What is a Power Purchase Agreement?

Between rising costs, increased emphasis on decarbonisation, and uncertainty in global markets, more businesses are rethinking how they can best source their energy to power their operations.

If your company has been looking at ways to manage long-term energy costs while hitting sustainability targets, you might’ve come across the term Power Purchase Agreement, or PPA for short. While it might sound technical, it’s relatively straightforward.

At its core, a PPA is simply a contract between a business and a renewable energy producer. The business agrees to buy a set amount of electricity, usually from wind or solar, at an agreed rate over several years. In return, they receive price stability, renewable energy credentials, and a break from the rollercoaster of energy markets.

In the UK, PPAs are no longer just for energy giants or tech companies with massive sustainability teams. There is an increasing number of small and mid-sized businesses entering the space, often through shared or aggregated deals arranged by suppliers or consultants.

But what is the big appeal? Mostly, it's cost predictability. Instead of worrying about what’s going to happen to wholesale prices next winter, a PPA can lock in your rate.

You also get access to REGOs (Renewable Energy Guarantees of Origin), which help prove the energy a business is using is actually green. That’s a big advantage for ESG reporting, especially under frameworks like SECR.

It’s not always simple to arrange a direct PPA from scratch, but with the right partner, the process is easily manageable, and the long-term payoff can be substantial.

It’s important to take a step back when considering why PPAs matter in the current climate.

They aren’t about cutting costs today; they’re about stabilising them for tomorrow. They’re a hedge, a sustainability tool, and a strategic energy choice rolled into one.

As a business, PPAs let you:

·       Budget more confidently

·       Reduce your carbon footprint

·       Show stakeholders you are serious about climate commitments

·       Support the buildout of new renewable energy capacity

And the best part? You no longer are required to be a massive corporation to sign one.

Before diving in and signing a PPA, though, it’s worth asking a few questions:

·       How long can your business commit to a fixed deal?

·       Do you want the power physically delivered, or just the financial benefit?

·       Is your energy consumption steady enough to match the deal’s volume?

It’s also important to understand how local rules work, as PPAs aren’t one-size-fits-all across Europe and differ from location to location.

That’s where working with a knowledgeable and strategic partner comes in. Here at SEFE Energy, we work closely with businesses across Europe to help achieve their energy goals.

PPAs might’ve started as a niche tool for energy buyers with big budgets. But today? They’re becoming a smart, flexible option for businesses that want more certainty in an uncertain world.

If you're looking to lock in clean energy at a stable price and make real progress on sustainability, this could be the move that gets you there.

SEFE Energy is here to help you explore your energy transition. Get in touch with our specialist team today.