Businesses and public bodies are more committed to sustainability than ever before. They recognise the cost and carbon saving benefits of renewable solar power, but are more cost conscious and cautious in these difficult economic times.
So how do these reluctant investors make the switch to renewable power without spending precious capital, straining finances or incurring risk?.
Delaying the switch to solar and missing out on the benefits of emissions and energy cost reduction is certainly not a good idea. With energy bills rising, solar enables you to deliver on net zero goals while controlling long-term costs. Making the shift to renewables will also improve brand reputation and meet stakeholder demands by demonstrating environmental responsibility.
The future low carbon economy relies on steep growth in solar and wind power. The UK National Grid aims to be capable of operating the world's first carbon-free electricity system by 2025. We gained a glimpse into what this decarbonised grid could look like during lockdown, when renewables supplied a record 67.5% share of UK electricity during May, with solar playing a major role.
The rapid electrification of transport and heat over the next decade will drive much higher demand for solar and wind power. The International Renewable Energy Agency (IRENA) estimates that nearly $22.5 trillion must be invested in renewable infrastructure by 2050 to meet net zero goals.
Where will this additional green energy capacity come from? What role can organisations play in contributing to new renewable generation? How can organisations directly benefit from new zero carbon generation?
One option is to invest in your own on-site solar project.
Capital investment in solar may not be the right choice for all organisations. Many don't have the capital for a non-core business project, or the right site, or just don't want the responsibility of solar ownership.
Renewable Power Purchase Agreements (PPAs) provide the best of both worlds. PPAs are a proven method for managing the complexity and financial risk of renewable generation projects. Public bodies and businesses have an opportunity to reduce energy costs and carbon emissions, without any responsibility for the capital cost, ownership, or operation and maintenance of the asset.
You can use PPAs to source 100% of your renewable power, while also helping to fund additional new generation infrastructure. This involves forming a long-term (10-25 year) contract with a renewable power generator.
The bilateral contract provides a quid pro quo, where sellers (or generators) gain funding for a bankable project. Buyers (or offtakers) improve carbon performance and gain long time energy cost assurance and budget control.
PPAs are used widely across the commercial and public sectors in North America. They are now growing in popularity across the UK and Europe. Data from Bloomberg New Energy Finance shows that renewable capacity from corporate PPAs (where end users contract directly with the generator) reached 19.5 GW per year in 2019 – more than triple the 2017 volume.
Centrica Business Solutions delivered its first behind the meter solar PPA in 2011 and is a specialist in the market.
Since then, we have delivered many PPAs across UK, Europe and North America. We combine trading and supply capabilities with expertise across all aspects of low carbon energy management.
There are many different PPA options. We work in partnership with our customers to tailor products to their specific needs and site energy profile – shaping agreements around their broader carbon reduction strategy. This often involves developing a combined net zero plan that exploits the potential of distributed energy resources.
The optimum solution is an on-site commercial solar PPA, which is a highly visible statement of your commitment to sustainability. As one of the world's leading solar providers, we can design and build bespoke projects on or close to customer sites. We can take care of the long-term funding, operation and maintenance of assets via commercial solar PPA agreements. You just pay for the power consumed at a fixed rate that is typically lower than purchasing electricity from the grid.
There are two key types of commercial solar PPAs:
Our professional engineering and service team ensure that the asset operates efficiently to maximise cost savings. We also optimise power flexibility by exploiting demand response opportunities, in line with the customer's operational requirements.
Where it's not possible to locate solar generation on or close to your site, there are off-site PPA options. These break down into two key types of PPA (physical or virtual/synthetic). In all cases, Renewable Energy Guarantees of Origin (REGO) are delivered to the buyer to prove that the power is from an identified renewable source. This supports disclosure and reporting requirements.
The main choice is whether to select a physical or virtual PPA. With a physical PPA, the buyer and generator are on the same grid and the transaction is generally 'sleeved' by the supplier, who acts as the intermediary in delivering the power to the customer and ensures that the energy is fully guaranteed and traceable. A pool of generation assets may be used.
In the case of a virtual, or synthetic PPA, the connection between the buyer and seller is much looser and they may even be in different countries. This power is usually traded on a contracts for difference basis, where the customer pays a fixed MWh price, but adjustments are made in line with whether spot wholesale prices rise or fall on a shared risk basis.
Solar PPAs are a mutually beneficial partnership between buyer and seller. Key deliverables of successful agreements are:
Centrica Business Solutions combines commercial solar installation expertise with global leadership in energy trading and supply. We can provide the end-to-end support to help you deliver on your cost and carbon saving ambitions.
We are talking to a number of major clients actively looking for solar PPAs at the moment. If you have schemes in development for delivery 2021 to 2023, please contact us to discuss how solar PPAs can support your net zero goals.