CPPAs – from ESG badge to balance sheet hedge

Original CPPA drivers

Sainsbury’s signed what many consider to be the first UK CPPA in 2008. When others decided to follow suit, their main incentive was access to energy from a named renewable source. This was a significant factor in energy procurement at a time when large-scale corporate consumers were starting to consider their environmental footprint more seriously.

As a result, CPPAs were valuable for organisations to use in supporting their environmental, social and governance (ESG) objectives and evidencing their corporate social responsibility (CSR) claims. The relative unavailability of green-source energy made CPPAs even more appealing.

What’s changed in the CPPA market?

The energy market’s evolved.

We’ve seen a massive build-out of renewable energy infrastructure. In 2016, 15.3% of the UK’s energy came from renewable sources: in 2025, the figure had risen to 44.9%. This abundance of clean energy contributing to the energy mix has made the UK’s grid ‘greener’. And, in turn, it’s reduced the ‘green’ alure of CPPAs.

We’ve also experienced a surge in geopolitical uncertainty – and energy regulation change – which has introduced considerable market volatility.

Recent years have seen extreme energy-price fluctuations. Events such as Russia’s invasion of Ukraine and various regulatory changes have brought significant instability.

What challenges do CPPAs solve today?

CPPAs offer a long-term, secure of electricity – and, crucially – at a predictable and stable price. There’s no other product in today’s energy market that allows a consumer to fix their electricity price over a period of five years or more.

Protection from market swings is the primary driver for organisations choosing to contract via CPPAs today. Agreeing a CPPA means hedging over a long period of time. In this way – even if they’re only contracting for a percentage of their power requirements – organisations can use CPPAs to help build robust risk management strategies.

Of course, CPPAs remain an effective tool for corporates to use in supporting their ESG objectives too.

What obstacles to CPPAs’ widespread adoption remain?

Accessibility was always – and remains – the biggest barrier for consumers agreeing CPPAs.

When they first appeared, the scarcity of CPPAs made them hard for organisations to find and complicated for them to negotiate.

Until more recently, grid congestion formed an access barrier. Lack of grid capacity delayed the connection of certain renewables projects. This left potential customers exposed to potentially high market prices in the meantime.

The Contract for Difference (CfD) scheme has also impacted the growth of CPPAs as a primary method for energy sourcing. These schemes – driven by the Government’s Clean Power 2030 initiative – have offered renewable generators an alternative form of contracting and securing revenue. Accordingly, many generators have opted for the Government-backed alternative to CPPAs, causing lower contract availability for consumers.

That said, CPPAs’ terms have become more standardised over recent years – and their accessibility’s better than ever. That growth in accessibility is likely to continue, as the Government’s recent call for evidence – on how to grow and better facilitate CPPAs – suggests.

With DESNZ recognising the importance of CPPAs, only two more allocation rounds remaining in the CfD before reaching the 2030 target, and increased accessibility for buyers of all shapes and sizes – it would seem as though this sector of the energy market is about to take off. There is growing demand and a strong incentive to reduce barriers. Are CPPAs the answer to a more a stable and safer energy system which is backed by renewable technology? For a lot of corporate consumers, this seems to be the case.

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