Energy costs can be hard to predict and manage because of a range of external factors. As a business, you’ll want more cost certainty so you can manage cash flow and plan with greater confidence. At the same time, businesses like yours are expected to demonstrate strong progress on sustainability, which often poses challenges. In this blog, we’re looking at what a corporate PPA is.
A corporate PPA is a long-term agreement that allows a business to purchase electricity from, or enter into an arrangement linked to, a renewable energy generation project.
The exact structure can vary. For example, a sleeved PPA uses a licensed supplier to incorporate the contracted generation into the customer's wider electricity supply. Meanwhile, a virtual PPA is a financial arrangement rather than a physical supply of electricity.
Corporate PPAs (power purchase agreements) can help address energy costs and sustainability challenges by giving businesses a long-term renewable energy solution.
Using a corporate power purchase agreement can be highly beneficial, as it can provide greater predictability around future costs, a route to procuring electricity from renewable generation, and a clearer link between energy procurement and sustainability objectives.
This can give your business greater visibility over energy costs and reduce exposure to some wholesale market movements. They may also allow your organisation to support renewable energy generation projects. Read more about our support for renewable electricity procurement.
Corporate PPAs can be long-term agreements, with contract lengths varying considerably depending on the project and structure.
While a PPA doesn’t guarantee lower energy prices, it does offer greater pricing predictability, giving you more control and clarity and helping you stabilise energy costs.
Energy market volatility can make it difficult to forecast future costs and plan effectively. A PPA can allow you to agree pricing arrangements over a longer period, helping to reduce some of this uncertainty.
If your business is working towards a more sustainable energy strategy, then it’s highly likely that you’re looking at renewable energy solutions. A renewable PPA can help a business increase its exposure to renewable generation and support wider ESG, renewable energy or decarbonisation objectives, depending on the agreement's structure.
Planning helps you stay proactive, not reactive. A long-term plan gives you a clear strategic direction for your energy procurement.
A corporate renewable power purchase agreement involves renewable energy generation, commonly wind and solar projects. These can help you achieve the following benefits.
Before you get started with a corporate PPA, you need to understand exactly how much energy your organisation uses and when. This will enable you to understand the true benefits and set up a strategy that works for you.
Once you know your business's energy use, you need to find a suitable renewable generation project. In most cases, new renewable energy projects involve wind or solar power.
A contract must be put in place for a corporate PPA. This contract should outline pricing, duration, volumes and renewable attributes.
Once the PPA is agreed, you need to put the electricity supply arrangements in place. Depending on the structure, this may involve a licensed supplier sleeving the contracted generation into your wider electricity supply.
Renewable generation will not always match your business's electricity demand. Your supply arrangements therefore need to account for periods when generation is higher or lower than your consumption.
A key consideration when structuring a PPA is how the agreement fits with the way your business actually uses energy, rather than taking a one-size-fits-all approach.
A sleeved PPA is an arrangement where a business agrees to purchase electricity generated by a renewable project, with a licensed electricity supplier managing the process of bringing that contracted generation into the business's wider electricity supply.
This can make renewable generation more practical for businesses that still need a reliable electricity supply when the contracted renewable project is not generating enough electricity to meet their demand.
A corporate PPA does not necessarily lead to savings in every case, but it can provide greater clarity over energy costs and reduce exposure to some energy price volatility. The exact financial value of your strategy depends on many factors, including the following.
When considering a corporate PPA, it’s not always right to focus on price alone. Instead, it’s about identifying whether it provides the right balance of risk, price, flexibility and sustainability value for your business.
As with any business decision, it’s important to recognise the risks involved. Understanding these risks from the outset can help you plan more effectively and put appropriate measures in place to manage them.
PPAs are typically long-term arrangements, although contract lengths can vary considerably depending on the project and structure.
With this in mind, it’s important to understand your long-term goals and requirements. If your electricity requirements are likely to change substantially, then a PPA may not be suitable.
A sleeved structure can help manage the practical differences between contracted generation and your consumption. However, your supply arrangements still need to account for periods when your business uses more or less electricity than expected.
Market volatility is a challenge, and by locking into a PPA, you have to accept the fact that prices may fall at some point. This could mean you pay more under a fixed price than you would if you accepted market risk and didn't require pricing certainty. However, you will remove some of the seasonal volatility associated with the wholesale energy markets,
Energy generation can vary depending on a range of factors. Typically, wind and solar output varies throughout the year, so you need to be prepared for these additional risks, especially if you are in an energy-intensive industry.
It’s also important to recognise that PPAs often contain detailed commercial, legal and energy market terms. The key to securing a robust corporate PPA is ensuring that it works for you, not by signing one that doesn’t meet your requirements.
If you’re debating whether or not a corporate PPA could work for your business, then you should consider the following.
A PPA could be worth exploring if you:
You may need to consider other options if you:
From a financial standpoint, you can ask the following questions.
Remember, there is no right or wrong answer when choosing a corporate PPA strategy or a traditional energy strategy. The right choice depends entirely on your energy usage, financial priorities, and whether you want to lock into a long-term commitment.
A corporate PPA isn't the only way for a business to access renewable energy.
If a PPA doesn't align with your consumption profile, risk appetite, contractual requirements or want for a long-term commitment, there are other approaches to consider. The most suitable option depends on what you're trying to achieve, whether that's increasing renewable electricity procurement, supporting sustainability objectives, managing energy costs or finding greater flexibility.
This is where it helps to consider your wider renewable energy strategy, rather than focusing on a PPA alone.
Trident's Renewable Energy Alliance provides a practical alternative to direct Power Purchase Agreements, helping organisations access credible, traceable renewable electricity without the cost or complexity typically associated with a PPA.
The Renewable Energy Alliance uses a collective procurement model, grouping organisations together to access renewable generation from named wind, solar and hydro assets. Electricity consumption is matched to renewable generation every half hour, providing greater traceability and confidence around the renewable electricity being procured.
This approach can help businesses strengthen their sustainability credentials and renewable electricity procurement without requiring individual asset ownership or a bespoke Power Purchase Agreement.
The Renewable Energy Alliance is designed for organisations consuming approximately 2–20 GWh of electricity per year that are committed to credible sustainability and long-term ESG goals.
When exploring renewable energy options, the most important thing is finding an approach that works for your business. A corporate PPA can offer significant benefits, but it isn't necessarily the right solution for every organisation.
Speaking to an energy specialist can help you understand the options available and identify an approach that fits your consumption, commercial priorities and sustainability objectives. This can give you:
If you're exploring renewable energy to achieve greater cost certainty, strengthen your sustainability credentials or take a more strategic approach to energy procurement, a corporate PPA may be one option, but it isn't the only one.
Trident's Renewable Energy Alliance provides an alternative route to credible, traceable renewable electricity without the cost and complexity typically associated with a direct PPA.
Explore the Renewable Energy Alliance to find out whether it could support your business's renewable energy and procurement objectives. Contact us today for expert advice.