Why Corporate Power Purchase Agreements (PPAs) matter

This article explores why Corporate PPAs matter and why more organisations embrace them.

What is a Corporate PPA?

A Corporate Power Purchase Agreement (PPA) is a long-term contract where a business agrees to purchase renewable energy directly from a generator, such as a solar or wind farm. Unlike traditional energy procurement through utilities, a Corporate PPA allows companies to contract renewable energy at a fixed rate, providing financial and environmental benefits.  

There are different types of PPAs that corporations can consider:  

Physical PPAs: The company receives the physical energy delivery and manages the supply.  

Virtual/Synthetic PPAs: These involve financial contracts in which the corporation doesn't take direct delivery of power but benefits from the price differential.  

By securing these contracts, businesses directly control their energy sourcing, ensuring stable pricing while contributing to the renewable energy transition.

Key benefits of Corporate PPAs for businesses  

1. Cost Savings and Price Stability

Cost savings is one of the most compelling reasons for adopting a Corporate PPA. With energy prices often subject to fluctuations, companies that sign long-term PPAs can lock in fixed energy prices. This price stability allows companies to avoid the unpredictable nature of energy markets and plan for the future with a clear understanding of their energy costs. Many corporations, especially those with high energy demands, have significantly reduced costs by opting for PPAs.  

2. Sustainability and Corporate Social Responsibility (CSR)

The demand for corporate sustainability is at an all-time high. Consumers, investors, and regulatory bodies expect companies to make strides toward reducing their environmental impact. Corporate PPAs allow companies to achieve these goals by ensuring a steady renewable energy supply, directly reducing their carbon footprint.  

PPAs also help companies meet global environmental standards and ESG (Environmental, Social, and Governance) reporting requirements. By committing to a Corporate PPA, a business can showcase its dedication to sustainability and improve its brand image, making it more attractive to eco-conscious consumers and investors.  

3. Energy Independence and Risk Mitigation

PPAs offer companies energy independence from traditional energy suppliers. By sourcing energy directly from renewable generators, companies can bypass the volatility of fossil fuel markets. This independence also helps mitigate risks associated with future regulatory changes, such as carbon taxes or stricter emissions regulations. Companies that sign PPAs are essentially future-proofing their energy strategy by locking in green energy at a predictable cost.

Case Studies: Companies that have succeeded with Corporate PPAs  

Corporate PPAs have already seen significant adoption by major global corporations.  

Here are some examples of companies that have successfully integrated PPAs into their energy strategies:  

Google: A pioneer in corporate renewable energy procurement, Google has signed multiple PPAs to power its data centres worldwide. Through these agreements, Google uses PPAs to reduce its carbon footprint, secure energy supply, and stabilize financing for new projects.

"In 2020, Google 'matched' 100% of it's non-renewable electricity use with an equivalent amount it purchased of renewable energy" - Source: IHRB 

Microsoft: Utilising Power Purchase Agreements (PPAs) is central to Microsofts strategy to ensure sustainability and decarbonisation goals are achieved. As of 2024, Microsoft has signed PPAs for over 34 gigawatts (GW) of renewable energy capacity across 24 countries, with a notable focus on solar and wind power. These deals help ensure that new renewable projects come online to meet their increasing electricity demands.

For example, Microsoft secured a 10.5 GW renewable energy deal with Brookfield Renewable Partners, which is the largest corporate PPA ever signed and supports projects in the U.S. and Europe - Source: PV Magazine

Looking ahead, Microsoft aims to match its electricity consumption with carbon-free energy 100% of the time by 2030 - Source: Accelerating the addition of carbon-free energy

These companies are just a few examples of how Corporate PPAs can help businesses achieve sustainability goals while benefiting financially.

Overcoming common concerns and challenges  

While Corporate PPAs offer substantial benefits, some businesses may hesitate due to perceived challenges. Here are common concerns and how to address them:  

Contract Length: PPAs often span 10-20 years, and some companies fear committing to such long-term agreements. However, by locking in a stable energy price, companies can hedge against future market fluctuations and rising costs, offering a long-term competitive advantage.  

Complexity of Negotiation: Negotiating a Corporate PPA can be complex and time-consuming. However, partnering with experienced energy consultants or legal advisors specialising in PPAs can simplify the process and help companies secure favourable terms.  

Regulatory Risk: Some companies may be concerned that changing regulations will impact their PPA agreement. However, PPAs often include clauses that provide flexibility to adjust terms in response to regulatory changes, minimising the risk.  

By addressing these concerns early, businesses can ensure a smoother path toward PPA adoption and start reaping the benefits.

Steps to take when considering a Corporate PPA 

If you're considering a Corporate PPA for your business, here's a roadmap to help guide the decision-making process:  

• Define Energy and Sustainability Goals: Start by assessing your energy consumption and sustainability targets. Understand how much energy you need and how renewable energy aligns with your long-term business goals.  
• Identify Key Stakeholders: Engage all relevant stakeholders within your organisation, including finance, sustainability, and operations teams. Securing internal buy-in is crucial for a successful PPA negotiation.  
• Evaluate Potential Renewable Energy Partners: Research renewable energy developers and suppliers to find a partner that aligns with your energy needs. Look for providers with a strong track record and experience in executing Corporate PPAs.  
• Perform Financial and Risk Assessments: Evaluate the long-term financial benefits and risks of a PPA. Ensure your company can commit to the terms and that the agreement aligns with your risk management strategy. 

Why Corporate PPAs should be a top priority for your business 

Corporate PPAs are not just a cost-saving tool but a strategic investment in your company's future. With rising energy prices, increased pressure for sustainability, and growing regulatory risks, now is the time to consider how a PPA can benefit your business.

By securing renewable energy through a Corporate PPA, your company can lock in energy prices, reduce its environmental footprint, and position itself as a leader in corporate responsibility. 

If you're ready to explore how a Corporate PPA can transform your energy strategy, contact us for a consultation and take the first step toward a more sustainable future.