Exciting opportunities for consumers and generators to benefit from innovative corporate PPAs

Direct agreements between generators and energy consumers, known as corporate PPAs, are attracting greater interest with the decline in renewable subsidies. Head of Renewable Sales Chris Smith discusses how to overcome the barriers to enabling corporate PPAs.

Corporate PPAs, are direct agreements between generators and large energy consumers, and are increasingly the focus of renewable developers and investors seeking to continue building in the post Renewable Obligation world.

Association with a renewable project is attractive to corporate brands, who are increasingly looking for new ways to differentiate themselves as sustainability leaders and future-proof against climate change threats.

There are many different corporate PPA structures available, but a typical agreement involves a business agreeing to buy the power from a generation project for approximately 15 years. This commitment from the business is then used by the generator to secure funding from a lender to build the project.

However, landing on a structure that suits both parties is difficult due to the lack of long-term price guarantees in the market – the illiquid power market can only provide certainty out to five years at most.

The investment community is seeking revenue certainty for a longer term of up to 15 years to ensure bankability. Further there is an implicit requirement for investment grade counterparty to underpin the investment decision.

Despite the challenges, the investment community are still looking to invest in assets and developers are still looking for partners to buy their power.

To help overcome these issues and enable more corporate PPAs in the market, suppliers have a crucial role to play. Their unique position working for generators and supply customers, and understanding both parties’ requirements can help unlock the innovative structures needed to get projects off the ground.

As the UK’s leading PPA provider and established supplier to large corporates, we are already working with our partners to develop solutions, drawing on our own capabilities and the markets feedback to enable these projects to be built.

Finding the right structure for the supply customer is crucial to scaling the segment. One solution we are progressing is utilising our forward wholesale market access and appetite of supply customers to have price security for years 6 to 15 when there is no liquid market. To support project closure.

The key drivers are always going to be price certainty and value, and as wind and solar are becoming cheaper to build, it will be easier to create viable commercial structures that suit both parties.

The right corporate PPA product will enable investment and the continuation of renewable deployment in the UK, so we will continue to invest our expertise in this important area.

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