Inside the Deals That Decide Power Prices - Renewable Exchange

**Ed Porter** (0:00)
I'm your host, Ed Porter. Welcome back to Transmission.
If your energy tariff says it's 100% green, here's an uncomfortable truth. Right now, the electricity actually reaching your home might be coming from gas. That's just one quirk buried inside the deals that really decide how Britain's electricity gets built, priced and sold. Deals called Power Purchase Agreements or PPAs. My guest today is Rob Ogden, founder and CEO of Renewable Exchange. He breaks down how power purchase agreements impact what we pay and how green our power actually is. And we take a look at their expansion to Germany, where a growing market of wind assets are going merchant after finishing their subsidy schemes. Before we start, if you want to see what future power prices look like right now, head to modoenergy.com and ask Ko, Modo Energy's AI Analyst. Sign up is free and take seconds. Let's jump in.
Hi Rob, welcome to Transmission.

**Rob Ogden** (1:10)
Hi Ed, thanks very much for inviting me on.

**Ed Porter** (1:12)
Our pleasure. And as ever, we're going to get straight into the detail. So what is one thing that people get wrong about power purchase agreements or PPAs as they're known?

**Rob Ogden** (1:22)
PPAs. So I think there's lots of misconceptions with PPAs in the market. But when you think about a PPA, I'm wondering what's coming to your mind.
Is it the short-term utility PPA market where you've got thousands of generation assets striking contracts over one, two, three year durations with all the energy suppliers? Or I don't know, is it maybe more like an AWS blue chip or a 15 year off take agreement? Where would you go?

**Ed Porter** (1:47)
Yeah, interesting. I think about it in a very general sense, right? So anyone signing any agreement to purchase power, I know that sounds like it's very much what's...

**Rob Ogden** (1:56)
Let's break it down, absolutely.

**Ed Porter** (1:57)
Yeah, but I think about the broad bucket of that. I know that you can get those shorter term contracts, those rolling contracts for people who are looking to, let's say they've got off a feed-in tariff and they're looking for sort of additional secured revenue. I also know there's a very corporate angle to this as well. So there are some big energy users who are looking to get certainty from the market, and so they're going out and they're trying to buy in PPAs to lock away a portion of their energy.

**Rob Ogden** (2:24)
Absolutely.

**Ed Porter** (2:25)
How do you see it? What's the divide?

**Rob Ogden** (2:27)
Well, that's it. I think that is the, if we listen to the big corporate marketing hype of the world, I think that's where most people would go. It's the big long-term contracts with the blue chips of the world. But that really is the thin end of the wedge in PPAs.
A PPA is a generic phrase at the end of the day, power purchasing agreement. So it's a power is electricity, purchasing is to buy, and agreement is a contract. So it is a contract to buy electricity fundamentally. That's what it is. You could therefore argue so many things of a PPA, or power purchase agreement, everything from your generic electricity supply agreement. So I think where you draw the line is subjective, and there's not any kind of one rule. The big corporates of the world have definitely tried the land grab on PPA to kind of make it that blue chip contract. But I think for me, that really misses the point. Certainly in the UK, every ROC project has its subsidy. So ROC, Renewable Obligation, one of the subsidies that lots of the renewable generation projects have been built on in the UK. They get their subsidy and then they can sell their electricity however they like. So for a lot of those projects, they're optimizing them on one, two year contracts and they're trading in and out of the market at different times.
Feed and tariff exactly the same. You get your feed and tariff subsidy and then you get your electricity, which you can sell yourself. So there's different structures in the market. And in the UK specifically, PPAs generally are short term contracts signed between a generator of electricity and an energy supplier. And there's thousands that get signed every year.

**Ed Porter** (4:00)
And so in terms of what you see through Renewable Exchange, what does the split look like between those sort of two to three year contracts for renewables under RO or FIT tariffs? And what does the split look like for the corporate? Is it sort of an 80-20 split?
What does that look like?

**Rob Ogden** (4:15)