What is a corporate power purchase agreement? CPPA explained

A corporate power purchase agreement, usually shortened to corporate PPA or CPPA, is a long-term electricity contract between a business and a power generator. In most cases, the generator is a renewable energy project, such as a solar farm, wind farm or on-site solar installation.

The short answer is: a corporate PPA allows a business to buy electricity linked to a specific generation project, usually for a fixed or agreed pricing structure over several years.

For businesses, the main attraction is long-term price stability, renewable electricity sourcing and protection against some wholesale market volatility. The main drawback is complexity. CPPAs are usually longer, more technical and more legally demanding than standard business electricity contracts.

Summary answer

Question	Answer
What does CPPA stand for?	Corporate power purchase agreement
What is a CPPA?	A long-term electricity purchase agreement between a business and a generator
What type of power is usually involved?	Usually renewable electricity, such as solar or wind
Typical contract length	Often 5–20 years, depending on the structure
Who uses CPPAs?	Large energy users, manufacturers, retailers, data centres, public bodies and increasingly SMEs through solar PPAs
Is a CPPA the same as a green tariff?	No. A CPPA is linked to a specific generation project or output
Does a CPPA remove all energy bill costs?	No. Businesses still pay network charges, balancing costs, supplier fees, taxes and other charges
Main advantage	Long-term price certainty and renewable electricity sourcing
Main risk	Long commitment, price risk, volume mismatch, legal complexity and project delivery risk

The UK Government defines PPAs as long-term electricity purchase agreements between a generator and a buyer, where the buyer may be a utility, supplier, trader or a business using the electricity for its own needs. In January 2026, the Government launched a call for evidence on how to improve the corporate PPA market in Great Britain, specifically to help businesses secure stable, competitively priced electricity.

How does a corporate PPA work?

A corporate PPA usually involves three main parties:

Party	Role
Business buyer	Agrees to buy electricity or financial value from the generation project
Generator	Owns or develops the renewable energy asset
Licensed supplier	Handles supply, balancing, sleeving, metering and residual power where required

In a simple version, the business agrees to buy power from a renewable generator for a set period. The generator gets predictable revenue, which can help finance the project. The business gets a long-term electricity price and renewable electricity credentials.

In practice, most CPPAs are more complicated than that. Electricity may still be delivered through the grid, a supplier may still be needed, and the business may still need to buy additional electricity when the generator is not producing enough.

CPPA versus standard business electricity contract

A standard business electricity contract is usually with a supplier. The supplier buys electricity, manages industry costs and sells power to the business at an agreed rate.

A CPPA is different because it links the business more directly to a generation asset.

Feature	Standard business electricity contract	Corporate PPA
Main counterparty	Electricity supplier	Generator, often with a supplier involved
Contract length	Often 1–5 years	Often 5–20 years
Price structure	Fixed, variable, flexible or pass-through	Fixed, indexed, floor/cap, pay-as-produced or synthetic
Renewable link	May be based on supplier fuel mix or REGOs	Usually linked to a specific project
Complexity	Lower	Higher
Legal work	Usually limited	Usually significant
Volume risk	Usually managed by supplier	May sit partly with business
Best suited to	Most SMEs	Larger or more energy-aware businesses

A CPPA is therefore not just a cheaper tariff. It is a procurement strategy.

Main types of corporate PPA

There are several types of CPPA. The right structure depends on the size of the business, the location of the generator, the business’s electricity profile and the level of risk the business is willing to take.

CPPA type	How it works	Best suited to
Physical sleeved CPPA	Power is sold by the generator and “sleeved” through a licensed supplier to the business	Large businesses wanting renewable sourcing and supplier support
Virtual or synthetic CPPA	A financial contract settles the difference between agreed PPA price and market price	Large businesses comfortable with financial settlement
Private wire PPA	A generator supplies electricity directly to a nearby business through a private cable	Sites near generation assets or on-site solar projects
On-site solar PPA	A third party installs and owns solar panels on the business premises, and the business buys the power	SMEs, warehouses, factories, farms, schools and care homes
Aggregated or multi-buyer PPA	Several buyers share output from one or more projects	Medium-sized businesses that cannot support a large CPPA alone
Portfolio PPA	The business buys from several renewable projects	Large buyers seeking volume and technology diversification

Physical sleeved CPPA

A physical sleeved CPPA is one of the most common corporate structures for larger buyers.

