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.