The rise in the number of such back to back corporate or "sleeved" PPA's has been consistent over the last few years. We advised on the first wave of these arrangements over a decade ago but what followed was a series of fallow years so why are corporate PPAs now back in vogue?
There are some obvious reasons such as the rise in ESG and decarbonisation awareness. This has been stimulated further by the UK government move to Net Zero and the peer pressure brought about by the Renewable Energy 100 (RE100) signatory companies committing to renewable energy supplies.
From a generator's perspective we have seen wind and solar developers in particular, grappling with the withdrawal of the support mechanisms such as the Renewables Obligation and looking for a secure long term revenue stream for their power. In that sense perhaps, there has been more of a willingness on the part of the generators to consider corporate PPAs whereas in the past the main concern might understandably, have been closing the project within the RO window and securing a price for ROCs and the electricity quickly from a bankable licensed supplier.
Some have observed that the corporates have benefitted from somewhat of a buyers market recently but if that is the case, how much longer will it last? The pipeline of new "ready to build" onshore projects has dropped off and might remain constrained for the next few years as the inevitable result of the Westminster policy changes made a few years ago. In the medium term things are looking healthier and with Net Zero has come the realisation that new onshore renewables have an important role to play.
Corporate PPA's can work really well and we see a steady stream of corporates and wider organisations including the public sector looking at them. That said the renewables sector and the government who can see these PPAS as a stimulus for the sector, also need to be realistic that the number of organisations that have the electricity needs, the internal resources to arrange one and the willingness to enter a long term power offtake arrangement is not endless.
So aside from having the right advisors who have documented these arrangements before, what would be our top tip for generators and corporates considering these arrangements? That is actually a pretty easy one to answer .......there needs to be a "can do" cooperative, committed attitude between all parties, including the sleeving energy supplier, from the outset and throughout the process.
Under the sleeved corporate PPA, Tesco will purchase 100% of the electricity generated by the wind farm at a long term fixed price. The PPA has been signed as part of a wider programme of investment by Tesco to meet its commitment to source 100% of electricity across the Tesco Group from renewable sources by 2030.