Power purchase agreements for business

A power purchase agreement is one way for a business to secure renewable electricity directly from a generator, rather than simply buying whatever mix a supplier offers. This guide explains what a PPA actually is, the three structures used in Great Britain, and why government’s own review found them out of reach for most smaller businesses.

What is a power purchase agreement?

A corporate power purchase agreement (PPA) is a long-term contract to buy electricity directly from a specific generator, such as a wind farm or a solar farm, rather than buying at a rate your supplier sets from the wider wholesale market. Government’s review of the market found typical terms of 10 to 15 years, sometimes longer, considerably longer than a standard 1 to 3 year business electricity contract.

The point of a PPA is usually one or more of:

• Locking in a known electricity price over a long period, as protection against future market swings.
• Supporting a specific renewable generation project, sometimes one that wouldn’t otherwise get built (referred to as “additionality”).
• Being able to make a more credible claim about the source of your electricity than a standard green tariff.

Government identifies three main types of PPA structure used in Great Britain, described below.

Why a 10 to 15 year price matters

A standard business energy contract runs for a year or a few years and is repriced each time you renew, so it tracks the wholesale market fairly closely over time. A PPA sets a price (or a pricing formula) for a much longer period, which cuts both ways: it can protect you from a period of rising wholesale prices, but it also means you don’t automatically benefit if prices fall well below your agreed rate. Government’s review notes that corporate buyers are rarely willing to match the 15 to 20 year terms typical of the government’s own Contracts for Difference scheme with generators, which is one reason PPA terms tend to sit at the shorter end, around 10 to 15 years, of what a generator might ideally want.

What is a sleeved PPA?

A sleeved PPA is the most common structure in Great Britain. Under this arrangement, a supplier delivers the generator’s output to you through the ordinary electricity grid as part of your wider supply contract. You still have a relationship with a licensed supplier, who handles delivery, balancing and billing, while the underlying price is set by the agreement between you (or your supplier, on your behalf) and the generator.

This is generally the easiest structure for a business without its own dedicated energy trading capability to access, because it fits inside an otherwise familiar supply arrangement.

What is a private wire PPA?

A private wire, or on-site, PPA connects a generator directly to your site rather than routing the electricity through the public grid. Government describes this as the most cost-competitive structure, because it avoids the network charges that come with using the wider grid. But it says these arrangements are hard to use at scale, because they depend on having a suitable generator physically close to, or on, your premises, alongside the land, proximity and planning constraints that come with that.

This structure suits businesses with their own suitable site, such as space for an on-site wind turbine or solar farm connected directly to a nearby factory or warehouse, more than businesses looking to buy renewable electricity in the abstract.

What is a virtual or financial PPA?

A virtual or financial PPA is a financial contract for difference between you and a generator, rather than a physical delivery arrangement, and government notes these are more common in other countries than in Great Britain. You still buy your actual electricity through a normal supply contract, but separately settle the difference between the market price and an agreed price with the generator. These are more complex to set up and are generally used by larger, more sophisticated corporate buyers.

Can a small or medium business get a PPA?

It’s difficult, and government’s own review confirms this rather than just anecdotal experience. Its call for evidence and subsequent response, published 7 July 2026, found that access to PPAs is concentrated among large, creditworthy buyers, for several reasons:

• Credit requirements and collateral. Generators and their financiers want assurance that a buyer will pay over a 10 to 15 year term, which smaller businesses often can’t offer without support.
• Minimum volume thresholds. Many PPAs are structured around volumes well beyond what a smaller business uses, making transaction costs disproportionate to the deal size.
• Specialist expertise. Negotiating a PPA requires knowledge that larger buyers have in-house and smaller ones typically don’t, pushing up advisory costs.
• Non-commodity costs. Network charges and policy costs, which don’t change under a PPA, dilute how much benefit a smaller buyer sees from locking in a generation price.

Government’s response set out that it is looking at options including demand aggregation (pooling several smaller buyers into one larger PPA), publishing standard contract terms to cut negotiation time and legal costs, credit support schemes to improve smaller buyers’ bankability, and a central marketplace to reduce search costs. None of these were confirmed as delivered schemes at the time of the response, so check current DESNZ guidance for what, if anything, has since launched.

