Energy UK Response to Corporate Power Purchase Agreements Call for Evidence

Executive Summary

The Contracts for Difference (CfD) mechanism, which has successfully helped to de-risk investment in renewable generation at scale, should remain the primary mechanism to ensure there is sufficient new build large-scale renewable generation to deliver a decarbonised electricity system. However long-term contracts between end users with renewable and other low carbon generation projects – Corporate Power Purchase Agreements (CPPAs) play an important complimentary role to Contract for Difference (CfDs) in driving investment in new renewable and flexibility projects.

CPPAs can support business competitiveness and decarbonisation by providing long-term, stable electricity prices. There has been growing interest in behind the meter and private wire low carbon generation solutions which can be financed by a third party with the power generated then sold to end users under long-term power and maintenance contracts. CPPAs could play an important role in supporting end of life low carbon projects to stay on the system, enhancing security of supply, and providing end users with competitive rates.

However there needs to be a number of policy changes to grow the CPPA market and to enable a wider set of end users to benefit. In this response to the Government’s Call for Evidence on the CPPA market, Energy UK sets out recommendations to address key barriers including the low credit rating of offtakers and how to make CPPAs more competitive. It will also be important to reform and strengthen ESG drivers and reduce transaction costs and complexity.