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CPPAs a key ingredient for net zero economy

Neil Mearns Senior Writer

On 18 November, commercial law firm TLT hosted a panel discussion in London in collaboration with Cornwall Insight on the future of clean energy. The discussion centred around the viability of achieving a net zero economy, and what models would be key in delivering this aim. In the discussion, the role of corporate power purchase agreements (CPPAs) featured prominently. Risk Cornwall Insight CEO Gareth Miller, who was among the panellists, described three factors that will aid the transition to net zero: Investment in electric vehicles. The connected homes model, which will decarbonise domestic properties. The change to subsidy-free transactions for renewables projects, which are increasingly not utilising conventional debt and equity models. Miller emphasised that, in order to meet the net zero ambition, a player in the sector will need to take on more risk, whether that be the government, investors or the public. The issue of risk was echoed by co-panellist Gauri Kasbekar-Shah, Director of Structured Finance at RBS. She said CPPAs offer a viable model, as they absorb much merchant risk and provide a hedge against rising electricity costs. CPPA structures A CPPA is a long-term contract under which a business agrees to purchase electricity directly from a generator. This differs from the traditional utility PPA model, where electricity is bought from licensed electricity suppliers. The most popular CPPA in GB is the direct “sleeved” CPPA. These tend to be utilised in “ring-fenced” grids where attempts to incorporate buyers from different grid systems could expose ...

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