A CHP power purchase agreement, also known as a CHP PPA, is a legal contract that defines the terms of the sale and purchase of electricity between a Combined Heat and Power (CHP) system owner and an electricity buyer.
CHP systems, also known as cogeneration, generate electricity and thermal energy simultaneously. Compared to traditional power generation, CHP systems are more efficient because they capture and use the thermal energy created during the electricity generation process. This reduces the amount of fuel needed to produce the same amount of energy, resulting in cost savings and reduced greenhouse gas emissions.
A CHP PPA is an important tool for CHP system owners because it provides a guaranteed revenue stream for the electricity they produce. With a PPA in place, the CHP system owner can secure financing for the project, knowing that there is a contracted buyer for the electricity their system produces.
The terms of a CHP PPA typically include the price per kilowatt-hour (kWh) of electricity, the length of the agreement, the minimum and maximum amount of electricity to be purchased, and the responsibilities of each party in terms of maintenance, repair, and operation of the CHP system.
A CHP PPA also provides benefits to the electricity buyer. By purchasing electricity from a CHP system, the buyer can secure a reliable and predictable source of energy, which is often less expensive than purchasing electricity from the grid. Additionally, because CHP systems are more efficient, they can reduce the buyer`s carbon footprint and help them meet their sustainability goals.
In some cases, CHP PPAs can be structured as a “behind-the-meter” arrangement, where the CHP system owner installs and operates the system on the buyer`s property. In this case, the buyer purchases the electricity directly from the CHP system owner, avoiding the need to purchase electricity from the utility grid altogether.
Overall, a CHP power purchase agreement is a valuable tool for CHP system owners and electricity buyers alike. It provides a stable, reliable, and cost-effective source of energy that can help reduce greenhouse gas emissions and support a more sustainable energy future.