Renewable power purchase agreements (PPAs) in the UK have increased by 1.2 gigawatts (GW) since September 2020, reaching a total of 30.7GW, says a report from energy consultancy Cornwall Insights.
The report attributes most of this new capacity to the UK’s contracts for difference (CfD) scheme, which is the UK Government’s main mechanism for supporting new low-carbon electricity generation. This pays renewables developers the difference between the cost of the low-carbon power they produce and the electricity market price.
As of March 2021, Cornwall Insights identified 905 megawatts [out of 1.1GW] of CfD planned capacity linked to a PPA, with a further 3.7GW of signed capacity not yet operational.
As government subsidies are scaled back, a corporate PPA can provide revenue certainty for project developers looking to raise finance for a new project. In turn, PPAs can bolster a corporate’s green credentials.
Most of the PPAs are being signed with new-build subsidy-free projects, the report says. Solar PV and wind were the preferred technologies, and the most common deal lengths were 10 and 15 years.
However, finalising a PPA continues to be a lengthy and difficult process. For short-term PPAs (around three years), risks arising from price cannibalisation – the depressive influence on wholesale electricity prices at times of high output from intermittent, weather-driven generation – remain a significant barrier.