The most recent online seminar hosted by the Livery Climate Action Group took the topic of Power Purchase Agreements. They may sound rather niche, but they are a growing part of the way that corporates are responding to the climate crisis.
There is a need to accelerate the decarbonisation of our energy systems. Our housing stock and commercial and industrial buildings create some 40% of carbon emissions today. The electricity grid is becoming greener by sourcing energy from wind and solar but more needs to be done. Locally, district heating systems and heat pumps as well as PV cells on buildings are all part of the mix. Fears that the rise in energy costs would lead to a return to fossil fuels has not materialised but has largely created a greater incentive to look to resilience in energy supplies and to pursue greener options.
One vehicle that is popular for large users of electricity is the use of Power Purchase Agreements (PPAs). There are commercial contracts to buy long term electricity directly from a generator. As presently configured, these create a direct relationship between the corporate buyer and the solar/wind generator. Corporates can rely on a supply that they know is certifiably green and long-term, which means that they can have reliable prices for renewable supplies that are both good for their reputation but ensure that they meet their net zero targets.
Whilst the logistics seem a bit cumbersome and the risks need to be assessed by anyone entering such an arrangement, they are proving very popular. In the seminar Phil Dominy, Director Strategy and Transactions – Energy at EY outlined the process and examined the risks and purpose. PPAs are widespread geographically and the top 5 sectors using them are ICT, heavy industry, telecoms, transport and consumer goods.
What the seminar brought home to the attendees is that the City of London Corporation has entered into a PPA and this is now providing 50% of the Corporation’s’ energy needs. Graeme Low from the Corporation’s energy team said that it is the first public sector off-taker PPA. It is backed by a solar farm in Dorset which was specially built to provide this contractual arrangement. This will last for 25 years at the end of which the land use is likely to revert to agricultural.
The Corporation are now exploring the creation of a multi off-taker PPA that could be used by a number of City occupiers effectively clubbing together. Livery Companies and SMEs seem to be the most likely end users. A further seminar about this will be held on May 25th with a sign up here on Eventbrite. All are welcome to attend and explore this further. https://www.eventbrite.co.uk/e/city-of-london-multi-offtake-ppa-workshop-tickets-625234080967
A video of the LCAG seminar is accessed here. https://www.youtube.com/watch?v=5LhGceXHpJU
A PowerPoint of the LCAG seminar can be accessed here: LCAG PPA Webinar presentation 26.04.2023