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2021 Green Energy Audit Report
Power purchase agreements explained
If you follow green energy news – or Bullfrog’s newsletter – you’ve probably seen the term “power purchase agreement” come up. But what is a power purchase agreement, or PPA? Who can sign one, and how do they contribute to the renewable energy transition?
We’ll answer those questions here and show you why power purchase agreements are an important part of the sustainability toolbox.
What’s a power purchase agreement?
Simply put, a power purchase agreement is a long-term financial agreement between an energy buyer and an energy seller. The buyer guarantees the seller a fixed price for energy from a renewable project that hasn’t been built yet. This fixed price guarantee helps the energy seller secure financing for their new wind or solar project.
Power purchase agreements can be physical or virtual. With a physical PPA, the seller delivers electricity directly to the buyer. The buyer is usually an organization that uses a lot of electricity in one place, like a data centre.
A virtual PPA is a financial agreement, not a contract for physical power. In a VPPA, the buyer continues to purchase electricity from its utility as usual, and the developer sells its electricity to the grid at market price. If the market price is lower than the fixed PPA price, the buyer pays the difference to the seller. If the market price is higher than the fixed price, the buyer makes a profit. In both cases, the buyer receives renewable energy certificates (RECs) to lower its carbon footprint.
Virtual power purchase agreements are ideal for organizations with widespread operations, like banks. VPPAs are also a great option for organizations in regulated markets that want to take advantage of renewable development opportunities in Alberta’s deregulated market.
Why sign a power purchase agreement?
Power purchase agreements come with environmental, financial, and brand benefits. On the sustainability front, PPAs are a reliable way for organizations to meet their green energy commitments and help bring new renewable sources online.
On the financial side, PPAs are often more affordable than other ways of procuring renewable energy. Power purchase agreements involve some financial risk, but the right mitigation strategy can protect your organization from market volatility and provide insulation against rising energy costs.
Signing a power purchase agreement can also position your brand as a sustainability leader. Because these agreements lead to the construction of a specific wind or solar facility, they provide tangible proof of your company’s sustainability progress and great storytelling opportunities.
How do power purchase agreements contribute to sustainability?
PPAs prove that consumer demand for renewable energy exists, which helps developers finance and build more renewable facilities. These agreements allow companies to contribute directly to the green energy transition.
Power purchase agreements are already driving significant renewable growth, and they’re gaining popularity exponentially. According to Business Renewables Centre-Canada, 2019 saw Canadian organizations contract for 246 MW of renewables, more than five times the contracted capacity from all previous years put together.
Demand quintupled again in just two years. In 2021 alone, Canadian organizations contracted 1,262 MW of wind and solar deals. For context, Alberta’s largest natural gas-fueled power plant, the Shepard Energy Centre, has a capacity of 800 MW.
"PPAs are an important tool in the climate action toolbox," says Nagwan Al-Guneid, Director of Business Renewables Centre-Canada. "They help bring more renewables online and have contributed to reducing emissions from Canada's grid much faster than could otherwise have been accomplished. Not only that, but they are an economic win too: private renewables investment will support $3.75 billion in construction by 2023 and nearly 4,500 jobs that come with it."
How do power purchase agreements compare to green electricity?
The end result of a PPA and Bullfrog Power’s green electricity product is the same: the buyer receives high-quality renewable energy certificates and can proudly say that they’re purchasing green energy.
PPAs are complex, long-term deals that are best suited for large power users with some energy expertise. In return for the upfront effort of signing a PPA, these agreements offer insulation against rising energy costs, as well as potential cost savings. Our green electricity, on the other hand, is a turnkey solution for businesses of all sizes and experience levels.
Do you think a power purchase agreement is right for your organization? Learn what you need to know before signing one or explore our power purchase agreement solutions below.
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Shopify
Bullfrog Power provided excellent support to Shopify as we identified and selected a high impact renewable energy project for our first PPA. Bullfrog Power’s subject-matter expertise and offerings continue to enable Shopify to meet our renewable energy commitments, and support our broader mission of reversing climate change.
How a Hamilton youth is clearing the way for his community’s most vulnerable residents
Whether they’re marching in global protests or fighting invasive species in their own backyard, young people are finding ways to fight climate change and improve their communities. Bullfrog Power partnered with Youth Challenge International (YCI) to help fund youth-led sustainability projects like advocacy groups and circular economy initiatives.
YCI’s Youth Climate Leadership Program is helping young people from the Greater Toronto and Hamilton Area design and grow a sustainable project, mobilize other youth, and encourage community development. The Program also helps youth deepen their understanding of climate science and traditional ecological knowledge.
After completing the Program, participants pitch their climate solution for the chance to win one of four cash prizes from the bullfrogpowered community. This round, Yuxiang Guan took home a $500 prize for his project, The Robot.
