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Drive for ESG, higher carbon costs boost PPA sector

A flurry of power purchase agreements have been signed between big corporate names in Canada. They connect companies to renewable energy projects like Potentia's Wheatland Wind Project. (Courtesy Potentia Renewables Inc.)

After a series of blockbuster long-term clean energy deals, Canadian players in the power purchase agreement field say further growth is imminent, with corporate ESG policies and superior pricing driving demand.

A power purchase agreement (PPA) is a long-term contract between an energy buyer and a renewable energy project developer.

The buyer commits to a fixed price for energy to be produced by a renewable energy project that is yet to be built. In exchange, the buyer will receive renewable energy certificates to use toward environmental goals like greenhouse gas reduction.

Bullfrog advised Shopify on their PPA and signed its own PPA with Berkshire Hathaway Energy.

In April 2022, Toronto-based Bullfrog Power advised Shopify on its own PPA and signed a PPA with Berkshire Hathaway Energy for the 130 MW Rattlesnake Ridge wind power project near Medicine Hat, Alta.

More recently, Potentia Renewables Inc. and Greengate Power Corporation announced a 15-year PPA with Microsoft to acquire energy from the Paintearth Wind Project LP. It is expected to generate 543 GW-h of renewable energy per year.

“(There’s) been really a growing demand for power purchase agreements . . . There’s such demand for really good renewable solutions and addressing climate change quickly, and this is an excellent path for companies to embark on to meet their goals because there’s a tangible way for them to make a difference,” said Suha Jethalal, president of Bullfrog Power.

The Microsoft PPA project

With the Paintearth Wind Project LP, Potentia owns a 75 per cent interest while Greengate holds the remaining 25 per cent. The wind project in Alberta will start construction and operations next year, and will sell a major portion of the output to Microsoft.

It is expected to offset a half tonne of carbon dioxide per mW-h.

Potentia started as a rooftop solar company and eventually grew into a utilities-scale business. Its notable projects include a 200 MW wind facility named the Golden South Wind Energy in Saskatchewan. It also has operations in Alberta, Nova Scotia, Ontario, and U.S. states Minnesota and Montana.

What is driving PPA adoption

Jethalal named “ambitious” corporate ESG goals and carbon reduction targets as a leading cause for the rise in the popularity of PPAs.

There is also a financial advantage as buyers "can be certain about their energy costs for that certain amount of usage for the time to come."

While PPAs have faced criticism for promising energy from a potentially inconsistent source like solar or wind, Jethalal said the PPAs can contract a percentage of production, versus the absolute amount. Developers can also make up any shortfall in different ways, and sometimes there is more production than anticipated.

“So you’re taking on financial risk, but there’s potential gain in taking on that risk.”

Ben Greenhouse, vice president of growth at Potentia, said with increases in carbon prices and renewables pricing decreasing, the value proposition is there for renewables.

“It doesn’t have to be an environmental ethos, it doesn’t necessarily have to be driven by carbon. Wind power in particular is the cheapest form of power in most jurisdictions.”

How to boost PPA adoption

In a press release, Bullfrog Power claims PPAs have exploded in growth. It says only 44 MW was contracted through PPAs in Canada before 2019. Now, Bullfrog says organizations have contracted 1,262 MW of PPAs.

Jethalal said there has been a “really big surge in interest,” estimating a tripling of the number of companies interested in PPAs compared to three months ago.

To further unlock PPAs across Canada, Jethalal said Bullfrog is looking for policy changes on a provincial level. She said Alberta is ahead of the curve on PPAs due to its more liberal regulatory environment compared to other provinces. Alberta allows developers to contract directly with a buyer.

Greenhouse argued the provincial monopolies controlling power generation and distribution outside of Alberta have constrained PPAs. Alberta is the only place where multiple people can sell into the grid, he added.

To ease the market for PPAs, he suggested a policy called ‘sleeving.’ An intermediary utility company transfers the funds and power between a renewable energy project on behalf of the buyer. The utility company is responsible for directing energy from the renewable project and ‘sleeving’ it to the buyer.

Greenhouse said this does not require a change in the provincial regulatory monopoly, as it allows the monopoly to facilitate the transactions.

With the fall economic update from the federal government promoting billions in clean energy and climate tech through investment tax credits, Greenhouse is optimistic it will boost his company’s business.

“We’re very excited about the growth of demand in Canada. We’re not focused solely on Canada, but we think the market here is so robust that we still have spent a lot of our time developing in Canada.”



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