This post is one of a series of “practice tip” articles about renewable energy power purchase agreements.
There is a well-known Chinese proverb: “All problems derive from your big mouth.” These are words of wisdom for parties who are negotiating renewable energy PPAs.
In due diligence, we regularly come across on-site solar power purchase agreements (PPAs) that state that the seller is reserving all environmental attributes and selling only the project’s electricity to the buyer. This type of reservation is common in states like Maryland and Massachusetts, where environmental attributes may have a fairly high market value and may be monetized by the seller to make the project more marketable by effectively reducing the delivered price of electricity. However, despite this environmental attribute reservation, these PPAs too often go on to say, quite expressly, that the buyer has the right to announce that it is using “solar energy” or “renewable energy” produced by the project. This seemingly innocuous provision, intended to enable the buyer to brag about its renewable energy purchase, can create problems in PPAs where the seller also reserves environmental attributes.