Growing renewable energy options help businesses meet carbon-reduction targets
Renewable energy is in demand like never before. Businesses of all sizes are prioritising carbon reduction and environmental responsibility, driven both by government targets and by demand from customers for more sustainable products and services.
In a recent article for Business Green, Russell Reading, ENGIE’s Renewable Operations Director explains how Corporate Power Purchase Agreements (CPPAs) are adding to the carbon-free energy options available to businesses to decarbonise.
Increasing demand for carbon-free energy
“In the past six years, we’ve seen a huge increase in the number of businesses looking at green electricity contracts, from a base of almost no interest outside of a few major corporations, to a situation where most businesses have renewable energy on their minds.” Russell says.
“Even now, the renewable energy supply market is quite polarised. At one end of the scale are simple green electricity supply contracts backed by Renewable Energy Guarantees of Origin (REGOs), which appeal to businesses who need simplicity and cannot make the long-term financial commitments needed to secure Corporate Power Purchase Agreements (CPPAs). CPPAs, at the other end of the scale, enable those relatively few larger organisations that can commit to long-term fixed-price supply agreements with new renewable power plants, to access fixed price guaranteed green energy supplies from a designated source for their business over the next 15 years. In return they give the payment guarantees required to get new renewable projects off the ground.”
New green energy purchasing options
With the renewable energy supply market is beginning to evolve, Russell adds that there are more options for businesses of all sizes to source their electricity from renewable generators.
Most significantly, shorter-term corporate PPAs have been developed to appeal to a much wider market, with contract terms of as little as three to five years. This type of corporate PPA still involves a direct supply from a renewable generator, but the business signing the contract does not have to be the sole off-taker from that asset and the CPPA is much more integrated into the supply agreement making it much easier, and crucially efficient, to set up and run.
Whereas the traditional CPPA was typically a long-term fixed price (with indexation) agreement, the new breed of CPPAs are much more like a conventional energy supply contract. They can incorporate fixed prices or flexible market price deals, enabling businesses to choose between price stability or access to more market-reflective rates.
These new Corporate PPAs are integrated into more familiar energy supply agreements, so a business may opt for a five-year CPPA with a solar power generator, and then secure the rest of their energy via a green energy supply contract with options available to ensure they can still know the source of their green energy. The new short-term CPPAs offer a really simple, low-risk way for businesses to access renewable energy generation because the CPPA is provided by an energy supplier that has an established long-term PPA with the generator. This type of agreement eliminates the need for complex balancing or sleeving agreements and legal contracts.
Short-term arrangements enable businesses to dip their toe into the world of CPPAs or even make the transition to more traditional CPPAs. The difference between a corporate PPA and a standard green energy supply contract is that it enables a business to know before the contract starts precisely which generator its renewable electricity will be coming from, and access fixed prices for this in advance.
Read the full article on Business Green here