Choosing the right CPPA for your organisation

Choosing the right CPPA for your organisation will depend on your goals (and therefore the benefits you’re keenest on leveraging) and the contract structure that suits you best. But there are a number of other factors to consider before signing a long-term offtake contract.

This article covers those considerations.

Generation technology

Different generation technology types – and generator sizes – will better suit different organisations’ needs. Technologies such as solar may offer lower CPPA prices, but is more at the mercy of nature, and therefore more intermittent. This will accordingly have different balancing costs, which will affect the overall CPPA price. Understanding these trade-offs helps you choose a project that fits your operational profile and risk tolerance. On the other hand, combining technologies such as solar with wind, can help create a less intermittent profile which would help you diversify your generation risk and contribute to improved balancing costs over the long term.

Generator ESG credentials

Engaging generators that have developed projects with environmental, social and governance in mind will reflect well on your organisation. It’ll also provide opportunities for creating community-focused news stories.

Contract length

Shorter contract lengths (of under five years) might better suit if you’re either:

1. Unsure about your organisation’s likely future consumption patterns, or
2. Less inclined to commit to a CPPA price without visibility of longer-term market forecasts

Longer contracts offer different benefits. They might work if:

1. You’re keen not to have to source a new contract – or renegotiate an existing one – for your organisation in the near future
2. You’re happy with the CPPA price and comfortable forecasting your organisation’s likely consumption patterns over a decade or more. A longer-term contract provides a longer-term hedge against the energy market. If you believe wholesale prices will only increase in the future, then committing to a fixed CPPA price over the next 10 years would make sense for your organisation.

Partner suppliers

Unless you’re able to arrange on-site generation via a private wire, an electricity supplier will form part of your CPPA structure. It’s worth reviewing your existing supply as a good supplier can:

• Simplify the registration process for you
• Manage financial settlement
• Support with balancing when consumption and supply don’t align

In-house trading expertise

CPPAs represent long-term, legally binding commitments that may be complex to execute. So consider whether you or your organisation has the necessary knowledge and experience to agree and manage the contract.

You may benefit from the expertise of a trusted supplier that can provide valuable insights as well as reduce the administrative requirements for you.

Organisational objectives

Your CPPA should – where possible – align with your company’s strategic plans and corresponding environmental, social and governance (ESG) targets. For example, organisations more focused on boasting their ESG commitments might opt to choose CPPAs from projects which are newly built – thereby illustrating to the broader market how their CPPA is providing additionality to the grid (supporting renewable energy investment). On the other hand, new build projects tend to be more expensive than operational projects so for those organisations who are more price conscious, it might be better suited that they opt for operational projects as opposed to new builds.

Certain technology types or generator locations might better tally with the sector in which your organisation operates or the sustainability objectives it’s committed to.

More information

To learn more about CPPA structures and challenges – and to better understand the current CPPA landscape and future projections – download our guide to CPPAs.

Disclaimer

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