Last year saw record numbers of corporations purchasing clean power and that record is set to be broken again in 2021, as corporates increasingly turn to clean power for their energy needs.
According to Pexapark data, the number of corporates signing power purchase agreements (PPAs) in 2021 is up 37 per cent on 2020, year-to-date.
This shift is being driven both by energy-intensive industrial companies, such as manufacturers, for whom energy forms a large proportion of their costs, and consumer-facing corporates transitioning to renewable energy as part of their decarbonisation and environment, social and governance (ESG) goals.
As generators of renewable power are mitigating against merchant market risk by equipping themselves with the tools to negotiate 10 to 15 year PPAs, so too are corporations looking to go green with their energy consumption.
Traditionally, corporate buyers have procured energy over one to three-year terms, but in the new world of renewable energy trading, they are having to hedge procurement risk over much longer time periods.
With demand for renewable energy growing, consumer-facing corporates – such as retailers – are signing virtual PPAs for the first time to demonstrate that their operations are being powered by green energy.
Meanwhile, more sophisticated industrial energy buyers are increasingly turning to PPAs as they too face rising ESG pressure to decarbonise their value chain. This type of corporate organisation is capitalising on the added-value brought about by renewable energy which makes them more competitive and puts them in stronger negotiating positions for big industrial contracts.
To do this successfully, however, they need to fill the gaps in their existing energy trading expertise. PPAs are one way of doing this, enabling them to hedge against price volatility and reduce the cost of energy consumption.
Pexapark and its suite of quantitative and analytical tools, can help corporates understand the fair value of energy and how to price risks, in exactly the same way that sellers are having to in this new world of post-subsidy energy trading.
Pexapark’s pre-transaction advisory services to both experienced energy traders in industrial corporations, as well as those corporates seeking to ensure their operations are powered by renewable energy, by helping to compare different PPA structures and look at the overall value of PPAs across their total duration.
Rommero Carrillo, Head of Corporate PPA Desk at Pexapark, said: “As the global energy transition continues at pace, it is clear that corporates don’t want to be left behind and are increasingly turning to renewable energy to power their operations”.
“But as the dynamics in the market have shifted with the phasing out of subsidies, so too is the way that renewable energy is sold, and in turn, this has implications on the way that energy is bought.
“Corporates need to ensure that they have the strategies in place to mitigate against energy risk, which is increasingly being spread out over longer contract timeframes – and that means increasing in sophistication. This is where Pexapark’s existing suite of tools can help, with pre-transaction advisory and software that will equip those responsible for energy procurement in corporations with the knowledge they need to get a fair price for their energy and to mitigate against risk.”
The Pexapark team will be a ReSource in Amsterdam 14 – 15 October. On day two of the event, at 1.30pm to 2.45pm, Rommero Carrillo will be part of a panel discussing how Europe will need to utilise renewable hydrogen to deeply decarbonise the sectors which can't easily do so through electrification, for cost or technical reasons.
