Data from Cornwall Insight, included in their insight paper ‘A corporates guide to decarbonising power’ has shown that small and medium sized enterprises (SMEs) looking to save money on energy bills, and increase their use of renewable energy, could save money by purchasing their energy jointly with other SMEs through a Corporate Power Purchase Agreement (CPPA).
CPPAs which allow corporations to get long-term fixed energy price security with little or no upfront costs, have up until now been reserved for large companies that have a good credit rating. However, with supply from renewable energy generators looking to surpass demand from large corporations committed to 100% renewable energy (Figure 1) for at least the next two years, some generators are now considering selling collective CPPAs to groups of smaller companies.
With some SMEs seeing their gas bills soar by 250%1 this year, a new avenue of energy procurement could help struggling businesses stay afloat.
Figure 1: Demand for CPPAs from RE100 corporations compared to the pipeline of renewable energy generation.
Dr Matthew Chadwick, Lead Research Analyst at Cornwall Insight said:
“Currently only a small minority of UK businesses are suitable for CPPAs, with this proportion likely to decrease further when the economy is volatile and big businesses lose money. However, with renewable energy generation forecast to outstrip demand, some generators are expected to start offering CPPAs to businesses that did not previously have the chance. Many SMEs could take advantage of this opportunity to collectively save on bills and increase energy security, while also decarbonising their businesses.
“Joint CPPAs for SMEs are a win-win, which will allow more corporations to take advantage while also being beneficial to the generators by reducing the risk of contract termination. A joint CPPA may also allow businesses with credit ratings that previously would have meant a CPPA was denied to them, to group with companies with a credit rating that would be accepted.
“Small and medium sized businesses have had a difficult time of late with ever increasing energy bills, but the supply-demand mismatch of renewable energy generation could make it a buyers’ market and SMEs will be the ones holding the cards.”
Reference:
1. Businesses facing 250% increase in gas bills – Cornwall Insight, March 2022
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Notes to Editors
For more information, please contact: Verity Sinclair at v.sinclair@cornwall-insight.com
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About the Cornwall Insight Group
Cornwall Insight is the pre-eminent provider of research, analysis, consulting and training to businesses and stakeholders engaged in the Australian, Great British, and Irish energy markets. To support our customers, we leverage a powerful combination of analytical capability, a detailed appreciation of regulation codes and policy frameworks, and a practical understanding of how markets function.
