Why businesses are adopting Power Purchase Agreements faster than ever

The energy landscape is changing at an unprecedented pace, with behind-the-meter Power Purchase Agreements (PPAs) becoming an increasingly attractive option for commercial and industrial businesses. Last year, the uptake in PPAs hit a record high with 16.2 GW in disclosed contracted volumes. That’s 40% more than the year before, and 65% more than the year before that.

The UK alone is the fourth largest European market for PPAs, underscoring their growing popularity. But why are these agreements gaining traction? How do they work? And why are companies of all sizes, from Amazon to local pubs, getting on board? This blog aims to answer these questions and more.

What are Power Purchase Agreements (PPAs)?

A Power Purchase Agreement (PPA) is an electricity supply contract where the design, installation, operation, and maintenance of your business’s renewable energy solution are fully funded by a third party. In return, you generate and pay for the green energy at a lower rate than conventional grid tariffs. The cost of electricity under a PPA tariff is calculated based on the system design, installation cost and lifetime active maintenance and management, rather than being linked to fluctuating energy markets.

Backed by funds managed by Octopus Energy Generation, Zestec Renewable Energy offers comprehensive PPA solutions so that businesses can enjoy reduced electricity bills and lower carbon emissions without upfront capital or hassle of managing the system. Once the agreement term ends, the systems typically transfer to the business for them to enjoy the ongoing benefits of their renewable energy system for its remaining asset life.

Why are PPAs attractive now?

Energy price volatility
The energy crisis that began in Autumn 2021 has highlighted the risks of energy dependence. For many businesses, high energy bills have posed significant financial challenges, with 25,000 companies filing for insolvency in 2023—the highest number in 20 years. PPAs offer a way to stabilise energy costs by locking in a predetermined price for electricity, reducing reliance on volatile grid prices and providing a financial buffer against market fluctuations.

Cost and scale
When businesses opt for a Capital Expenditure (CAPEX) approach to renewable energy, such as installing a rooftop solar PV system, the initial costs can often be prohibitive. While the return on investment is generally favourable, the real challenge lies in covering the expenses for installation, operation, maintenance, and insurance. PPAs solve this issue by allowing businesses to focus their financial resources on core activities. With institutional investors covering the costs upfront, companies can access the latest top spec technology at minimal investment, as well as ensuring that systems are delivered to the highest quality, meeting all the health and safety requirements.

Net-zero commitments
The push for meaningful climate action and the impending compliance changes impacting UK businesses for Environmental, Social, and Governance (ESG) standards make net-zero commitments more pressing than ever. PPAs offer a straightforward way to achieve these commitments without significant upfront investment or operational disruption. Businesses can generate green energy on-site, reduce their carbon footprint, and lower energy bills, making net-zero promises a reality.

How do PPAs work?

Assessing your needs
The first step in entering a PPA is to assess your business’s energy needs and sustainability goals. Companies like Zestec conduct thorough evaluations to understand your site’s electricity usage and pricing data. This helps in designing a renewable energy solution tailored to your current specific requirements with an eye on the future.

Proposal and agreement
Once the assessment is complete, a detailed proposal is provided, outlining the recommended technology solutions and design options. This includes projected energy cost and emission savings. After agreeing to the fully financed option, site visits, grid connection applications, planning, and structural assessments are carried out to ensure a seamless installation process.

Installation and management
The renewable energy system is then installed with minimal disruption to your operations. Ongoing maintenance throughout the full term of the PPA is provided to ensure the system’s optimal performance. At the end of the agreement term, ownership of the system typically transfers to your business, so that it can continue to generate its own clean electricity for future years.

Case study: Kärcher
Kärcher, a global leader in cleaning technology, embarked on their energy transition with the help of Zestec’s fully funded PPA model. Zestec designed and installed a 300 kWp solar PV system at Kärcher’s Banbury HQ. The system generates approximately 270,000 kWh per annum, covering 75% of the site’s energy consumption. This resulted in an annual electricity cost reduction of £17,000 and a 71-tonne reduction in CO2 emissions.

Benefits of PPAs

Financial savings
One of the most compelling reasons for businesses to adopt PPAs is the financial savings. By locking in lower electricity rates and reducing reliance on the grid, businesses can achieve significant cost reductions. The savings can then be redirected towards other critical areas of the business.

Environmental impact
PPAs contribute to a company’s sustainability goals by promoting the use of renewable energy. This not only reduces carbon emissions but also enhances the company’s reputation as an environmentally responsible entity.

Risk mitigation
By entering into a PPA, businesses can mitigate the risks associated with energy price volatility. The fixed-rate agreements provide a stable and predictable cost structure, allowing for better financial planning and budgeting.

Access to advanced technology
PPAs enable businesses to access the latest renewable energy technologies without the financial burden of upfront investment. This ensures that companies can stay at the forefront of technological advancements while focusing on their core operations.

Zestec – The power to make a difference with PPAs

Zestec is committed to helping commercial and industrial businesses harness the power of renewable energy through fully funded PPA solutions. From solar PV systems to energy storage and electric vehicle charging, Zestec provides comprehensive services to meet your energy needs.

Owned by funds managed by Octopus Energy Generation, Zestec ensures that your renewable energy solution is designed, funded, and managed to deliver maximum savings and sustainability.

Contact Zestec today to learn more about our fully funded renewable energy solutions and how we can help your business thrive and be compliant for the future.

Speak to one of our team on: 01202 018 800
Email us at: info@zestecgroup.co.uk

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