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NONTRADITIONAL OFFTAKE STRATEGIES FOR RENEWABLE ENERGY: AVOIDING LANDMINES IN CONTRACT STRUCTURING AND FINANCING

July 16, 2019
USA (United States of America)
The steady increase in the demand for renewable energy requires alternatives to the traditional 20-year power purchase agreement (PPA) to meet delivery requirements. Nontraditional offtakes can meet these demands with shorter contract periods, risk shifting, and other items beneficial to the energy project company and the purchaser. Energy counsel must understand the nuances of these complex contract structures, the associated risks, and available financing approaches.An offtake agreement is an arrangement between the project company and the party buying the energy and related products that the project will produce and deliver over time. These arrangements traditionally have been through PPAs with terms ranging from 20 to 25 years. The risks associated with these long-term contracts have forced projects, utilities, and investors to consider other methods that will limit the risk and offer shorter terms while securing revenue. Available alternatives, such as corporate PPAs, energy hedge agreements, and proxy revenue swaps, must be considered.