Help starts at home
Yuxiang, a 20-year-old engineering student from Hamilton, believes that the best way to address a problem is to start by helping those around you. When he saw a senior woman struggling to plow snow in his neighbourhood, he offered to do the job for her.
After chatting with his neighbour, Yuxiang learned that she had been diagnosed with Parkinson’s disease and didn’t have any family to help out with household chores like plowing snow. Yuxiang decided to design something that could help her and any other community members who have difficulty clearing snow from their driveways.
Yuxiang and his team are now building a robot that could plough snow autonomously. Their goal is to reduce the need for ice-melting salts and to help vulnerable residents like seniors and people with disabilities plow their sidewalks for free.
Don’t be salty
Road salt is a cheap and effective way to melt ice and keep roads and sidewalks safe. But once it does its job, it doesn’t just disappear. The salt washes into surrounding soil and waterways, sometimes contaminating drinking water and damaging freshwater ecosystems.
Canada uses about five million tonnes of road salts each year, most of which will eventually end up in our waterways. With his snow-plowing robot, Yuxiang hopes to reduce salt usage in his neighbourhood and show other communities that there are eco-friendly alternatives.
Learning to lead
Yuxiang gained a lot from the Youth Climate Leadership Program’s supportive atmosphere. “The program has taught my team and I a lot when it comes to presentation skills, pitching, teamwork, and leadership,” he said.
For a time, Yuxiang was having doubts about presenting at the Program’s final pitch night because his robot wasn’t finalized. His mentor noted that you don’t need a fully functional project to pitch – progress and planning are also important.
That encouragement paid off, and Yuxiang walked away from the pitch night with a $500 prize from Bullfrog Power. His team plans to use the funds to purchase and mount new electric motors on the robot.
More on Bullfrog's community projects:
Solv4x: preparing for the electric future
Solv4x is helping electric vehicle fleets charge without overburdening our energy systems – which is good for the planet and the bottom line.
Read More
Sunset Renewables: creating a circular economy for solar panels
Renewable technologies like solar panels, wind turbines, and battery storage are essential to addressing the climate crisis. But like every product, they’ll produce waste at the end of their life…
Read More
Net zero explained
By Stephan Wehr, Vice President of Technical Services, and Matt Beck, Senior Director Carbon Management and Sustainability at The Delphi Group
By the end of 2021, countries responsible for nearly 80% of global GDP will have pledged net-zero emissions by 2050 — or, in the case of China and Brazil, 2060. One-fifth of the world’s largest corporations have set net-zero targets, and that figure is expected to grow exponentially. Many leading companies and organizations here in Canada have made similar pledges, which can be found on Canada’s Net-zero Leaderboard.
Want to know more about all things net zero? Look no further.
What is the difference between a carbon-neutral and a net-zero target?
In a word, none.
Until recently, carbon neutral was the term we used to refer to a goal that balanced (1) the carbon emissions an organization produces with (2) activities that reduce or offset its emissions, so the net result is zero. Net zero is an equivalent term that has gained popularity in recent years, in part because it is used in the Paris Agreement, an international treaty on climate change that was adopted in 2015.
Are all net-zero or carbon-neutral targets created equally?
No. Currently, these targets can be based on different timelines and include different types of emissions – for instance, many companies do not yet include scope 3 (value chain) emissions, which are associated with supply chains and how products and services are distributed and used.
There’s some good news, though: the Science Based Target Initiative (SBTi ), which is a partnership between CDP, the United Nations Global Compact, World Resources Institute (WRI) and the World Wildlife Fund (WWF), is working on a science-based standard for net-zero target setting. Having a global standard will make it easier for investors, customers, and other stakeholders to compare and differentiate between companies.
How do I know if a net-zero target is robust?
Once again, the SBTi comes to the rescue by proposing the following criteria for robust targets:
- In line with what climate science deems necessary to meet the Paris Agreement’s goals and limit warming to 1.5°C
- Always includes value chain emissions, unless there are none
- Prioritizes reducing emissions related to business activities and value chains over offsetting them
- Includes near-term goals with clear action plans on how to achieve them
- Transparent
- Independently assessed
Are there other types of carbon goals out there?
There sure are: some companies are going beyond net zero by committing to remove more carbon from the atmosphere than they release. These commitments have been referred to as ‘carbon negative’ and ‘carbon positive,’ but we like to think of them as restorative goals. For example:
- Interface launched its first carbon-negative carpet tiles.
- Microsoft has also recently set a carbon-negative target.
- IKEA has pledged to become carbon positive by 2030.
- Patagonia also has a carbon positive goal.
Is my organization ready to set a net-zero target?
We put together a quiz to help you determine where your company is on its sustainability journey and what your next steps should be.