With buyer-led aggregation, negotiating contract terms generally falls into three stages.
- First, the project developer and buyers will negotiate and sign a term sheet before entering into an exclusivity agreement to negotiate the full contract. Aggregation groups should be mindful to work efficiently with developers toward a term sheet and exclusivity agreement to prevent other, nimbler buyers from poaching the project.
- Second, a template contract will be developed that will form the basis for each buyer’s individual agreement with the developer. This template contract may be largely developed by an anchor buyer or through the group’s previously determined processes and procedures.
- Third, each buyer will review the contract and, in some cases, make additional modifications.
These contract negotiations can often take months and go through many revisions.
If the group has not already done so, it can be helpful during this process to designate certain individuals to liaise with the project developer on behalf of the procurement group. For example, the Dutch Wind Consortium appointed a single point of contact for operational questions to ensure effective communication with the wind farm owner. Meanwhile, the Corporate Renewable Energy Aggregation Group chose to hire shared legal counsel to negotiate with the developer on behalf of the group and liaise with internal legal teams.
Groups may find it necessary or useful to allow buyers to amend certain portions of the template contract, but these adjustments should be used sparingly. One of the principal selling points of aggregation to a developer is that it reduces transaction costs by eliminating the need to negotiate separate contracts with each buyer. These lower transaction costs can translate into lower PPA prices for the buyers. As such, when issuing an RFP, aggregation groups should be transparent about which contract terms can be negotiated by individual buyers and should limit these areas of flexibility as much as possible.