Electricity purchase contract (AAE) for small rural energy projects as part of a series of documents developed by international law firms for use in small rural energy projects. Documents prepared for the country in Southeast Asia. An electricity purchase contract (AAE) is a long-term contract between a renewable energy project and an electricity buyer in which the buyer agrees to purchase the project`s energy at a fixed price for the duration of the contract. The previous PPAs for renewable energy had a duration of 20 years, but the tenors fell to 15, 12 and even 10 years to meet the demand of buyers. Investors are like risk managers. They aim to optimize their risk/return ratio. For them, the conclusion of long-term AAE contracts is a way to manage the risk of volatility. Prices in electricity markets are extremely volatile, as they can change very often (every 5 to 30 minutes). The buyer generally requires the seller to guarantee that the project meets certain performance standards.

Performance guarantees allow the buyer to plan accordingly when developing new facilities or when executing application plans, which also encourages the seller to keep appropriate records. In cases where the supplier`s delivery does not meet the buyer`s contractual energy needs, the seller is responsible for restructuring the buyer`s debt. Other guarantees can be contractually agreed, including availability guarantees and performance curves. Both types of safeguards are more applicable in regions where the energy used by renewable technologies is more volatile. [9] When a statutory subsidy to an existing plant ends, AAEs are a means of providing follow-up funding for the operation of the facility. This could include operating costs such as maintenance and leasing. These are examples of this type of PPP that are listed below. AAEs have been subdivided into AAEs that are more relevant to smaller and more rural energy projects, and more complex AAEs, relevant to large projects in developing countries.

The buyer and generator agree to a strike price. If the price of electricity on the open market price is higher than this strike price, the generator pays the difference to the buyer. If the market price is lower, the opposite is true. This gives both parties long-term security over their electricity prices- and thus helps both parties make investment decisions. It is at least one award, a tenor and an AAE structure. Offers received can vary considerably depending on the buyer and, on the other hand, due to different basic structures, the inclusion of costs (which are not included in others) or the different price base. Comparing one offer to another can be quite complicated. In order to obtain offers to purchase, the owner of the renewable project usually makes a request for a proposal or offer (RFP/RFQ). Interested energy buyers can then make an offer to purchase. This is mainly due to the fact that the electricity market in Scandinavia is a well-regulated and predictable market, which gives companies the confidence to sign agreements and currently offers low electricity prices. PPAs work best in countries where governments have supported renewable energy in the past, but do not necessarily offer long-term contracts for these projects themselves, as this opens up the potential for private companies to fill this gap. The AAE is considered binding at the time of signing, also known as the reference date.