Power to the purchases: the CPPA evolution

Demand for UK Corporate Power Purchase Agreements (CPPAs) is gaining momentum amidst new European ESG reporting requirements, volatile energy costs and rising energy demand across industries from data centres to pharmaceuticals. 

Traditionally the domain of energy giants and multinationals, CPPAs are also rapidly evolving to give industrial and commercial (I&C) businesses greater access, with rising demand from industries as diverse as retail, healthcare and hospitality. This could herald a democratisation of renewable energy, end energy exclusivity and make secure, traceable green power available to companies large and small.

With that said, UK firms face major barriers to adoption, including project availability, generator credit requirements and the daunting cost and complexity of the contractual requirements including rigid terms and conditions. There is an urgent need for new innovations to open up the CPPA market and make projects directly accessible and affordable to a wider range of companies.

The drivers of market growth

A perfect storm of circumstances is sparking increased interest in CPPAs across the I&C sector. ESG reporting requirements such as the EU Corporate Sustainability Reporting Directive are now seeing many retailers include sustainability requirements in competitive tenders for their own demand, as well as their supply chains, linked to Scope 3 emissions and to satisfy more robust reporting requirements which are aligned to the Science Based Targets initiative (SBTi).

Related:Weaveley Solar Park, Blenheim Palace celebrate import-export milestone

At the same time, geopolitical conflicts – from Yemen to Ukraine – and dunkelflaute dips in renewable energy generation during solar or wind droughts are causing frequent power price volatility. Wholesale electricity prices in the UK again spiked to £250/MWh during one such event in January 2025, negatively impacting commercial energy bills across the country. 

This comes as a decline in wind production and embargoes on Russian gas have depleted Europe’s gas stores, which were filled to 56.6% of capacity as of June 2025. Storage levels remain well down against the same time last year, when sites were filled to 75.5%.

This is driving rising demand for solutions such as CPPAs that can provide long-term price stability and energy security. At the same time, the market is becoming more favourable with 2024 marking a record year for renewable energy generation across the UK and average prices for CPPAs started to fall.

High barriers to entry

There remain significant barriers to I&C organisations being able to access CPPAs, as developers – particularly of new-build assets – typically prefer 10–15-year contracts to satisfy current or future debt financing requirements, where they often have the ability to secure their revenues through the highly attractive government Contracts for Difference (CfD) subsidy mechanism. 

Related:eEnergy chosen as preferred supplier for GB Energy school solar delivery

The CfD scheme in isolation is keeping generator price requirements high and tenors inflexibly long if they are to be otherwise incentivised to sell their power for new projects through a CPPA. 

Furthermore, early indications, based on how the government has increased the strike price caps for wind technologies for the upcoming CfD Auction Round 7, are that generators will continue to be disincentivised from considering a CPPA instead of a CfD.

A long-term commitment might not only be daunting but is worlds apart from how some businesses typically commit to their forward hedging horizon, which presents difficulty in securing board consent. 

Additionally, businesses, including those with prominent brands, struggle to satisfy the high level of credit required to secure a CPPA; many developers will require an investment-grade counterparty, otherwise they will seek alternative credit mitigation through cash collateral or a Letter of Credit (LoC), which can tie up significant capital and can make a CPPA financially unviable.  

Related:UK solar mergers and acquisitions boom with grid reform deadline looming

Many businesses also lack the knowledge and resources to navigate a diverse and complex renewables supply market, where there is little standardisation. They may be unsure of their own future energy needs or the risks to supply from different renewable power sources and are therefore unable to accurately assess which kind of assets and CPPA structure suits them best. CPPAs are highly complex and materially significant in value, with an associated liability regime, and therefore require legal review. 

As corporate buyers are unable to satisfy data provision to the generator within the CPPA, they must effectively sub-contract their obligations to a licensed supplier and seek equivalent indemnities through a Sleeving Agreement that governs the integration of the renewable energy into the buyers’ supply arrangements. 

Legal costs can quickly mount up on all sides and the need for the indemnities reduces motivation for licensed suppliers to commercially support renewable energy through independent generators. Negotiations can become protracted, and so a CPPA can take anything from several months to a couple of years to negotiate, which can deter one or more parties from executing the deal.

There is a clear and pressing need to overhaul the CPPA market and lower barriers to adoption, including generator credit constraints, helping simultaneously to reduce costs and risks for I&C consumers.

Towards a democratic CPPA marketplace

CPPAs for existing, non-CfD subsidised assets are slowly evolving from the traditional model of complex bilateral contracts towards simpler, more affordable and shorter-tenor models that are bringing the benefits of renewable energy to a wider array of businesses.  For example, joining a renewable energy consortium can now give companies all the benefits of a standalone CPPA, but without many of the associated costs and risks. 

These consortiums involve flexible supply frameworks and offer a more compelling alternative to ‘green products’ that merely allocate REGO certificates against conventional brown power procured in the wholesale market. Consortiums enhance the ability to time-match generation to demand and offer an affordable, secure route to sustainability for companies that cannot otherwise access certifiable renewable power due to credit constraints and/or minimum volume requirements.

Some CPPAs are now being structured to include supply licence exemption arrangements (such as Class A), which allow smaller generators to supply up to 2.5MW of their power per half-hourly settlement period, provided the generation source is directly matched with the demand. 

‘Exempt supply’ does not attract government social and policy costs, which is attractive on the one hand because generators and corporate consumers are already separately contributing to UK net zero targets under their own alternative financial commitments, and on the other, the cost savings help to justify continued investment in renewable supply solutions.

Corporates are also adopting multifaceted energy strategies that blend CPPAs with other solutions, including onsite storage and generation, to help combat a lack of available grid capacity and the associated cost and lengthy time constraints of infrastructure upgrades. Drawing on a portfolio of smaller renewable generators, instead of a single larger generator, also gives companies the benefit of strength in numbers, helping diversify and thus de-risk their energy supplies in case any individual generator goes offline.

Market transparency is improving too. There’s now a growing array of service providers whose software platforms can help companies identify renewable energy projects aligned to their individual energy needs and help structure bespoke contracts or advise them on the best deals. For example, we provide a full breakdown of energy consumption and offer bespoke CPPAs and multiple funding options.

The tipping point

We are rapidly reaching a tipping point where traceable green energy is becoming increasingly important across the I&C sector. The prize is greater transparency of emissions, accelerated carbon reduction and price certainty – at a time when UK net zero goals and supply chain requirements relating to Scope 3 emissions are firmly in the spotlight. 

Yet this will require a shift from an opaque, complex and inefficient market model to a more transparent, flexible and open marketplace.

Lowering barriers to entry will require generators to coalesce around standardised terms and conditions, creating more streamlined, simplified and transparent contracts. Greater standardisation and commoditisation may also widen consumer choice and enhance collective transparency. 

Ultimately, we could see a shift towards specialist intermediaries and platforms offering a menu of projects that provide a range in scale and tenors, catering to a wide variety of industry energy needs. Creating a more affordable and accessible renewable energy marketplace could accelerate the energy transition and bring traceable clean energy to every sector of the economy.