In this blog, Alana Johnson, Head of Corporate PPAs for Ørsted, breaks down the corporate power purchase agreement, and explores how some UK corporations are leading the way towards a greener future.
Corporate Power Purchase Agreements: The next step for sustainability?
Combatting the climate crisis is at the top of the public agenda, with concern at a record high1. Last year’s UN2 report shows that to limit global climate change, we must lower temperature rises to 1.5C by 2030. To achieve this, the latest Committee on Climate Change (CCC) report3 states that the UK must act swiftly. Roughly two thirds of carbon reduction will come from electricity, transport, and heating, so businesses play a vital role by taking determined, strategic action in these areas.
100% renewable electricity has been available for several years, so Corporate Power Purchase Agreements (Corporate PPAs) can provide the next step, guaranteeing electricity sourced from a specific renewable generation asset. Northumbrian Water recently agreed a 10-year Corporate PPA with Ørsted – the first of its kind in the UK. For businesses considering a Corporate PPA, here’s a guide to what to what’s involved.
What exactly is a Corporate PPA?
It’s a long-term, fixed price agreement, linked to specific renewable generation assets. The length of term can vary, but between 10 to 15 years is most common. Typically, it’s a direct agreement with a fixed price structure for the full contract. This reduces price risk for the proportion of electricity purchased through the Corporate PPA, by removing exposure to future price volatility.
By taking renewable volume from a specific renewable asset, you support the development of new renewable generation, helping to create a net zero carbon nation. Renewable Electricity Guarantee of Origin certificates (REGOS) enable you to report zero carbon emissions for that electricity.
Is it more expensive than a normal supply agreement?
No – in fact, Corporate PPAs are a great way to manage long-term price risk, with the price per unit typically fixed throughout the full contract period.
Contracts are agreed with generators, not suppliers. The volume is then ‘sleeved’ to your supplier and into your normal supply agreement. Your bill will show different commodity prices – one for your Corporate PPA volume and one for the remaining volume for your regular supply arrangements. Non-commodity costs are the same as for your normal supply agreement, because unless the generation asset is located on your site, the electricity is always transmitted via the grid network.
What should companies look out for?
Supporting sustainability, Corporate PPAs provide a next step from 100% renewable supply. Here are some considerations:
- Preferred type of generation. Different generation assets have differing levels of output and efficiency. Discuss this in depth with generators, to determine performance, profile and how these match your own demand profile. Some organisations – and end customers – prefer one technology over another, so factor this in when considering your options. If a generator is also a supplier, this “one stop shop” saves you time.
- Volume of consumption. In the UK, businesses of any size can choose a Corporate PPA from existing generation assets. Some new build projects might look for a minimum volume of consumption. This will vary depending on the asset size, so it’s worth assessing the kind of renewable generation that’s best for you.
- Generation assets can be chosen in specific locations. So Corporate PPAs often appeal to companies looking to support their local community, and the regions where they operate or have a substantial customer base.
- Contract term. Corporate PPAs are best suited to companies and organisations, where taking a longer term, strategic view makes sense. Generally, we would recommend a contract of at least ten years, in order to benefit from long term price stability. However, contracts at Ørsted in the UK can begin at four years, bridging the gap between supply agreements and the Corporate PPA.
- Shaping of power. A standard Corporate PPA will deliver you the “as generated” output from a renewable asset. Many companies today, such as Ørsted, offer trading services to balance and shape the output from the generation asset, to a profile more aligned to your consumption requirements (e.g. daily profile or flat baseload). We recommend exploring this, alongside your search for a Corporate PPA, to get the best all round solution that matches your energy purchasing strategy.
RE-SourceUK 2019 is the UK’s leading corporate and public sector energy procurement event.
RenewableUK and the Solar Trade Association are working in partnership to deliver this event in the UK, bringing the European RE-Source platform to the UK for the first time.
Originally, RE-Source was established by SolarPower Europe, Wind Europe , RE100 (The Climate Group and CDP) and WBCSD as a forum to link senior decision makers, energy buyers and renewable generators in addition to helping promote and grow the European Corporate PPA market. We are working in partnership with these groups to spread this message, including public sector sourcing of renewables, into the UK.
Join Ørsted, along with multinational corporations, local authorities, renewable energy developers and senior decision-makers at this exciting new event to learn, network and do business.
**Energy buyers attend for free**
Discounts available for Solar Trade Association members.
- Alana Johnson
Head of Corporate PPAs
Alana is an expert in renewable energy and leads the Corporate PPA team at Ørsted. She specialises in helping businesses source renewable energy and contribute to a greener future. With a Masters in Mechanical Engineering from Imperial College, London, Alana has over 9 years of experience working in the engineering and energy sector.