Efficient PPAs Could Spur Solar-Diesel Hybrid Micro-grids says THEnergy

Hybrid Plant in Western Tanzania During Construction (Redavia GmbH)
Hybrid Plant in Western Tanzania During Construction (Redavia GmbH)

Germany – THEnergy, a Germany micro-grid consultancy company has made a finding that efficient power purchase agreements (PPAs) are the key success factor in the current booming market of reducing diesel consumption by incorporating renewables in diesel micro-grids.

For traditional grid-connected applications such as photovoltaic systems, PPAs have been stream-lined over the years and are now common practice, says THEnergy, adding that often, the main challenge is to adopt them to specific legislations.

The consultancy company notes that in the last number of years, solar-diesel hybrid plants that aim to reduce the diesel consumption of remote commercial and industrial off-takers have become extremely popular.

Hybrid micro-grid technology is also improving and battery prices are falling, making the business case even more attractive.

According to THEnergy Africa, Asia and Australia are employing solar-diesel hybrid solutions for the mining sector, while wind-diesel hybrid is big in Canada and South America.

The mining sector has acted as a pioneer in large-scale micro-grids, but there is also an increasing number of renewable energy-based plants in other industries such as cement, food and beverages, textiles and salt.

“In the meantime, the first large-scale PPAs have been applied in this segment. However, the standard templates for grid-connected PPAs cannot be used as the framework is far more complicated,” notes THEnergy.

One of the main challenges for hybrid micro-grids arises from the synchronization of generation and consumption. In the end, the off-takers often do not think in terms of buying a certain amount of power as the generated electricity is only a means for the purpose of reducing diesel consumption.

As solar-diesel hybrid is a rather new field, many potential off-takers are not experienced and fear production losses which also need to be covered in PPAs.

Other challenges stem from the fact that in many remote locations no alternative off-takers exist in case the contract partner does not pay. Contracts cannot eliminate this risk completely, but mitigate it as far as possible.

As well, many solar-diesel hybrid applications are built in countries with certain legislative risks that must be considered in the PPA. It is obvious that PPAs for solar-diesel hybrid plants are highly complex.

Dr. Thomas Hillig, Managing Director of THEnergy says, “As a consultancy specializing in micro-grids, we have been pushed by our clients to specifically cover the PPA topic. We have conceived workshops for optimizing PPA negotiations and also accompany our clients individually in the process. Our offer is aimed at both sides, renewable energy developers as well as commercial and industrial off-takers.”