The generator sells power to the business, but the electricity is physically delivered through the grid. A licensed supplier “sleeves” the electricity, handling settlement, metering, balancing and top-up supply.

Element	What happens
Generator	Produces renewable electricity
Business	Contracts to buy the power
Supplier	Sleeves the power through the electricity market
Grid	Physically transports the electricity
REGOs	May be transferred to the business as evidence of renewable generation

This structure allows a business to contract with a renewable generator even if the generator is not located next door.

Virtual or synthetic CPPA

A virtual CPPA is a financial arrangement rather than a direct physical supply contract.

The business agrees a strike price with a renewable generator. The generator sells power into the wholesale market. The business continues buying electricity from its normal supplier. The CPPA then settles the difference between the agreed strike price and the market reference price.

Market outcome	What happens
Market price above agreed CPPA price	Generator may pay the business the difference
Market price below agreed CPPA price	Business may pay the generator the difference
Market price equals agreed CPPA price	Little or no settlement difference

A virtual CPPA can help a business hedge electricity prices and support renewable generation, but it is more complex. It may involve accounting, credit, collateral and mark-to-market considerations.

Private wire PPA

A private wire PPA is where electricity is supplied directly from a generator to a customer through a private electrical connection rather than being fully delivered through the public grid.

This is common with on-site or near-site projects such as:

• rooftop solar on a warehouse
• solar panels on a factory
• ground-mounted solar next to a business site
• wind generation near an industrial facility
• energy centres serving large campuses

A private wire PPA can reduce exposure to some grid-import costs because the business consumes electricity generated on or near the site. However, the business will usually still need a grid supply contract for times when the generator is not producing enough.

On-site solar PPA

An on-site solar PPA is one of the most accessible forms of PPA for smaller and medium-sized businesses.

Under this model, a third-party investor or solar company pays for, installs, owns and maintains the solar panels. The business agrees to buy the electricity generated at an agreed pence-per-kWh rate for a long period.

Feature	Typical on-site solar PPA arrangement
Upfront cost	Usually £0 or low upfront cost
Asset ownership	Third-party funder or solar provider
Contract length	Often 10–25 years
Power price	Agreed p/kWh rate, often lower than grid import price
Maintenance	Usually handled by the system owner
Grid electricity	Still needed when solar output is insufficient
Best suited to	High daytime electricity users with suitable roofs

Recent reporting has highlighted growing SME interest in this model. The Times reported in 2026 that some UK solar providers were offering no-upfront-cost solar and battery PPAs, with one provider quoting an average customer price of 18p/kWh compared with an average business electricity price of 24.3p/kWh from the latest ONS figures cited in the article; another provider reported some clients achieving energy costs of 8p/kWh.

CPPA versus green tariff

A CPPA is not the same as a standard green electricity tariff.

With a green tariff, a supplier may match some or all of the customer’s electricity use with renewable certificates. With a CPPA, the business usually has a stronger contractual link to a specific renewable generator or portfolio of projects.

Feature	Green tariff	Corporate PPA
Contracting party	Usually supplier	Generator, supplier or both
Link to specific project	Sometimes weak or indirect	Usually stronger
Contract length	Often 1–5 years	Often 5–20 years
Additionality	Variable	Can be stronger, especially if it supports new build
Complexity	Lower	Higher
Price certainty	Depends on tariff	Often a key objective
Suitable for SMEs	Yes	Usually larger users, though solar PPAs can suit SMEs

Ofgem says the Renewable Energy Guarantees of Origin scheme provides certificates that demonstrate electricity has been generated from renewable sources and provides transparency to consumers about the proportion of electricity suppliers source from renewable electricity. A CPPA may include REGOs, but businesses should check exactly what certificates they receive and whether they can make renewable electricity claims.

