How Does That Work?

Power purchase agreements help ensure reliable, sustainable power

OPPD is always looking for new, efficient and financially smart ways to generate electricity for customers.

Sometimes, that means adding natural gas stations that OPPD owns outright, such as the new Turtle Creek and Standing Bear Lake Stations.

Other times, it makes more sense to buy access to electrical generation through a long-term agreement.

Enter power purchase agreements (PPAs).

What is a power purchase agreement? 

A PPA is a contract between the developer of a generation facility and a customer (in this case, OPPD) who wants to purchase the energy that facility generates.

The developer typically finances, owns and operates the facility. The customer pays a price per megawatt-hour to gain the rights to the energy generated, as well as related products, such as the capacity of a facility and any renewable energy tax credits it receives.

“Capacity” is the maximum amount of power a generator can physically produce. Utilities must always maintain enough capacity to serve all customers, plus a healthy extra margin to ensure reliable power during extreme summer heat or winter cold.

How does it work?

The process typically begins once OPPD determines that it will need more energy generation to serve all customers, with margin to spare. OPPD issues a request for proposals (RFP) to solicit proposals from potential developers.

Once developers respond, OPPD reviews all the proposals it received and determines which, if any, meet its requirements and needs. OPPD and a developer will then negotiate a power purchase agreement. With a PPA in place, the developer will plan, design and build the project if it hasn’t already.

Once the unit comes online, developers will own and maintain the facility and ensure it complies with the agreement.

What are the benefits?

While every situation varies, PPAs typically offer many benefits.

They help reduce the amount of money OPPD has to spend to build new facilities. The developer covers the up-front building costs and accepts the risks that come with any new project. OPPD only pays for the energy once the facility starts operating.

Power purchase agreements also help utilities lock in their costs as a hedge against unpredictable price changes in the markets where energy is bought and sold.

Private developers have also been able to take advantage of renewable energy tax credits that weren’t available to public utilities. Under most PPAs, developers would then pass along those savings to their public-power customers.

That restriction officially ended with the Inflation Reduction Act of 2022, but there are still some questions about how that law will be implemented. Most public utilities are being cautious and waiting for more clarity.

Does OPPD have any PPAs now?

Currently, OPPD uses PPAs for the output of six wind farms: Grande Prairie, Prairie Breeze, Flatwater, Petersburg, Sholes, and Milligan.

OPPD uses PPAs for the output of two solar farms: Fort Calhoun Community Solar and Platteview Solar.

Additionally, OPPD has signed power sales agreements with NPPD for the partial output of five other wind farms. Those farms are Ainsworth, Broken Bow 1, Broken Bow 2, Crofton Bluffs and Elkhorn Ridge.

The normal term of OPPD’s PPAs is 20 years.