The government’s own summary of respondents’ views was blunt on this point: many felt that corporate PPAs “were not well suited to facilitating small-scale low-carbon deployment” in their current form, largely because of the credit risk smaller purchasers represent to generators and their lenders. That’s a useful reality check if a broker or adviser suggests a PPA is straightforwardly available to a business of any size.

How does a PPA compare with other ways to buy or sell renewable electricity?

Option	What it is	Who it suits
Green tariff	Your supplier matches your usage with REGO-backed renewable generation	Any business, any size
PPA (sleeved, private wire or virtual)	A direct, long-term contract with a specific generator	Larger buyers with volume, credit and, for private wire, a suitable site
Smart Export Guarantee (SEG)	Payment for electricity your own on-site generation exports to the grid	Businesses that generate their own electricity, such as with solar panels
On-site generation	Generating your own electricity, for example with solar panels	Businesses with suitable roof or land space

A PPA is about buying renewable electricity at scale from someone else’s generation asset. If your business generates its own power and wants to be paid for what it doesn’t use, that’s a different arrangement, the Smart Export Guarantee, covered in our SEG for business guide. Our renewable energy for business guide covers green tariffs and REGOs, which remain the accessible option for most smaller businesses.

What does a PPA prove about your renewable energy claims?

Government’s review suggests a physical PPA, sleeved or private wire, can offer more credible evidence of supporting new renewable generation than buying REGO certificates on their own. REGOs can be traded separately from the electricity they certify, and government’s review notes they currently carry a low market price, giving less demonstrable “additionality” (support for genuinely new generation) than a direct, long-term contract with a specific project. If your business wants to make a stronger claim about supporting new renewable capacity rather than simply matching your usage on paper, a PPA is a more direct way to do that than certificates alone, though it comes with the access barriers set out above.

Whatever route you choose, any claim you make to customers or investors about your electricity needs to be accurate and evidenced. Our renewable energy for business guide covers the rules on making green claims.

Is there a route to a PPA for public sector or larger buyers?

Public sector organisations in England, Wales, Scotland and Northern Ireland can access energy procurement frameworks that include PPA-style arrangements without negotiating one from scratch. The Government Commercial Agency’s RM6390 framework for the Supply of Energy and Decarbonisation Services includes options that let public bodies sleeve renewable electricity through their energy contract. This route is specifically for public sector bodies rather than private businesses, but it illustrates how demand aggregation, buying through a larger, pre-negotiated framework, is one of the routes government is exploring more widely for smaller private buyers too.

For private sector businesses, the equivalent today is more likely to be an industry body, trade association or larger group structure that already has the scale to negotiate a PPA, rather than a public procurement framework. If your business belongs to a group, franchise or buying consortium, it’s worth asking whether renewable electricity procurement has been, or could be, arranged centrally, since that’s effectively the demand aggregation government is trying to encourage more widely.

Should your business consider a PPA?

1. Work out your scale. If your annual electricity volume is modest, a PPA is unlikely to be practical on its own, given the minimum volumes and transaction costs involved.
2. Check whether you have a suitable site for a private wire arrangement, if that’s the structure you’re interested in.
3. Ask your existing or prospective supplier about sleeved options. This is the most accessible PPA structure for a business without in-house energy trading expertise.
4. Consider whether a green tariff or the Smart Export Guarantee meets your actual goal before committing time to a PPA, since both are far more accessible for most smaller businesses.
5. Get specialist advice before signing anything. A 10 to 15 year contract carries commitments well beyond a standard energy deal, and the credit and volume terms need proper legal and financial review.
6. Watch for developments from government’s ongoing work on demand aggregation, standard contracts and credit support, since these are specifically aimed at making PPAs more accessible to smaller buyers over time.

For most businesses today, a well-chosen standard contract, informed by our fixed vs flexible energy contracts guide, remains the more practical starting point, with a PPA something to revisit as your usage grows or as government’s proposed reforms take shape. Whatever you decide, compare business energy quotes to make sure your day-to-day supply contract is competitively priced.

Frequently asked questions