Why are businesses interested in CPPAs?

Businesses consider CPPAs for several reasons.

Reason	Why it matters
Price stability	Long-term contracts can reduce exposure to wholesale price volatility
Sustainability	CPPAs can support renewable electricity claims and net zero plans
Additionality	New-build CPPAs can help finance new renewable generation
Brand value	Customers, investors and supply chains may value cleaner electricity
Budget planning	A known electricity price can help long-term forecasting
Carbon reporting	CPPAs can support Scope 2 emissions strategies
Energy security	Diversifies procurement away from short-term market buying
Competitive advantage	Large energy users may secure better long-term cost visibility

The UK Government’s 2026 corporate PPA call for evidence specifically framed CPPAs as a way to support stable, competitively priced electricity, industrial competitiveness and growth.

Does a CPPA reduce business electricity bills?

It can, but not always.

A CPPA can reduce costs if the agreed PPA price is lower than future market prices or if an on-site/private wire arrangement reduces imported grid electricity. However, a CPPA does not remove every electricity cost.

A business may still pay:

• network charges
• balancing charges
• supplier sleeving fees
• top-up electricity costs
• metering charges
• taxes
• Climate Change Levy, where applicable
• VAT
• imbalance costs
• shaping costs
• legal and advisory fees

For grid-supplied CPPAs, the business is usually not simply replacing the whole electricity bill with one renewable price. It is usually replacing or hedging the wholesale electricity element, while many non-commodity costs remain.

Example: how a CPPA can affect costs

A business uses 2,000,000kWh of electricity per year.

It signs a CPPA for 1,000,000kWh per year at 11p/kWh. Its alternative grid electricity commodity price is assumed to be 15p/kWh.

Item	Calculation	Annual cost
CPPA power	1,000,000kWh × 11p	£110,000
Equivalent market power	1,000,000kWh × 15p	£150,000
Indicative saving on CPPA volume	Difference	£40,000

This is only the power-price comparison. It does not include network charges, balancing costs, supplier fees, top-up electricity, legal costs or the risk that market prices could fall below the CPPA price.

Example: on-site solar PPA for an SME

A business uses 150,000kWh of electricity per year and installs an on-site solar PPA that generates 60,000kWh per year for use on site.

Item	Assumption
Annual business electricity use	150,000kWh
Solar PPA electricity used on site	60,000kWh
Grid electricity price	25p/kWh
Solar PPA price	14p/kWh
Saving per solar kWh	11p
Annual saving	£6,600

This is an illustrative example. Actual savings depend on roof size, generation, self-consumption, grid rates, PPA price, indexation and contract terms.

Typical CPPA contract length

CPPA contracts are usually longer than normal business energy contracts.

CPPA type	Typical length
Standard SME energy contract	1–5 years
On-site solar PPA	10–25 years
Physical sleeved CPPA	7–20 years
Virtual CPPA	10–15 years
New-build renewable CPPA	Often 10–20 years or more

Long contract length is both the advantage and the risk. It can provide price stability, but it also locks the business into a structure that may outlast management teams, leases, premises plans or changes in electricity demand.

How is CPPA pricing set?

CPPA pricing can be structured in several ways.

Pricing model	How it works	Main advantage	Main risk
Fixed price	Business pays a fixed p/kWh price	Predictable	May be expensive if market prices fall
Indexed price	Price rises with inflation or another index	Protects generator from cost inflation	Business faces annual price increases
Floor and cap	Price moves within an agreed band	Shares risk	More complex
Market discount	Price set at discount to market rate	Can maintain savings	Less long-term certainty
Pay-as-produced	Business buys actual output as generated	Simple link to generation	Volume may not match demand
Baseload	Generator or supplier shapes output into a flatter profile	Easier for buyer	Shaping cost may be higher
Contract for difference style	Financial settlement against market price	Useful hedge	Accounting and market risk

The most suitable pricing model depends on whether the business wants certainty, savings, carbon benefits or a balance of all three.

