Power Purchase Agreement
A Corporate Power Purchase Agreement, known as a CPPA or PPA, is an energy contract between an energy user and a renewable energy generator. For businesses, this allows renewable energy to be purchased directly from the source. As a result, both purchaser and generator have more flexibility to fix a price over a given period of time, providing more certainty for both.
CPPAs have seen rapid growth in popularity in recent years. The benefits for businesses are clear, with CPPAs offering long-term security of price and supply, ensuring you a steady supply of renewable energy at a fixed price. For the generator, it offers a similar certainty that their power will be purchased at an agreed price for a fixed period of time. This eliminates the risks associated with the often volatile wholesale energy market.
Another major driver of CPPAs is the ability for an organisation to clearly demonstrate where they are sourcing their power from. This is vitally important when laying out sustainability plans and when relaying progress to key audiences.
Many suppliers now offer green energy tariffs, guaranteeing 100% renewable energy. However, as investors, partners, and the general public become more aware of the need for sustainability, this is no longer enough.
Many of these schemes operate using the sale and purchase of carbon credits, rather than genuinely sourcing renewable power. A direct PPA with a renewable generator guarantees that the power you are using is renewably generated, removing any risk of the accusation of ‘green-washing’.
CPPAs are an important driver of continued investment in the renewable energy sector, allowing developers to guarantee a certain price for the power they generate. As a result, it is easier for them to successfully fund large wind or solar farm developments, further fuelling the UK’s transition to sustainable generation.