A long-term power purchase agreement (PPA) with a creditworthy buyer is the cornerstone of project financing for a utility-scale solar photovoltaic (PV) facility. These are facilities that directly convert solar radiation into electricity. PV PPAs share several similarities with traditional, thermal PPAs, but some differences are key to negotiating them successfully and properly allocating risk. What follows is a brief look at PV PPA risk allocation and selected, material provisions of which lawyers should be aware that are unique to PV PPAs in comparison to thermal PPAs.
The PV PPA is a critical document. The seller will want the PV PPA to allocate development and operational risks to the buyer; the seller seeks long-term, predictable revenue to support the project financing and an acceptable return on investment. The buyer wants a long-term, stable source of energy and renewable energy credits (RECs) at a fixed price to satisfy load demand and renewable portfolio standard requirements.
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