Posted on: 13/06/2018
Our Strategic Sales Manager, Michael Watts looks at Corporate PPAs from the consumer’s point of view. He explores the consumer trends driving interest in these agreements and why we expect to see them accelerate in the future.
With renewable subsidies already allocated to existing generation projects, we’re seeing a hiatus in new project development and generators have begun to actively seek alternative sources of funding. This has put an increasing focus on the role of large power consumers to enter into what are generally termed as Corporate PPA - an agreement between a generator and a large investment-grade consumer.
These agreements are attractive to large consumers as they can provide long-term price certainty for part of their energy supply. They can also support business sustainability ambitions, demonstrating additionality by enabling a project that might not otherwise get built.
Generators are turning to large corporations to lead the way and we’re seeing a growing interest in Corporate PPAs from businesses – both large and small. So, what are the consumer trends driving interest?
1. Companies are becoming more sustainably aware and responsible
Some of the world’s leading businesses are choosing renewable energy supply as part of their environmental sustainability commitments. This trend is being driven by not-for-profit groups and organisations such as RE100, CDP and Science Based Targets. Read our Guide to Purchasing and Reporting Renewable Energy for more information.
2. Business energy strategies are changing
As the energy landscape continues to change, large businesses are playing a more active role in the energy system, influencing strategic decisions and employee behaviours around energy procurement, efficiency and flexibility – all shaping the business energy strategy.
3. Consumers are looking to protect themselves against long-term price rises
Intermittent generation is making a material difference to the cost of energy. With overall delivered prices set to continue rising, consumers are looking for long term price security and potential cost saving opportunities.
Corporate PPAs are inherently complex but using our experience in aggregation and supply we are aiming to simplify the process for generators and consumers. See our Corporate PPA contract model below whereby a consumer provides a long-term price guarantee and the generator agrees to pay a value share for that commitment. SmartestEnergy, as the supplier administers the value share and settles the appropriate payments/charges.
Given the nature of our business, SmartestEnergy have a vested interest in ensuring both consumers and generators meet their business interests. Our Corporate PPA is built on an existing supply or PPA contract with an additional long-term agreement defining the extra terms, enabling us to minimise the non-standard contract components.
If you would like to learn more about the commercial and sustainable benefits of our Corporate PPA product, please get in touch to arrange a meeting.