I remember visiting a new micro-hydro scheme in a small town in Derbyshire, UK, about 15 years ago, and hearing the tales of its complicated genesis by a group of community energy volunteers. The technical and civil engineering aspects of installing an Archimedes screw turbine at the edge of a river had been a challenge for the group, but some of the financial complications were eased by the local Co-op Store stepping in and agreeing to buy the power generated, conveyed to the store by a new private wire.

The Co-op still buys power from Torrs Hydro now, 15 years on, under what we now call a renewables power purchase agreement (PPA). The scheme, still operated by local volunteers, has generated very nearly 2 GWh of green energy.

While many renewable energy schemes have been developed with the help of government subsidies and incentive schemes, it’s no surprise that the corporate sector has spotted the potential to create new sources of power by contracting to buy some or all of their output for lengthy periods of time. With electricity from renewable sources widely reported to be cheaper than fossil power today, it’s also no surprise that renewable PPAs are now growing in volume.

Corporate purchase agreements
Bloomberg New Energy Finance (BNEF) reported in its 1H 2024 Corporate Energy Market Outlook that, globally, corporations announced a new record of 46 GW of solar and wind purchase contracts signed in 2023, a rise of 12% compared to the previous record in 2022. BNEF suggests that improving power economics, particularly in Europe, alongside company clean energy goals, are the main drivers underpinning recent growth. It expects the numbers to rise again this year.

PPA-supported renewables schemes are now very big business indeed. BNEF says that, since 2008, corporations have announced renewable agreements for 198 GW of solar and wind-generating capacity – more than the power generation capacity of countries such as France, the UK and South Korea. BNEF again: ‘The market has grown 33% on average since 2015 and catalysed hundreds of billions of dollars of investment into the energy transition, marking the seventh year that the corporate PPA market has reached a new high.’

And, from the other side of the contract, buying clean energy has never been easier, adds BNEF, suggesting that the variety of contracting structures now available around the world mean that renewable PPAs are now the centrepiece in many companies’ sustainability strategies.

Some 45% of renewable PPA volumes announced in 2023 were in the Americas region, followed by Europe with 33% of the total. Corporate buyers include some of the world’s biggest tech companies, including Amazon (by far the biggest single buyer), Meta and Google. According to BNEF, Amazon announced 8.8 GW of PPAs across 16 countries in 2023 and the company’s clean energy portfolio totals nearly 334 GW, greater in size than the power generation fleets of markets such as Belgium and Chile.

French utility Engie sold the largest volume of clean energy to corporations through PPAs last year, followed by US-based AES, India’s Tata Power and Lightsource BP, says BNEF.

Another example is France’s TotalEnergies, which says it has signed renewable PPAs to the value of 1.5 GW of generation with 600 industrial and commercial customers worldwide. The company lists solar photovoltaic (PV) projects installed at customer sites at JFK Airport serving New York City; a cement plant in Belgium; a desalination plant in Oman; and a steel factory in Indonesia.

Meanwhile, Germany’s giant chemicals manufacturer BASF has agreed to purchase 49% of the output from Vattenfall’s 1.6 GW Nordlicht 1 and 2 wind farms to supply its production sites in Europe. With its PPAs in place, the Norlicht wind project is being built in the German North Sea without state subsidies, says BASF.

Buying clean energy has never been easier – the variety of contracting structures now available around the world mean that renewable PPAs are now the centrepiece in many companies’ sustainability strategies.

Government incentives
Today’s highly developed electricity-from-renewables industry was kick-started by a wide range of government incentive and support schemes around the world, many of which are operated through the power distribution system and are ultimately paid for by consumers.

In the UK, this started as the electricity industry was first privatised, with the Non-Fossil Fuel Obligation (NFFO) in 1990. This required electricity network operators to buy electricity from the renewable energy sector and was paid for by a levy on all electricity consumption. NFFO was followed a decade later by the Renewables Obligation, which required electricity suppliers to steadily increase the proportion of electricity sourced from renewables. And the evolution has continued to today’s ‘Contracts for Difference’ reverse auction scheme under which renewables developers bid for supply contracts.

But it’s clear that corporate power purchase agreements are a growing alternative to such schemes – and a sign of the maturity of the global renewables industry.

The views and opinions expressed in this article are strictly those of the author only and are not necessarily given or endorsed by or on behalf of the Energy Institute.

• Further reading: ‘PPAs are driving Europe’s energy transition’. Corporate power purchase agreements (PPAs) have become an important driver of the energy transition and also enhance energy security in Europe, explains Joop Hazenberg, Policy and Impact Director of the RE-Source Platform, Europe’s leading forum for direct renewable energy sourcing.
• Read more about the biggest solar corporate PPA deal in the UK.