Origins of a PPA. A PPA is the foundational document for most power projects and the fundamental instrument to facilitate the sale and purchase of electrical power. As such, it only comes into being once the offtaker has established certain facts and made a series of important decisions. These may include determining the power demand, the available sources of power to meet that demand, the offtaker's economic ability to purchase additional power, the power-generating technology desired, and the location of the power plants relative to existing power market infrastructure and demand centres. Power Demand Prior to approaching the market for new generation, the offtaker has to assure itself of the power demand. The offtaker or systems operator would ideally have its short-, medium- and long-term demand forecasts at hand. Demand estimation may occur as part of a larger power market study, sometimes termed an integrated resource plan, that is led by the offtaker and/or the regulator. Demand and load forecasts are highly correlated to economic growth. Unmet power demand has restricted economic growth in many emerging economies. A broader economic analysis involving non- power sector stakeholders such as the ministry of finance may, therefore, be required. Transmission Infrastructure The ability to evacuate power from a power plant is critical to its success. Insufficient transmission capacity can lead to severe delays in reaching commercial operation. The offtaker should take primary responsibility for the planning and availability of transmission infrastructure to ensure that the country benefits from the new power generation source as soon as possible.
Origins of a PPA. Overview of PPA Obligations The main obligation of the offtaker under the PPA is to pay the agreed tariff when due. The project company's primary responsibilities are to develop, finance, design, build, operate and maintain the power plant in accordance with the requirements of the PPA and applicable law, and deliver the agreed amount of power in accordance with the PPA. However, the parties’ obligations do not stop there. Additional obligations relate primarily to the need for: (a) payment and performance security; (b) transmission of power and interconnection to the grid; (c) arrangements with lenders; (d) consents, permits, approvals and licenses; (e) rights to the land on which the power plant and/or transmission lines will be located; and (f) insurance. For the most part, these obligations do not fall solely on one party alone, but are often shared by parties or will shift from one party to another based on the circumstances surrounding the power plant and where it is located.
