A performance guarantee refers to the case where COD production does not correspond to the contractually planned production. Consider how to approach this settlement between the two parties. In which case does the seller have to compensate the buyer? We often hire PPAs for less than 100% of the asset volume. This means that some energy sales will always be exposed to market risks, even under a PPP contract. Banks generally need coverage of 70% of total asset output. Synthetic AAEs decouple the physical flow of electricity from the financial flow. This will further increase the flexibility of contractual agreements. With respect to synthetic chaining contracts (also known as sPPAs), producers and consumers agree on a price per kilowatt-hour of electricity, as does a physical AAE. However, electricity is not delivered directly to the consumer from the power generation facility. Instead, the producer`s energy service provider (for example. B an electricity distributor) takes the electricity generated in its clearing group and acts (in the short-term electricity markets, to cite an example). The consumer`s energy supplier (for example.
B, a municipal plant) obtains exactly the power profile that the manufacturer makes available to its energy service provider on behalf of the PPA consumer partner, the purchase being made on a platform such as the spot market. In the synthetic AAE, this flow of electricity is now supplemented by what is called a differential contract. In this contract, the AAEs parties aim to compensate for the difference between the agreed price of AAEs and the actual spot market price. This means that each counterparty in the AEA has two cash flows: one with the energy service provider concerned and the other with the AAE contractor. In any event, the payments add up to the price of the AAEs set at the beginning and offer both parties the desired price guarantee. Without direct physical delivery between the contracting parties (such as an AAE on site) and without a direct link between them (such as an off-site AAE), this is a simple and administratively economical AAE. It is well suited to cases where a producer does not create or does not wish to create its own balance sheet group, to cite an example. AAEs can be managed by service providers in the European market. Legal agreements between the national energy sectors (sellers) and the distributor (buyer/purchaser of large quantities of electricity) are treated as AAEs in the energy sector.
As a general rule, the termination of an AEA ends with the agreed commercial operating period. An AEA may be terminated in the event of unusual events or circumstances that do not comply with contractual guidelines. The seller has the right to limit the supply of energy if such unusual circumstances occur, including natural disasters and uncontrolled events. The AAE can also allow the buyer to reduce energy if the value of after-tax electricity changes.  In the case of a reduction in energy, it is usually because one of the parties involved is liable, resulting in damages to the other party. This can be excused in exceptional circumstances such as natural disasters, and the party responsible for repairing the project is responsible for such damage. In cases where liability is not properly defined in the contract, the parties can negotiate a case of force majeure to resolve these issues.  PPAs allow the long-term sale of part of a project`s future energy production (3 to 30 years) to an energy buyer.