Municipally owned electric utilities (munis) and electric cooperatives (co-ops) are always searching for ways to keep providing low-cost, reliable energy to their members. Renewable energy can offer great solutions for munis and co-ops by offering fixed pricing for 20 to 25 years.
How Does It Work?
There are several ways munis and co-ops can take advantage of renewable energy products with long-term, fixed pricing.
Traditional Power Purchase Agreement (PPA)
In a traditional power purchase agreement, a customer signs a contract to purchase a specified amount of energy from a renewable energy project for a specified length of time at a specified price. PPAs are generally most attractive to utilities, municipalities, and electric cooperatives, because they remove fuel uncertainty while addressing potential EPA regulations and water scarcity issues.
Co-ops and munis with excellent credit ratings are often interested in a pre-paid PPA option whereby they pay a larger amount up front in exchange for a discount on the PPA price. Similar to a down payment on a house, this allows munis and co-ops to help with some of the up-front capital costs of constructing a project in exchange for a cheaper price per MWh for the decades the project is in operation.