RENEWABLE ENERGY
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FINANCING OUR RENEWABLE FUTURE
Vish Sharma, head of Power Purchase Agreements
at npower Business Solutions, asks: Can Power Purchase Agreements (PPAS) secure funding for new energy generation projects?
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nvesting in onsite energy generation has become an increasingly popular way businesses are
reducing energy risk and lowering their carbon emissions. There are numerous benefits, not least reducing their reliance on the wholesale energy markets, which have caused so much energy price volatility over recent years. In addition to this, there is the opportunity
for owners and operators of onsite generation assets to earn revenue by exporting excess power to other businesses. In fact, two-thirds of the independent
generators (67%) we surveyed in our report, Clean power 2030: Harnessing the power of the UK’s independent energy generators, said they’d seen an increase in demand fromcorporates to buy power from independent sources over the previous two years. One in five (21%) also said they are exporting their power to commercial customers, with the majority (58%) doing so through a fixed PPA, while one in five (20%) said they currently use a flexible PPA. So, for
Vish Sharma 14
organisations wanting to invest in an onsite asset, the business case can be compelling from an environmental, reputational and commercial point of view. However, securing capital to
fund an asset can be challenging. The Contracts for Difference (CfD) scheme
has been successful in financing many of the major renewable energy projects that have been commissioned in recent years. However, only a certain number of developers are successful after each allocation funding round, leaving most projects reliant on securing an alternative route of finance – particularly those installed onsite at commercial and public sector premises. This is where Power Purchase Agreements
(PPAs) and Corporate Power Purchase Agreements (CPPAs) are set to play a crucial role in funding future renewable energy generation projects.
WHAT IS A PPA? PPAs are a long-term contract between a generator and a buyer. They encompass all the commercial terms required to deliver a route to market for generation, including start dates, delivery schedules, pricing mechanisms, and payment terms. The time period is typically between five and 20 years and they can also include Renewable Obligation Certificates (ROCs) and Renewable Energy Guarantee of Origin (REGOs). PPAs and CPPAs are increasingly making
commercial sense as a way to finance renewable projects. They not only increase investor confidence in clean power projects and give energy generators a regular source of income, they also mean that organisations who buy their energy via a PPA benefit from long-term price stability from a guaranteed renewable source.
WHICH PPA IS RIGHT FOR YOUR ASSET? The best choice of PPA for a renewable generation asset will depend on a number of factors. These include the level of your annual output, the nature of their generation source, their risk appetite, and ultimately whether you want a steady revenue stream or wish to optimise profits with a flexible agreement. However, for those owners and operators that
are new to energy generation – or a new to selling their power – looking at the relative benefits of a fixed or flexible PPA is a good place to start.
ENERGY & SUSTAINABILITY SOLUTIONS - Autumn 2025
A fixed price PPA: • Sets an upfront price for each unit of power you export
• Provides a straightforward income stream, protected from volatile energy market fluctuations
• Offers competitive prices with the reassurance of regular, reliable payments
• Has agreed prices for typically between 6-36 months
• Is typically suited to smaller asset portfolio holders looking to cover their own overheads and sell the excess power.
A flexible PPA: • Gives the generator control - the ability to determine when and how much power is sold over the course of the contract
• Tracks the wholesale energy market to capitalise on price peaks and high demand
• Allows generators to benefit from real-time guidance via our award-winning Optimisation Desk and secure Risk Navigator portal
• Is ideal for generators with larger or growing assets
• Has the option of sophisticated flexible agreements for more advanced seller.
ACHIEVING GOALS While there are naturally risks associated with any investment, the long-termprice stability provided by PPAs and CPPAs are making them very attractive to both generators and businesses. They will also be a crucial financing mechanism
for new renewable generation if the UK is to achieve its clean power target by 2030 and its broader net zero ambition by 2050. To achieve these goals, the growth in onsite
generation on commercial or public sector premises is a huge opportunity. This is why the government needs to ensure
that the PPA and CPPA market is in the best position possible to support this by making them a key part of future energy policy.
nPower Business Solutions
https://npowerbusinesssolutions.com/
www.essmag.co.uk
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