Self-consumption projects

A Self-consumption Project refers to a Project that is installed in the facilities of a consumer organization, providing electricity targeting the internal energy consumption. This type of Project allows the organization to reduce energy consumption from the grid, lowering their electricity costs. In some markets, surplus energy (electricity that is generated by the Project but not consumed by the organization) can be sold to a Utility Company or exchanged for overnight energy consumption, improving the financial performance of the Project.

However, solar energy Projects often require initial investments that exceed the liquidity of an organization. A widely used solution to this problem is to sign a Power Purchase Agreement. The investment cost of the Project is paid for by a third party and the consumer organization agrees to purchase the energy generated by the Project.

Power Purchase Agreements (PPAs) are a type of contract where organizations agree to purchase the energy generated by an energy generation Project at a predefined price. These contracts are typically long-term, ranging from 15 to 30 years, and the energy price under the PPA is usually lower than the standard grid price. The benefits of signing a PPA from a consumer’s perspective are, among others, reduction of CO2 emissions, significant savings on energy bills, and avoiding high investment amounts that put their liquidity at risk.

PPAs lasting 20 or more years usually include a clause that allows the transfer of the ownership of the asset to the consumer organization at the end of the contract term. In these cases, the total lifetime of the Project is not dictated by the lifetime of the physical asset, but by the contract term.

The consumer organization may even execute the purchase option of the asset, which is represented within the Protocol by an instant depreciation of the asset followed by a large income equal to the amount paid for it. Following the Protocol specification, this would trigger the origination of a new Project.

The origination time (installation + commissioning) of a Self-consumption Project is on average about 4 to 6 months. However, in some jurisdictions, this time is somewhat dependent on third parties, such as grid operators, giving the required permissions allowing for the Project to connect to the grid.