Giving the control
back to YOU

In a deregulated electricity generation market,
you have control over the choices that determine your energy costs.
How can you make the best decisions? Energy Guide sorts the relevant data to determine your best options. This reduces
your price risk and frees up your management time.


You need criteria-based solutions from trusted experts who can help your
company manage the energy marketplace to your advantage. That’s why
The Ohio Manufacturers’ Association has partnered with Scioto Energy.

Learn more about Scioto Energy’s expertise and experience.
Learn more about The Ohio Manufacturers’ Association.

Renewable Energy Deals are Getting Interesting for Customers

Many AEP Ohio customers have been approached by the utility to consider a long-term solar arrangement in support of two solar projects it would like to develop. While this specific transaction is more complicated than traditional structures due to its regulated nature, it has likely initiated sustainability and renewable energy conversations within many companies. Over the past few years the renewable market has rapidly matured resulting in lower costs and an increase in available deal structures. Below is a summary of the primary renewable energy deal models.

Behind the Meter

Renewable generation, such as wind and solar, installed behind a customer meter provides the highest level of public visibility regarding a customer’s renewable energy commitment. Seeing a project in action is a clear a statement of a company’s engagement with renewable energy. There are many ownership models of behind-the-meter renewable energy. The assets can be purchased outright and owned by a customer, leased by a customer from the developer, or structured as a simple purchase power agreement (PPA) with Renewable Energy Credits (RECs) for the electricity produced. Additionally, behind-the-meter renewables will impact the cost of the remaining grid power that the customer needs to purchase which should be included in any economic analysis.


Off-site renewables are typically structured either as a Physical Power Purchase Agreement (PPPA) or Virtual Power Purchase Agreement (VPPA). A PPPA is a product whereby a buyer takes title to the electricity and RECs in exchange for a fixed rate. The term of such agreements can range from 10 to 15 years. PPPAs are difficult for retail customers to utilize as rules established by the Public Utility Commission of Ohio allow only Certified Retail Electricity Suppliers (CRES) to provide electricity to customer meters. In order to satisfy this requirement, the PPPA can be purchased by a CRES and sold back to a customer, known as “sleeving,” along with the remainder of the required electricity when the renewable asset is not running. This type of offering has become more popular by CRES providers in the past year.

In order to eliminate the physical complexity of a PPPA, VPPAs have become an option for certain retail customers. VPPAs are not an exchange of energy, rather they represent an exchange of a fixed price by the customer for hourly variable prices and RECs from the developer. The pricing is settled at the physical location of the renewable asset with term lengths similar PPPAs. This “financial swap” allows the developer to demonstrate to lenders long-term fixed-price commitments in order to achieve project financing. Customers would continue to purchase physical energy through their CRES at, ideally, a variable rate for the volume equal to that produced by the VPPA. VPPAs alleviate the physical complexities of PPPAs but they do introduce financial complexities as they can be viewed as financial derivatives possibly requiring special accounting and Dodd-Frank treatment.

Renewable Energy Credits

Renewable Energy Credits (RECs) provide the easiest access to the renewable energy market as they can be purchased as part of the CRES supply and do not require a long-term commitment. The value of RECs are traded separately from energy and can have attributes based on the asset type such as solar (SRECs). These credits create an additional income stream for renewable developers and allow the customer to claim the attributes. RECs are the typical instrument used by CRES suppliers to satisfy state-required Renewable Energy Portfolio Standards.

To ensure RECs are not double counted they can be tracked using a clearinghouse such as Green-e, a non-profit organization that verifies and retires the claims to the RECs. Those who purchase RECs generally cannot make the claim of “additionality” which is the demonstration that the buyers’ action caused the project to occur creating additional renewable energy and greenhouse gas emission reduction. However, such purchases do continue to support existing renewable assets.


Specific customer goals will dictate which structure will provide the best solution. Each comes with its own set of pros and cons with respect to capital required, operational risks, economics, price risk, maintenance requirements, tax benefits and social benefit. Such goals all start with the initial sustainability and renewable energy conversation.

Leave a Reply

Your email address will not be published. Required fields are marked *