The electricity purchase contract (PPA) signed by BASF and ENGIE will accelerate the decarbonization process of the first chemist. The contract is exceptional in terms of duration, volume, delivery conditions … We explain here its extraordinary characteristics in four key points.
1 – An exceptional duration for a green PPA
“25 years is a standard period for gas supply contracts, but much rarer for renewable electricity supply contracts at fixed prices. This green PPA is totally unique!, explains Thomas Papazov, expert at Global Energy Management (GEM), one of ENGIE’s Global Entities, who worked on the conclusion of the agreement.
The aim was to set a fixed purchase price for green electricity for the duration of the agreement, anticipating as precisely as possible fluctuations in available capacity and future costs of developing renewable capacities. While the unprecedented contractual period of this particular PPA can cause some problems, it’s also a benefit: “The exceptional duration of the contract gives us visibility and, with it, the opportunity to secure the financing of new renewable electricity production facilities”, said Thomas Papazov.
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2 – High production volumes across Europe
From January, ENGIE will supply BASF with up to 20.7 terawatt-hours of renewable electricity. To give you an idea of scale, this is the equivalent of a quarter of Belgium’s annual electricity consumption! The low-carbon energy will be supplied by a large, diverse and growing portfolio of production plants. ENGIE’s wind farms in Spain will supply the contract from 2022. Then, over the next 15 years, ENGIE will be able to use new assets, including future onshore and offshore wind farms. These new assets will allow us to supply several BASF factories in Europe.
3 – Custom delivery
Another specific feature of the agreement is ENGIE’s commitment to supply a “fixed tranche” of green electricity for 25 years. BASF will not encounter any supply problems because ENGIE will eliminate any risk of intermittency linked to the production of renewable energy. Each year, BASF will be able to choose which of its European production plants will be powered by this green electricity supply.
4 – A key role in BASF’s decarbonisation process and in the development of renewable energies
As the world’s largest producer of chemicals, BASF aims to achieve carbon neutrality by 2050 and reduce its greenhouse gas emissions by 25% by 2030 (compared to 2018). Its main driver is to replace fossil energy sources with renewable electricity to power production processes. To achieve this, BASF will apply two complementary principles: building its own portfolio of assets and purchasing green energy from third parties.
This green PPA will not only give a decisive boost to BASF’s decarbonisation process but will also play a key role in the energy transition as the agreement will allow the launch of new renewable projects.