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This is where businesses who have an onsite energy generation asset can step in. In fact, according to our latest report - Clean power 2030: Harnessing the power of the UK’s independent energy generators2
- which gauged the views of more than
350 independent generators across the country, more and more businesses are choosing to buy their power from independent sources.
Of the generators we surveyed, two-thirds (67%), said they have seen an increase in business demand to buy power from independent sources over the past two years, with 30% saying this was a significant increase.
What are the benefits to businesses in procuring their power this way? The report showed that stable pricing that is not impacted by the wholesale energy market was the top benefit (48%), followed by guaranteed clean energy supply (33%), and greater energy security (14%).
In addition, one in five (21%) generators are already exporting their power to commercial customers with the majority (58%) doing so through a fixed Power Purchase Agreement (PPA). One in five (20%) said they currently use a flexible PPA.
When asked about the benefits of selling their power via a PPA, the two-thirds said securing regular or additional revenue was the prime benefit, followed by supporting the low-carbon energy transition (16%) and giving long-term investor confidence in a project (12%).
This is why we believe 2025 could be a real opportunity for the UK’s independent energy generators to meet the business demand for renewable energy and support the wider UK plans for a clean power system.
Selling Your Power
So, if your business has an on-site asset, or you are considering investing in one, what is the best way to sell your energy to other commercial organisations?
The best route to market is via a Power Purchase Agreement (PPA). As a contract between a generator and a business, a PPA encompasses all the commercial terms required to deliver a route to market for generation, including start dates, delivery schedules, pricing mechanisms, and payment terms.
They can also include Renewable Obligation Certificates (ROCs) and Renewable Energy Guarantee of Origin (REGOs), and importantly, they can cover an existing generation asset or provide assurance and confidence to investors in the financing of new renewable projects.
PPAs are becoming increasingly popular, with our research showing that one in five (21%) generators are already exporting their power to commercial customers via either a fixed or flexible PPA.
According to the report, the top three benefits for generators wanting to sell their power to businesses via a PPA were:
☑ Additional revenue - this will depend on the type of PPA, for example a fixed PPA provides a straightforward income stream and is protected from volatile energy market fluctuation, while a flexible PPA gives you control over when and how much power you sell over the course of the contract.
☑ Supporting the energy transition - with more and more businesses procuring their power from clean energy sources, independent generators have an important role to play in both meeting this demand, and contributing to the UK’s overall net zero strategy.
☑ Investor confidence - as mentioned, PPAs can provide confidence to investors when it comes to funding a new renewable energy asset. So, if your organisation is considering installing a renewable energy asset, then getting a PPA in place could provide the added reassurance to help secure investment.
Of course, the best choice of PPA for your asset will depend on a number of factors, including the level of your annual output, the nature of your generation source, your risk appetite and ultimately, whether you want a steady and risk-free revenue stream, or wish to optimise profits with a flexible agreement.
However, for those businesses who are new to selling their power, working with an expert partner who can advise on the relative benefits of a fixed or flexible PPA is a good place to start.
Supporting The Business Case For Onsite Generation
For facilities managers who recognise the benefits of an onsite generation asset, and want to demonstrate the ROI for the investment in a project, the ability to earn additional revenue, while also reducing their own business’ energy costs and carbon emissions, is a compelling argument.
In addition, the results from our research show that the demand from other businesses for their power is there. That is why onsite generation, and selling your power via a PPA, makes commercial and environmental sense.
1:
https://npowerbusinesssolutions.com/businessconfidence2024 2:
https://npowerbusinesssolutions.com/voiceofgenerators2024
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