Out-Law Analysis 5 min. read

Corporate PPAs: Asia-Pacific deployment market dependent

desert wind solar seo

The wide variety of electricity supply models in operation across the Asia-Pacific region means there is no one-size-fits-all approach to encouraging the growth of corporate power purchase agreements (CPPAs).

By definition, CPPAs will only be possible where there is either a de-regulated market with third party rights of open access to the grid or, where the market is still dominated by a vertically-integrated national electricity utility, there is legislation permitting corporate customers to side-step the utility and enter into direct supply agreements with generators. There are examples of successful deployment of CPPAs under both models.

Currently, Taiwan and Vietnam stand out for their legislative reforms to enable CPPAs. Australia, one of the few fully de-regulated markets in the region, is also a growing market for CPPAs.

Taiwan: leading the region in CPPA deployment

One of the core election platforms of current Taiwanese president Tsai Ing-Wen in her 2016 presidential campaign was the phasing out of nuclear power generation and a shift to renewable power generation. On her election, the Electricity Act was amended, including amendments permitting the sale of power directly to end users. Before this change, Taipower, the incumbent power supplier, had the sole right to sell power to consumers.

Ronan Lambe

Ronan Lambe


To date, Taiwan undoubtedly leads the Asia-Pacific region in corporate PPA deployment.

Subsequent amendments to the Renewable Energy Development Act have further created a supportive environment for CPPAs and, to date, Taiwan undoubtedly leads the Asia-Pacific region in deployment.

Over the past 18 months, Taiwan has seen not just the signing of the first CPPA in the region – Google's agreement to purchase 10MW of solar photovoltaic (PV) power in Tainan to power its Changhua County data centre – but also the world's largest CPPA to date, Orsted and TSMC's agreement for 920MW generation from the Greater Changhua 2B and 4 offshore wind farms. More of these transactions can be expected to follow in the next few years, given the island's target of achieving 20% of renewable power generation by 2025.

The legislative framework in Taiwan provides generators with several possible routes to market. This in itself enhances the potential for successful project financing, particularly for large capital intensive offshore wind projects.

Direct wire

A developer in Taiwan could seek to enter into a direct wire transaction between itself and a corporate offtaker without the need to go through Taipower's grid.


Where a direct wire connection is not possible, perhaps because the generation and offtaker sites are too far apart, the alternative would be to 'wheel' the power through Taipower's grid. Taipower is required to provide open access to its grid through wheeling agreements.

Taipower offtake

A generator may also look to Taipower as an offtaker, by way of a non-negotiable PPA based on a feed-in tariff. One of the unique features of the Taiwanese framework is that the generator could sign both a Taipower PPA and a corporate PPA. It could then switch from Taipower as offtaker to the corporate offtaker or, should the CPPA terminate, rely on the Taipower CPPA as a fall-back.

With offshore wind projects, agreement must be reached with Taipower before a Taipower PPA can be terminated - presumably because offshore wind offtakes are relatively large in nature. The ability to switch from an offshore wind CPPA to a Taipower PPA will depend on the terms of the CPPA.

Vietnam: an abundance of resources

Since the approval of its 7th Power Development Plan in 2016, there has been a policy shift in Vietnam from its decade long focus on developing new coal-fired power generation towards a new emphasis on renewable energy. With over 3,200km of coastline, Vietnam has an abundance of wind energy, while its geographical location provides significant irradiation for solar PV.

Electricity sector reform in Vietnam has been slow, limiting the opportunities for CPPAs. However, two recent developments are encouraging in this context.

Decision 13 of the prime minister of Vietnam, announced on 6 April 2020, allows generators and retail customers to directly enter into a contractual arrangement for the sale and purchase of solar rooftop generation for the first time. The decision applies only to rooftop solar, with a capacity restriction of 1MW, and the supply has to be by way of a direct wire arrangement, not involving any wheeling through the grid. In this scenario, the terms of the PPA and the tariff are negotiable between the buyer and seller.

In addition, the Ministry of Industry and Trade, in cooperation with USAID, has submitted a draft decision to the prime minister allowing for direct PPAs. The pilot programme is aimed at grid-connected solar and wind projects that satisfy certain requirements - for example, the projects have to have obtained approval for inclusion in the Power Development Plan; have an installed capacity of at least 30MW; and have sufficient financial capability, technical resources and experience in developing and operating renewable energy projects. Priority will also be given to projects that are located in areas with no or limited grid congestion issues. The pilot has a limited initial target of between 400 and 1,000MW nationwide, covering the period 2020 - 2022.

An interesting aspect of the direct PPA pilot is its financial characteristics, akin to a synthetic PPA arrangement. A contract for difference (CfD) will be needed to settle the price difference between the strike price and spot price - the first time this type of instrument has been used in the Vietnamese electricity market.

Australia: market-driven change

Australia's shift towards renewable energy generation has been a gradual one, with 21% of its electricity supply currently generated by wind, solar and hydro sources. Although Australia enjoys an abundance of renewable energy sources it has not fully capitalised on them, with what many would view as lukewarm support for renewable energy at the national level. The coalition federal government has been slow to develop policies for large-scale solar and wind projects, and is yet to commit to phasing out traditional coal-fired power.

Against this backdrop, state and territory governments and, in effect, the market and businesses have taken the lead in the transition to renewable energy. Several states and territories have set ambitious renewable energy targets as wind and solar projects become more cost competitive and consumers demand sustainable alternatives to fossil fuels. Since 2019, the Australian Capital Territory has been running on 100% renewable energy, sourced from the territory itself and four other states. Tasmania is expected to achieve the same in 2022, with a 200% renewable energy target by 2040; and South Australia aims to run on 100% renewable energy by 2030. Australia's most populous state, New South Wales, plans to reach net zero emissions by 2050 through an increased share of renewable energy, carbon sequestration and industrial energy efficiency initiatives. Victoria has a renewable energy target of 50% by 2030, and also intends to achieve net zero emissions by 2050.

The private sector has also contributed to the growing appetite for clean energy in Australia, with increasing pressure from shareholders to act on climate change as we have seen elsewhere. Since 2017, CPPAs have supported projects with a combined capacity of more than 7,500MW. While 2019 was quiet, the market picked up again in 2020.

Australia's largest retailer, Woolworths, which consumes 1% of Australia's total electricity, is the latest organisation to commit to a 100% renewable energy target, which it aims to achieve by 2025. It plans to source clean energy from wind and solar PPAs and by expanding its rooftop solar panels, which are currently installed on 150 stores. The announcement follows a trend among other major Australian companies, such as telecommunications giant Telstra, to commit to transitioning to 100% renewables, with companies and organisations including Aldi, Coles, BHP and Amazon all having CPPAs in place.

As at November 2020, 14 Australian companies with a combined market capitalisation of over A$470 billion (US$360bn) are members of RE100, the market platform profiled in our previous article, including banks and property businesses. More businesses are expected to commit to renewable energy targets which offer potential savings on operating costs, reputational benefits and meet community expectations to reduce emissions.

Join Pinsent Masons for a virtual event, Powering the future: the opportunities which corporate power purchase agreements present to accelerate the path to net zero on Wednesday 28 April.

We are processing your request. \n Thank you for your patience. An error occurred. This could be due to inactivity on the page - please try again.