The power in PPAs: generating clean energy and extra income
1st August 2021
As we work towards a zero-carbon future for the UK, many farms are turning to renewable energy generation to diversify and support their business. Selling excess energy back to the grid can prove useful — it offers an extra source of revenue, earning a pence/kWh rate, while allowing you to generate your own energy.
There’s also the added benefit of lowering your cost exposure, by cutting down on the amount of power you need to import from the grid. Solar generation in particular is on the rise across the country — with many farms finding that the returns clearly outweigh the upfront installation and set-up costs. To make renewable generation work for you, finding a trusted Power Purchase Agreement (PPA) partner that suits your business is key.
Diversifying through renewables
As well as providing an extra revenue stream, many UK farmers have found that investing in energy generation technology can be a way to offset their electricity costs whilst supporting their local communities through supplying renewable energy.
These clear benefits explain why the UK solar industry continues to grow despite the lack of government subsidies and support. The Feed-in-tariff (FiT) was removed in early 2019, yet all three solar markets – residential, commercial rooftop, and ground-based – continue to thrive. In fact, rooftop solar capacity has seen a 14% year-on-year growth. And last year, the majority of these were set up on commercial and industrial buildings. This is despite a drop in installations during the lockdown.
But selling your energy can be complex. To make renewable generation work for you, it’s important to know what to look for when choosing the right PPA for your business.
The four questions you should consider to secure the best PPA
- How much electricity are you intending to sell through your PPA?
Think about your electricity usage. Roughly speaking, how much spare electricity capacity does your business have? Are you a ‘prosumer’ – a site that both produces and consumes electricity? Or are you looking to use your generator only to produce energy to sell?
2. How long do you want to fix your PPA for?
PPAs can be as short-term as six months, right up to five years.Whether you the favour flexibility of a shorter timeframe or the stability of a longer one will depend on your needs. If you work with a partner, they’ll be able to make recommendations on how long to fix your PPA for. Find out more about partners in question four.
3. Are there any hidden costs?
It’s important to be aware that there could be costs not included in your PPA offer. These could be metering charges such as Data Collection (DC) or Data Aggregation(DA) charges, other non-commodity costs, or management fees.
4. How do you want to arrange your PPA?
There are three main routes to setting up a PPA. These are:
Partner with an energy supplier
To avoid spending time searching for the right business to sell your power to, you can choose a licensed energy supplier to set up your PPA for you.This is one of the more common routes for PPAs, and it works especially well for small-scale generators. A supplier will buy your power from you, and then distribute to their portfolio of customers. A reliable partner will work with you and put your commercial needs first, while handling the paperwork and paying you for your power. At Drax, this is how we supply our customers with renewable electricity, while supporting small-scale independent generation.
With a Third Party Intermediary
You could also choose to work with a Third Party Intermediary (TPI) to find the right PPA for you. This could be either directly with a customer or through a licensed supplier. A TPI will be able to compare different suppliers. However, TPIs work on a commission basis which will add to your overall costs.
Directly to a site
You can choose to sell your excess power directly to another site or business, usually adjacent, and be compensated via a bespoke purchase agreement. This can bypass the grid, avoiding certain charges.Selling power directly can also be achieved through a Corporate Power Purchase Agreement (CPPA). A CPPA doesn’t bypass the grid in the same way, however, and will attract distribution charges.
Simplifying zero-carbon, lower-cost energy
At Drax, we’re proud to be supporting businesses in generating affordable, clean energy — and to be helping them maximise their revenue from selling excess energy. Many of the 2,300 smaller-scale UK generators we work with are farmers; we partner with them to run and monetise a range of renewable-generation technologies, including solar, wind, hydro and anaerobic digestion.
We know that, for the businesses we partner with, clarity is key — on how the PPA process works, and how much they’re able to earn from selling excess energy. So, through Drax Renewables Purchasing, we’re focused on providing quick, expert customer service that our partners can rely on for updates and advice.
Earn more from your renewables
We’re committed to paying our partners on time, and offering them the most competitive prices we can for their energy. We’ve also achieved Ofgem’s highest rating (‘Good’) in the latest FiT compliance audit. “We aim to deliver the highest level of service to our customers, and we’ll always put them front and centre of everything we do.”Valpy Fitzgerald, director of renewables & sustainable commodities, Drax.
Support at every stepDrax RenewablesPurchasing offers consistent, best-in-class service to the businesses it partners with.
- Achieved 99% billing accuracy
- Answered 94% of calls in under 1 minute
- Replied to 87% of emails within 5 working daysbetween January and June 2021
You can download our PPA guide too, to find out more about what we offer: energy.drax.com/ppaguide.