Renewable power: Why corporate PPAs are a crucial ingredient for net zero

The journey toward a net zero future by 2050 is a significant undertaking. To achieve this goal, it’s estimated annual power generation must double, and low carbon power generation must quadruple. That’s a monumental task, which will require a huge deployment of renewable technology.

The government intends to step up the pace of decarbonisation and has estimated that its mission to deliver clean power by 2030 will require at least a doubling of current onshore wind capacity, and a three to fourfold increase in current offshore wind and solar capacity.

Government initiatives like the Contract for Difference (CfD) scheme continue to play a critical role in funding the construction of renewable sites, and we are very pleased to see an increased budget recently announced by the UK government so we can get ahead in what is a global race and restore investor confidence. The CfD is fundamentally a good mechanism, but in light of recent rounds not delivering enough new projects to keep us on track for achieving these 2030 and 2050 targets, we also need additional methods of driving renewable investment.  

Businesses, too, play a pivotal role in achieving net zero, and must continue to forge their own paths to lowering their carbon emissions. More than half of the UK’s largest companies have committed to eliminating their contribution to carbon emissions by 2050. But this endeavour is far from easy. Tracking and reporting emissions across complex supply chains remain significant challenges, resulting in businesses currently on course to reduce emissions by only 40%.

Bridging the gap to net zero with corporate PPAs

Corporate Power Purchase Agreements (CPPAs) offer a powerful solution. These agreements allow businesses to procure renewable energy from a new renewable site at an agreed fixed price. In doing so, companies not only secure a reliable renewable energy supply for a long term into the future in today’s tricky wholesale market, but deliver meaningful change by driving investment into new renewable sites.

Project developers benefit from financial certainty, alongside the confidence to take a final investment decision on the new renewable site supported by the corporate PPA, ultimately building new sites that otherwise wouldn’t be possible without government subsidies.

This direct link between businesses and renewable projects ensures traceability of supply and empowers companies to know exactly where their energy is coming from. By providing complete transparency, corporate PPAs elevate a business’ ESG and carbon reduction strategy.

These unique agreements are among the strongest tools for businesses to reduce and report zero scope two emissions. They can even open the door to funding schemes for public and education sector businesses. And for B2B suppliers, corporate PPAs allow businesses to demonstrate how they’re reducing scope three emissions for their own customers.

While businesses can make contributions to reaching net zero in many ways, such as installing solar panels or using electric vehicles, corporate PPAs offer a unique way to deliver true additionality. Through these agreements, businesses actively contribute large ‘utility-scale’ amounts of additional renewable energy to the grid, propelling the country towards its targets.

Corporate PPAs also offer financial security to generators, encouraging further development, job creation, and overall economic growth. With a fixed power price typically spanning 10 to 15 years, the agreements offer increased budget certainty and risk management in a market that has been immensely volatile in recent years.

Yet, despite the many benefits for both corporates and generators, corporate PPAs currently account for less than five percent of total renewable generation on the grid. With many corporate PPA-backed renewable sites now under construction, this figure is set to grow. Embracing these agreements can help bridge the gap between renewable energy demand and supply, and help ensure a smoother transition to net zero, which alongside the government’s CfD scheme gives Britain the best chance of achieving its targets.

Customised solutions for every business   

EDF offtakes the most renewable electricity of any energy supplier in Great Britain, with the highest PPA market share under contract, according to Cornwall Insight.

A recent example of a business benefitting from a corporate PPA is Tesco, which has contributed to the development of four large new build wind farms and five solar farms. Tesco’s latest corporate PPA will generate enough clean energy to power the equivalent of more than 80 average sized supermarkets for a year. These PPAs help Tesco to meet its target of achieving carbon neutrality in its own operations by 2035, and most crucially, positively contribute towards the UK achieving its net zero targets.

Organisations looking to reach net zero will continue to seek new and innovative ways to reduce their supply chain emissions. With bespoke corporate PPAs, companies can ensure the maximum authenticity of their carbon credentials and help to bring brand new, additional renewable generation to the grid. And working with experts, like those in the EDF Business Solutions team, can make the whole process much simpler.