Utility Week

UTILITY WEEK | OCTOBER 2021 | 21 Policy & Regulation Hidden charges in power purchase agreements (PPAs), such as data collection and data aggregation costs, are leaving some generators out of pocket, despite the promise of a higher purchase price. PPAs form an important part of the UK's energy mix. They support local communities through the supply of renewable energy, helping to take the pressure o• the grid and improving energy e• ciency within the region. They also provide businesses with an additional revenue source and a means to build upon their sustainability credentials. Di• erent suppliers will o• er their own terms and conditions for PPAs. However, there are a few core features that all good PPAs share. For example, they should accurately re€ ect the current market price, have clear payment terms, and be easily understood by both parties. There should also be a clear point of contact for any queries or issues. Embedded bene„ ts are also an important component, because these usually make up around 30 per cent of a total PPA rate. These are the added extras for exporting on to the grid, rather than importing. They are paid by the distribution network operator (DNO) to the supplier, who then passes this on to the exporter. Embedded bene„ ts can be „ xed or variable depending on the type of contract. The challenge for generators looking to enter a PPA is that there's a lot of choice when it comes to which supplier to partner with. While this gives generators a greater choice of potential contracts, not all suppliers charge in the same way. This can lead to generators being stung by hidden costs. One charge that generators need to watch out for is Data Collection and Data Aggregation (DCDA) costs. This lesser-known charge, which covers the cost of onsite data collection, is oŒ en not re€ ected in the initial price. Fees can be around £200 to £300 per annum, which can make a big di• erence. Good suppliers will include this cost upfront, but it's sensible to ask about this before signing a new contract. Otherwise, you run the risk of an unpleasant surprise down the"line. Generators should also be aware of DNO costs, which are charged for use of, and connection to, the distribution system. These tend to be standard across the board but it's worth looking out for these in the small print. The price for the electricity generated and being paid on time continue to be two of the most important considerations for generators looking to set up a PPA. But in the absence of full cost transparency, they run the risk of losing out in the longer term. Good suppliers will provide this information upfront rather than luring in prospective customers with high prices. But in all cases, it's advisable for generators to do their research into potential hidden costs and the level of customer service as these will ultimately result in the best deal. For further information, visit: https://energy.drax.com/ befuturepositive/ EXPERT VIEW VALPY FITZGERALD, DIRECTOR OF RENEWABLES AND SUSTAINABLE COMMODITIES More cost transparency needed for generators selling their energy through PPAs Power Purchase Agreements are contracts which allow people to sell their excess generated power to a licensed energy supplier. aim is to achieve net zero, which means 100 per cent reduction," he says. He says greater reductions should be sought through electri„ cation, energy e• - ciency or the use of green hydrogen wherever possible. As well as keeping emissions lower, Jo• e says minimising the use of blue hydrogen would also limit reliance on carbon capture and storage (which will be needed else- where) and on imports of natural gas. He says extensive use of blue hydrogen would be "pretty undesirable from a strategic perspective". "We do regard home heating as one of those areas where there are other solutions," he adds. "I've got a heat pump. It works very well. I think that can de„ nitely be a mass solution. "Can it work for every home? Maybe not. But I think we can get pretty close to the majority of homes having heat pumps, and some that might not have a full heat pump solution might have what we call a hybrid heat pump, which is a heat pump and a hydrogen kicking in and doing the last 20 per cent, particularly on cold days or when the wind's not blowing to power the heat pumps. "Heat pumps have to be the priority. They have to be the main way of decarbonising homes. And yes, at the margins there can be a role for hydrogen boilers, but they are not the main solution. Otherwise you just need way too much hydrogen." Jo• e says that for applications where electri„ cation is not feasible and supplies of green hydrogen are insu• cient to meet demand, a reduction in emissions of 75 or 85 per cent is better than nothing. "That's the point for us – that there is an opportunity to do something that gets rid of the unabated gas. It might not be 100 per cent emissions reduction but up to 85 per cent is signi„ cantly better than zero," he says. Jo• e says the CCC expects blue hydrogen production to peak in the late 2030s and then begin falling. "We think that if you've already built the blue hydrogen infrastruc- ture but it's utilisation is falling over time – it's fallen into a backup role as a supply of last resort – that's a useful role." However, he concludes: "At some point it stops being sensible to do any fossil fuels at all, even with CCS; you just switch to entirely clean solutions. We think that's unlikely by 2050, though not impossible." Tom Grimwood, energy editor Read this article in full at: https://utilityweek. co.uk/blue-hydrogen-should-become-supply- of-last-resort/

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