Corporate PPAs: please form an orderly queue

With the promise of long-term fixed price agreements with creditworthy consumers, corporate power purchase agreements (CPPAs) have become one of the most talked about routes to market for new subsidy-free generators. CPPAs provide for the sale of electricity from a developer to a final consumer typically using a supplier to interface with market trading rules. Many large consumers are interested in them as a way of decarbonising their power supplies and in aiding budget certainty.

Recent announcements from developers such as Lightsource and EnergieKontor show that subsidy-free CPPAs can be delivered, but the scale of this model on a market-wide level is still being evaluated. This week’s Chart of the Week shines a light on this potential for increasing CPPA uptake by looking at the demand and supply balance.

For supply we have estimated new build onshore renewables capacity—currently ineligible for subsidy—from BEIS’ Renewable Energy Planning Database (REPD) based on projects with planning permission and grid connection dates already in place. Taking an average view on load factors, we have then calculated the volume production of this potential pipeline over the next five years.

This is compared to our calculation of aggregated demand of RE100 consumers in Great Britain. RE100 is a global corporate initiative which brings together leading multinationals committed to consuming 100% renewable electricity. Demand is then forecast against BEIS Energy and Emission Projections changes to show a like-for-like volume view of generation and consumption. We also show the existing RE100 demand we understand is currently being serviced by CPPAs. By 2021, the development pipeline for new subsidy-free assets is forecast to outstrip the demand from RE100 corporates and by 2024 it could be more than double their needs at 18TWh. Some developers are already looking to grow their market into small and medium business customers or advocating for other large energy users to opt-in for long-term fixed price agreements. However, business consumers are clued up on market trends and we could see a buyer’s market for CPPAs, potentially impacting who has the final say in all important negotiations around price and tenure.