given month, the consumer pays the producer the difference between the spot price and the CPPA price. Conversely, if the CPPA price is higher than the spot price during a given month, the producer pays the consumer the difference between the spot price and the CPPA price.
In terms of price security, the financial CPPA behaves exactly like a physical CPPA. Its main advantage is that it is entirely independent of the electricity supplier, simplifying the conclusion of the supply contract. However, three points should be noted:
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The accounting treatment of financial CPPAs is different from that of physical CPPAs; they are considered derivative financial contracts (marked-to-market accounting).
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The consumer needs to have a contract that allows for spot price exposure (e.g., a block+spot contract) and to size this exposure correctly in relation to the CPPA’s production. Otherwise, they may find themselves under- or over-covered during certain periods.
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Lastly, in the case of financial delivery, guarantees are not "netted." If your supplier requires guarantees or prepayments for your electricity supply, they will not deduct the CPPA volumes from your total consumption, and you will likely need to provide guarantees for the CPPA payment.
It’s worth noting that the choice between physical and financial CPPA delivery strongly depends on several parameters specific to the CPPA counterparties (size, market expertise, etc.). It is also important to carefully draft the CPPA’s delivery clause to avoid unpleasant surprises. Indeed, a physical CPPA that cannot be delivered can pose a significant risk to the contract. CPPAs that provide some flexibility around delivery methods—such as allowing a switch from physical to financial delivery—tend to be more robust.
Augmented Energy peut agir en tant qu’agrégateur afin de faciliter la livraison de vos CPPAs. Intéressé par en savoir plus : sales@augmented.energy