What is volume risk?

Volume risk is one of the main issues in a CPPA.

A renewable generator does not usually produce exactly the same amount of electricity that the business uses at each moment. Solar produces during daylight. Wind output changes with weather. Business electricity demand changes by day, season and activity.

Situation	Risk
Generator produces less than expected	Business must buy more top-up power
Generator produces more than business needs	Excess may be sold or financially settled
Business demand falls	Business may be over-contracted
Business demand rises	CPPA covers a smaller share of usage
Weather changes output	Renewable generation varies
Site closes or relocates	Long-term PPA obligation may remain

This is why CPPAs are often easier for businesses with stable, predictable electricity demand.

What are REGOs and why do they matter?

REGOs are Renewable Energy Guarantees of Origin certificates. They are used to show that electricity has been generated from renewable sources.

For a business signing a CPPA, REGOs are important because they support renewable electricity claims and carbon reporting. The business should check whether the CPPA includes REGOs, whether they are bundled with the power, and whether the certificates are transferred to the buyer or retained by another party.

Ofgem says REGOs demonstrate that electricity has been generated from renewable sources and are designed to provide transparency to consumers about renewable electricity sourcing.

What are sleeving fees?

A sleeving fee is a charge paid to a licensed electricity supplier to manage the delivery and settlement of power from a generator to the business through the electricity system.

The supplier may handle:

• electricity settlement
• balancing
• top-up power
• spill power
• metering
• billing
• reconciliation
• data reporting
• credit support
• supply licence obligations

Sleeving fees are important because they can affect the total value of the CPPA. A low generation price may look attractive, but the full delivered cost may be higher once sleeving, shaping and balancing costs are included.

What is shaping?

Shaping is the process of turning irregular renewable generation into a supply profile that better matches the buyer’s electricity demand.

For example, a solar farm produces during the day and more in summer. A business may use electricity in the evening, at night or during winter. The difference between generation and demand has to be managed.

Issue	Why shaping matters
Solar output peaks at midday	Business may need power outside solar hours
Wind output is variable	Business demand may be more stable
Business uses power 24/7	Renewable project may not produce continuously
Demand changes seasonally	Renewable output may not match seasonal usage
Generator output is intermittent	Supplier or market must fill gaps

Shaping can make a CPPA more useful, but it adds cost.

What risks come with a CPPA?

CPPAs can be valuable, but they carry risks that standard energy contracts may not.

Risk	What it means
Long-term commitment	The business may be locked in for 10–20 years
Market price risk	The CPPA price could become expensive if market prices fall
Volume risk	Generation may not match business demand
Project delivery risk	A new renewable project may be delayed
Credit risk	The generator or buyer may face financial problems
Legal complexity	Contracts require specialist review
Accounting treatment	Some structures may affect accounts or derivatives reporting
Collateral requirements	Some agreements may require credit support
Sleeving cost risk	Supplier charges can affect savings
REGO risk	Renewable claims depend on certificate treatment
Change of premises	Site moves or closures can create problems
Grid connection risk	Renewable projects can be delayed by connection queues

The Government’s 2026 call for evidence was partly designed to identify barriers and opportunities in the GB CPPA market, reflecting the fact that CPPAs are useful but not always easy for businesses to access.

Which businesses are best suited to a CPPA?

CPPAs are usually most suitable for businesses with high, predictable electricity demand and long-term site or operational certainty.

