The rise of corporate PPAs for renewable energy

By Michelle Froese 

Baker McKenzie‘s new report, The Rise of Corporate PPAs 2.0, summarizes the growing trend of corporates entering into renewable power purchase agreements following the release of its initial report in 2015. Corporate power purchase agreements (PPAs) are agreements whereby businesses purchase electricity directly from independent generators instead of from a utility. The structure provides economic, sustainable, and reliable benefits to the purchasing company.

Since the issuance of Baker McKenzie’s first report there has been an almost 20% increase in the number of gigawatts of clean energy provided via corporate PPAs, with 5.4 GW of clean energy purchased by corporations in 2017 compared to the previous record of 4.4 GW in 2015 — according to Bloomberg New Energy Finance’s (“BNEF”) Corporate Energy Market Outlook.

Baker McKenzie has advised on many corporate PPAs throughout the world, some of which are highlighted in the following map. According to the Climate Group’s RE100 Progress and Insights Report released in January 2018, direct procurement from offsite grid-connected generators has grown fourfold from 3% to 13% of RE100 members’ (corporations pledging to source 100% of their electricity from renewables at some date in the future) total renewable power consumption between 2015 and 2016. Most of the corporate PPAs in 2017 were for wind power.

The majority of renewable corporate PPAs are occurring in the U.S., which had 2.8 GW in corporate PPA volumes in 2017, which exceeded the 2016 rate by 19% according to BNEF’s Corporate Energy Market Outlook. Europe, the Middle East and Africa was the second-largest market for renewable corporate PPAs in 2017, with corporates there buying 1.1 GW of clean power per BNEF. Corporate PPA volumes are increasing in Latin America and Asia Pacific due in part to increasing corporate demand for sustainable and economical energy solutions and because of regulatory changes.

The Rise of Corporate PPAs 2.0 examines technology’s impact on corporate PPAs and deal structuring trends, in addition to providing regional updates on corporate PPA regulations and developments.