Corporate Power Purchase Agreement
A Corporate Power Purchase Agreement (CPPA) is a contract between a corporate end user and a renewable generator. PPAs are typically signed for a long-term period.
For generators, CPPAs are a way to maximise their income from generation assets, as well as giving them long term certainty on price leaving them less exposed to volatile wholesale electricity prices. It can also be an important tool for securing the investment needed to build out new renewable generation, providing a guaranteed level of income over an extended period once the project is completed. In this way, CPPAs help to deliver more renewable energy to the grid.
For end users, a CPPA is a good way of ensuring that claims such as using 100% renewable power for your organisation can be clearly and accurately clarified. By purchasing clean power directly from a generator, you can claim with confidence that your choices and investment are delivering more clean energy. This avoids the growing risk of accusations of greenwashing that surround claims of using 100% renewable energy, which is often simply done through changing to a ‘green’ tariff that doesn’t actually result in more renewable energy being generated in real terms.
While the ability to clearly demonstrate where your clean energy claims originate from is a powerful one, CPPAs also offer other benefits that are making them increasingly popular. One primary benefit is the ability to secure fixed energy costs over an extended period of time. With many CPPAs running between 10 and 20 years, businesses can protect themselves from the volatility of the energy market and ensure that they are unaffected by sudden increases in wholesale prices. In turn, this makes forward planning much easier, allowing business and investment decisions to be made safe in the knowledge that your energy costs won’t fluctuate during the duration of your contract.
A variety of CPPAs are available, delivering power to your site in different ways. The simplest is a private wire, which allows power to be drawn directly from a neighbouring renewable generator through a private connection. However, this is often restricted by location.
Other CPPA options include a virtual contract, which allows power to be purchased at a pre-agreed price for the duration of the contract. In practice, the power generated is fed into the grid and not supplied directly to end users, but their CPPA ensures that their tariff is still directly funding renewable generation. A Sleeved CPPA works similarly, but uses an intermediary utility company to manage the transfer of money and energy. Multi-buyer CPPAs allow a group of multiple buyers to enter into a collective CPPA with a generator.