Business type	CPPA suitability
Large manufacturer	Strong candidate if electricity demand is stable
Data centre	Strong candidate because of high continuous demand
Supermarket group	Strong candidate for portfolio CPPAs
Warehouse or logistics operator	Good candidate, especially with rooftop solar
Food producer	Good candidate if demand is stable
Cold storage business	Strong candidate due to continuous load
Hotel group	Possible candidate, especially multi-site
Care home group	Possible candidate for on-site solar PPAs
Small office	Usually less suitable for a large CPPA
Start-up or short-lease tenant	Usually less suitable because of long commitment

The business does not always need to be huge. On-site solar PPAs can suit smaller businesses if they have enough roof space, daytime usage and long-term occupancy.

When might a CPPA be unsuitable?

A CPPA may be unsuitable if the business:

• has uncertain long-term electricity demand
• may relocate soon
• has a short lease
• uses very little electricity
• cannot commit to a long contract
• lacks internal finance or procurement expertise
• needs simple monthly billing
• cannot manage legal complexity
• has weak creditworthiness
• wants complete flexibility at renewal
• is uncomfortable with market-price risk

For many smaller businesses, a shorter fixed business electricity contract or an on-site solar lease may be easier than a full corporate PPA.

CPPA and business energy bills

A CPPA does not automatically replace a business electricity bill. In many cases, it sits alongside a normal supplier contract.

A business may still need:

Requirement	Why it is needed
Residual supply contract	To cover electricity not supplied by the CPPA
Import supply agreement	To bring power through the grid
Sleeving supplier	To manage physical delivery and settlement
Export arrangement	For excess on-site generation
Metering and data services	To measure usage and settlement volumes
Network charge recovery	To pay TNUoS, DUoS and other network costs
Tax treatment	VAT and CCL still need to be considered

This is why businesses should compare the delivered cost of a CPPA, not just the headline p/kWh generation price.

Does a CPPA avoid non-commodity charges?

Usually not completely.

Non-commodity charges include network, balancing, policy and system costs such as TNUoS, DUoS, BSUoS, Contracts for Difference, Capacity Market and other charges. Some of these may still apply, especially where electricity is delivered through the public grid.

CPPA type	Non-commodity charge exposure
Physical sleeved CPPA	Usually still exposed to many grid and supplier charges
Virtual CPPA	Standard electricity bill continues separately
Private wire PPA	May reduce some grid-import charges for on-site consumption
On-site solar PPA	Reduces imported electricity, but standing charges and grid costs remain
Aggregated CPPA	Depends on supplier and structure

A private wire or on-site PPA can reduce imported grid electricity, but it does not necessarily eliminate standing charges, backup supply costs or all network-related costs.

CPPA and Contracts for Difference

A CPPA is different from the Government’s Contracts for Difference scheme.

Contracts for Difference, or CfDs, are a support mechanism for low-carbon generation. The CfD scheme provides revenue stability for eligible low-carbon generators through a guaranteed strike price, funded through the Supplier Obligation Levy on electricity suppliers.

Feature	Corporate PPA	Government CfD
Buyer	Corporate business or group of businesses	Low Carbon Contracts Company mechanism
Purpose	Business electricity procurement and renewable sourcing	Support low-carbon generation investment
Contract parties	Business, generator, supplier	Generator and LCCC
Bill impact	Direct to participating business	Cost or credit recovered through supplier obligation
Voluntary for businesses	Yes	No, costs are recovered through market arrangements

Some renewable projects may use either CPPAs, CfDs or a mixture of routes to market, depending on financing and revenue strategy.

CPPA and the Capacity Market

A CPPA also does not remove the need for security of supply. The Capacity Market is designed to ensure there is enough reliable electricity capacity available when needed. The Government describes it as providing payments for reliable sources of capacity alongside their electricity revenues.

This matters because a business using renewable electricity under a CPPA still needs electricity when the wind is not blowing or the sun is not shining. That backup and wider system reliability cost remains part of the electricity system.

How to assess a CPPA offer

A business should assess a CPPA using total delivered cost, risk and strategic value.

