The energy market is facing new changes: producers and large consumers are currently preparing for financing for the first wind farms to expire at the end of 2020 and price controls to be completed. However, since even without government assistance, producers need revenue security to make the necessary investments in wind farms, other mechanisms will be needed in the future to allow energy sources to bring wind to market. Power purchase contracts (AAEs) – long-term direct purchase contracts with large customers – are a possible solution. Such agreements are currently considerably popular, although there are legal and accounting challenges with regard to their design, including for green electricity customers. A corporate AAE, sometimes called a virtual power purchase contract, is a hybrid contract that includes a difference contract and an agreement to provide the project`s renewable energy credits. As part of a business AAE, there is no physical supply of electricity. On the contrary, the agreement provides for a regular payment based on the difference between an agreed fixed price and a variable market price, usually in a market or project node. First, the AAE must be reviewed to determine whether or not it meets all the characteristics of an embedded derivative. A controversial point in this context could be considered a criterion for contract performance on the basis of a “subliminal” value, since the final purchase volume is often only fully measured after actual production. Of course, it is not possible to accurately predict this volume for a wind farm, so an appropriate determination of the volume of the contract in the past has generally been considered unmet. However, IFRS 9 contains implementation guidelines (IFRS 9.IG.
B.8), which now contain an example in which the amount of a derivative is not determined from the outset. In the case of an AAE, it is therefore possible to use the expected values, which are generally available for wind performance. In the absence of significant acquisition payments, an AEA should be able to meet all the criteria for an IFRS 9 derivative. Derivative valuation considerations should be taken into account in the accounting of corporate data purchase contracts (“CORPORATE PPAs”) in both U.S. GAAP and IFRS. Volume risks are also obstacles that need to be circumvented with a precise contractual structure. Exogenous factors can affect delivery (for example. B the failure of a transmission system). In general, shortages are filled by deliveries purchased on the wholesale market.
Contracts should therefore clearly define who is responsible for the increased costs. Businesses around the world are assessing their impact on the environment. As part of their sustainable development strategies, they are working to reduce their greenhouse gas emissions. As technology evolves and renewable energy becomes more competitive, decarbonizing electricity is an achievable goal. One way to buy renewable energy is to enter into power purchase contracts (PPPs) directly with renewable energy producers. The company`s renewable PPPs are contracts that include the terms and conditions for purchasing renewable energy, such as the duration of the contract, the date of delivery, the date/date of delivery, the volume, price and product.