Renewable energy procurement plays a critical role in helping businesses realise their pathway to net zero, particularly in the early transition phases. Tim Wynn Jones, Head of Consultative Solutions for Centrica Business Solutions, explains how Private and Public Sector organisations can integrate innovative Power Purchase Agreements (PPAs) and other renewable supply options into their sustainable energy plans.
The most environmentally advanced organisations are shifting to an integrated energy solutions model, combining on-site renewable generation and storage, maximising efficiency opportunities and making use of digital technologies to inform energy and carbon performance and optimise flexibility.
However, it's likely that even the most sustainable businesses will need to buy-in, rather than self-generate, a proportion of their renewable power demand; especially in the earlier stages of a net-zero journey.
The challenge is integrating clean energy generation and procurement from integrated energy assets into a long-term sustainability strategy that maximises efficiency and optimisation opportunities. Centrica Business Solutions is uniquely positioned to manage this challenge and deliver all elements of complex corporate sustainable energy strategies.
As global leaders in energy trading, supply and all areas of sustainable energy management, we bring together market expertise across distributed energy generation, energy supply, optimisation and operation and maintenance services. We combine these services with flexible financing, enabling organisations to choose whether to fund these solutions through CAPEX or OPEX, and on or off balance sheet.
This means you can engage with one single experienced energy partner rather than multiple suppliers. We can help you streamline the procurement of services to tackle carbon and cost reduction across power, heat and transport (via electric vehicle charging infrastructure).
While integrated energy solutions such as renewable onsite generation and storage will accelerate decarbonisation, many businesses are unable to go entirely off-grid (and for many it would be unwise to do so). This means they must purchase their residual power demand. For sites that don't have the capability to deploy distributed energy resources, sustainable energy procurement is even more important.
The falling cost and increasing demand for renewable power relative to fossil-fuel sources is increasing the cost-competitiveness of sustainable energy procurement in many markets across the UK, Europe and North America. This has spurred market innovation, leading to the availability of a flexible suite of products that can be tailored to requirements.
Sustainable procurement options
There is 'no one-size-fits-all' solution when it comes to purchasing renewable electricity, but it's important to select a fully traceable, certified product that can complement other on-site carbon reduction measures.
The optimum solution from an environmental perspective is a product that provides long-term cost assurance, while enabling the commissioning of additional renewable generation, rather than off-taking power from an existing asset. Procurement options include:
Our 100% renewable electricity for large businesses is independently certified by the Carbon Trust and we’re the largest, and only the second supplier, to achieve this. Our product carries the Carbon Trust 100% renewable label which gives our customers and their stakeholders a clear visual signal to help verify the origin of the renewable electricity as part of sustainability reporting requirements.
Each unit of billed consumption is matched to renewable energy guarantee of origin certificates which enables you to report zero grams CO2 per kWh from purchased electricity using the market-based reporting method, in accordance with the GHG Protocol Scope 2 guidance. Corporate customers often combine this type of utilities contract with Power Purchase Agreements (PPAs).
PPAs are long term supply contracts for trading power from an independent renewable power generator to a business. Your PPA provides financial certainty to both you and the project developer, supporting additionality of new renewable generation infrastructure.
There are many different types of PPA. We design bespoke solutions to integrate with your sustainable energy strategy and meet the energy demand profile and physical capabilities of your sites.
These products range from on-site PPAs, which provide an opportunity to install CAPEX free renewable infrastructure on your premises, through to “sleeved” and “virtual” options. PPAs are evolving and we're constantly innovating to develop new products that can enable smaller businesses to participate in the renewable energy community.
Within the wider Renewable Power Purchase Agreement (PPA) category, there are several types of PPAs that public sector organisations and businesses can have access to.
Commercial Solar PPA
Under our Commercial Solar PPA, there is no capital investment, no PV system ownership responsibilities, and no ongoing operating or maintenance expenses. Customers simply pay for the power that their solar PV system generates at a fixed price/kWh rate, and we take care of everything else. This provides long-term energy cost control at a price typically below that of grid electricity (by how much is determined by the scale of project and your preferred contract duration)
On-site PPAs are often referred to as “behind the meter”, whereby the electricity is fed directly into the site without use of the distribution or transmission system, reducing the site’s demand from the grid and potentially exporting excess generation on to the grid. This can provide a cost-effective route to decarbonisation and support resiliency.
Private wire PPA
With a Private Wire PPA Centrica Business Solutions will finance, build, operate and maintain an electricity generation asset on client excess or third-party land in close proximity to the site, with a “private wire” feeding electricity directly into the site, reducing the site’s demand from the grid and potentially exporting excess generation on to the grid. We can also provide any residual demand from the grid via traditional supply contracts or offsite PPAs.
These break down into two key types of PPA (sleeved or virtual). In all cases Renewable Energy Guarantees of Origin (REGO) are delivered to the buyer to prove that the power is from a renewable source and to meet disclosure and reporting requirements.
Sleeved PPAs are more commonly known as corporate PPAs. Under this structure, Centrica acts as an intermediary by creating a back-to-back supply agreement between the client and offsite renewable generation sources. Centrica takes delivery of the energy and “sleeves” it to the client’s supply contract (this can be via the client’s existing supplier if this is not Centrica).
In instances where Centrica is also the import supplier we can also top-up the electricity delivered to meet the client’s total energy demands, and provide the necessary balancing, firming and settlement functions. We ensure that renewable supply is fully traceable and that origins are guaranteed.
Virtual PPAs (also known as Synthetic PPAs) are a form of a hedge where the generators and client off-takers buy and sell energy on the wholesale market either directly or via Centrica. Synthetic PPAs can be structured as a contract-for-difference, with an agreed strike price mechanism for the generated electricity sold by Centrica.
If prices achieved on the wholesale market are lower than the strike price, the client would pay the difference back to Centrica. If prices achieved on the wholesale market are higher, Centrica would pay the difference to the client. Alternatively this can be structured as an options agreement including a price collar. This structure provides flexibility in the number and location of loads supplied and thus enables aggregate multi-site and multi-buyer models.
PPAs offer an efficient and rapid route to achieving renewable energy goals, which is especially important during the transition to net-zero. Businesses gain full transparency of renewable sources and are provided with REGOs to evidence the origin of supply, which underpins greenhouse gas reporting. We strongly advocate agreements which support funding of additional new renewable generators, resulting in additionality.
In current challenging economic times, PPAs don't require capital expenditure, allowing businesses to make progress in meeting their environmental obligations, while improving their brand reputation. PPAs can also support long-term planning, providing cost certainly, avoiding risk and yielding longer term energy savings.
How we can help
PPAs and other sustainable procurement products are only one part of the sustainable energy 'tool box'. Centrica Business Solutions can help you to develop and implement an integrated sustainable energy strategy that is tailored to your long-term business needs.
If you are a renewable energy developer, 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 we can provide this route to market.
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