Question	Why it matters
What is the contract length?	Determines long-term commitment
Is the price fixed or indexed?	Affects future cost certainty
What volume is covered?	Determines how much usage is hedged
Is it pay-as-produced or shaped?	Affects mismatch risk
Are REGOs included?	Determines renewable claims
Who pays sleeving fees?	Affects delivered cost
Who manages imbalance risk?	Can create extra costs
What happens if the project is delayed?	Important for new-build PPAs
What happens if the site closes?	Protects against operational change
Are there break clauses?	Provides flexibility
How is credit risk handled?	May require guarantees or collateral
What happens if market prices fall?	Tests downside risk
Are network charges included?	Determines full bill impact
Is legal advice required?	Usually yes for larger CPPAs

CPPA checklist for businesses

Before signing a corporate PPA, a business should review:

Area	What to check
Consumption profile	Annual kWh, half-hourly demand, seasonal patterns
Site certainty	Lease length, expansion plans, relocation risk
Contract structure	Physical, virtual, private wire or on-site
Price terms	Fixed, indexed, floor/cap or market-linked
Volume terms	Baseload, pay-as-produced or shaped
Certificates	REGOs and carbon-reporting treatment
Supplier role	Sleeving, balancing, billing and top-up supply
Legal terms	Default, termination, change in law and force majeure
Credit requirements	Parent guarantees, collateral or deposits
Accounting treatment	Financial reporting and derivative implications
Sustainability claims	Whether claims meet internal and external standards
Exit options	Assignment, transfer and early termination

Advantages of a corporate PPA

Advantage	Why it matters
Long-term price certainty	Helps protect against wholesale volatility
Renewable electricity sourcing	Supports sustainability and net zero goals
Additionality	Can help finance new renewable generation
Reputation benefit	Demonstrates practical decarbonisation action
Budget planning	Provides a long-term price benchmark
Potential savings	Can reduce costs if market prices rise
Supply chain value	Helps meet customer and investor expectations
Energy strategy	Moves procurement beyond short-term tariff switching

Disadvantages of a corporate PPA

Disadvantage	Why it matters
Long commitment	Can outlast premises, strategy or demand forecasts
Complexity	Requires legal, procurement and energy expertise
Price downside	Business may overpay if market prices fall
Volume mismatch	Renewable output may not match demand
Extra fees	Sleeving, shaping and advisory costs can reduce savings
Credit requirements	Some buyers may need guarantees or collateral
Project risk	New renewable projects may be delayed
Accounting issues	Virtual PPAs can have financial reporting implications
Not always suitable for SMEs	Some businesses are too small or uncertain

How CPPAs fit with UK energy policy

CPPAs are becoming more important because businesses want lower-carbon electricity, stable prices and protection from volatile energy markets. They also help renewable developers secure predictable revenue, which can support investment in new projects.

The UK Government’s 2026 call for evidence sought views on how to develop and improve the GB CPPA market, with a focus on barriers and opportunities for businesses to secure stable, competitively priced electricity. The call ran from 9 January 2026 to 6 March 2026.

This makes CPPAs part of a wider debate about business energy costs, clean power, industrial competitiveness and how companies can secure long-term electricity supply.

Final verdict: CPPAs explained

A corporate power purchase agreement is a long-term electricity contract between a business and a power generator, usually a renewable generator. It can help a business secure long-term electricity price certainty, support renewable energy development and strengthen sustainability claims.

However, a CPPA is not simply a cheaper version of a normal business electricity tariff. It is a more complex procurement arrangement that can involve long contract terms, volume risk, sleeving fees, balancing costs, REGOs, legal advice and detailed financial modelling.

CPPAs are most suitable for businesses with high, predictable electricity use and a long-term commitment to their premises or operations. Large manufacturers, data centres, retailers, cold stores and multi-site businesses are often the strongest candidates. Smaller businesses may still benefit from simpler on-site solar PPAs where a third party installs panels and sells electricity back to the site at an agreed rate.

The key question for any business is not just “is the CPPA price lower than my current electricity rate?” It is: what is the full delivered cost, what risks am I taking, and does the agreement still make sense over the full contract term?

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