October 2019 saw a landmark deal, which allowed 20 universities to source clean, renewable energy direct from a portfolio of windfarms in Wales and Scotland. The deal was the first of its kind, where a group of public sector organisations clubbed together to directly source renewable energy to power their respective estates.
The £50m deal guaranteed the price of power over a 10-year period for the universities. It allowed the universities to pay a fixed price for their power, cut their carbon emissions and reduce their energy bills, while the wind farms secured a market for their power, potentially allowing them to develop further resource.
Many universities, along with the national government and local authorities, have declared a ‘climate emergency’. This deal allowed the group of 20 universities, which includes Newcastle, Exeter and Aberystwyth, to take a big step towards carbon neutrality by ensuring their power supply comes from a renewable source.
The collaborative clean energy deal, known as a ‘power purchase agreement’ or PPA is a mechanism to fix the price of energy over a set period. Large corporations, with considerable purchasing power, such as Google and Sainsbury’s have used corporate PPAs to strike similar energy deals in the past. However, the cost was too high for universities and smaller organisations to operate in this way.
Joining forces gave the universities the necessary purchasing power for supply platform Squeaky Clean Energy to arrange the deal, in partnership with not-for-profit public buying organization, The Energy Consortium. The recent simplification of the process involved - agreements used to run to over 120 pages but establishing standard documentation means they are now only 15 pages – was one factor in making this approach possible.
The hope is that this collaboration is the first of many, as the approach could work for a number of public sector organisations, local authorities and smaller businesses. The renewable energy sector is growing and it would open up increased opportunities for generators wanting to market their power.
The government has promised to end all coal-fired electricity generation by 2025 and the transition to renewable energy is underway. Renewables, including solar, biomass, wind and hydro installations generated more electricity (29.6TWh) than fossil fuels (29.1TWh) between July-September 2019 according to Carbon Brief.
While the government has recently awarded contracts for a further 6GW of offshore wind power, not all renewable generators can bid for government funding. The UK needs a further 55GW of offshore wind capability alone by 2050 to meet the Committee on Climate Change’s recommended targets. PPA contracts, such as the universities deal that was brokered by The Energy Consortium, have a part to play.
Securing funding through a PPA allows renewable energy generators to develop onshore wind, or offshore wind facilities without requiring subsidies or government contracts. The PPA provides a guaranteed source of income, with the power effectively pre-sold for a defined period.
This makes expanding the PPA market to further groups of smaller investors a potential bonus to the wider renewables industry. Universities, long seen as the home of big ideas and forward thinking, are leading the way once again.