- The fixed price contract will come into force when commercial operations at the facility begin.
- The last few years have seen a number of major firms strike power purchase agreements to buy renewable energy.
Danish energy firm Orsted and TSMC, a Taiwan-headquartered semiconductor company which supplies businesses such as Apple, have signed a deal described as "the world's largest renewables corporate power purchase agreement."
Announced Wednesday, the 20-year deal will see TSMC – also known as Taiwan Semiconductor Manufacturing Company – purchase all the energy produced by Orsted's yet-to-be-built 920-megawatt offshore wind farm off Taiwan.
The fixed price contract will come into force when commercial operations at the facility begin. This is expected to be in 2025/26, according to Orsted, subject to a final investment decision and grid availability.
Located in the Taiwan Strait, the wind farm, known as "Greater Changhua 2b & 4," will be Orsted's third offshore facility in Taiwan. It is currently building the "Greater Changhua 1 & 2a" offshore wind farm, which will have a capacity of 900 MW, and co-owns the 128 MW Formosa 1 project.
In simple terms, a renewable corporate power purchase agreement, or PPA, refers to a deal where an energy producer sells power to a business at a fixed price over a set period of time.
"Historically… corporate PPAs have emerged from the U.S. market," Shashi Barla, a principal analyst at Wood Mackenzie, told CNBC.com in a phone interview.
"If you looked at the data of corporate PPAs in the U.S., it has increased significantly in the past four years and in the past two years it's also kind of gaining traction in the European markets."
With regards to Asia, Barla said corporate PPAs in the region were "a very new phenomenon" but explained it was a "matter of time" before commercial and industrial offtake agreements gained traction there.
The last few years have seen a number of major U.S. firms, such as Google and Amazon, strike these types of agreements to buy renewable energy.
Other examples include Microsoft signing a 15-year power purchase agreement for the energy produced by a 74-MW solar power facility in North Carolina.
Fellow tech giant Facebook has also described itself as being "a leading corporate purchaser of renewable energy globally" in 2019.