Logo-VOLTA-Polska

cPPA

Questions & Answers

1. How does a cPPA differ from traditional energy procurement in the context of decarbonisation?

A cPPA is a long-term agreement to purchase energy from a specific renewable energy installation. Unlike standard energy purchases or “on paper” certificates, it provides a real link to the generation project. This makes it one of the most effective tools for implementing decarbonisation strategies.

The proposed changes to the GHG Protocol introduce hourly matching and regional matching requirements. By assigning energy to a specific farm, a cPPA enables companies to meet these requirements and operate in accordance with the most rigorous emission reporting standards.

cPPA stabilises energy costs in the long term, minimises the impact of market fluctuations and facilitates long-term budget planning. In addition, it strengthens the organisation’s image in the area of ESG, while some financial institutions offer more favorable credit terms to companies participating in this type of agreement.

    • Physical cPPA involves the actual delivery of energy through the grid. It is best suited to large-scale industrial off-takers with a stable consumption profile.
    • Virtual cPPA (financial) is based on the contract-for-difference (CfD) In this formula, there is no physical delivery of energy. Instead, the parties settle the difference between the contract price and the market price: if the market price is higher, the producer pays the consumer; if it is lower, the consumer pays the producer. This makes virtual cPPA flexible, and ideal for companies with numerous locations or dispersed energy consumption.

The most important risks are:

      • volume risk: fluctuating production from renewable energy sources;
      • price risk: the possibility of market prices dropping below the contract price;
      • legal and financial complexity: high costs of negotiating and preparing the contract.

In addition, regulatory risks and operational risks on the part of the producer and the consumer must be taken into account.

cPPAs are implemented by companies that take a strategic approach to energy costs and ESG. The leaders are:

      • industrial sector (e.g., KGHM, Cemex);
      • large corporations from the FMCG sector (e.g., Unilever, BAT);
      • selected public sector institutions (e.g., the City of Łódź).

That said, it’s important to keep in mind that this solution can work for any company looking to get access to sustainable energy at a guaranteed price for a set period of time.

These agreements are becoming the norm for organisations seeking to reduce their carbon footprint and stabilise energy costs.

A long-term contract (5–20 years) provides the producer with financial stability, which helps to secure financing. In this way, cPPA supports additionality — adding more green energy to the system. At the same time, there are shorter contracts (2–3 years) for projects that have already been fully financed.

The cPPA implementation process typically takes between 6 and 18 months and involves collaboration across several departments, including:

• Finance and Procurement;
• ESG;
• Energy/Operations.

Implementing a cPPA is a strategic decision that can provide long-term benefits for the company.

A well-prepared cPPA should explicitly define the following provisions:

      • Redispatch – curtailment of generation by the system operator;
      • Handling of negative market prices;
      • Price indexation mechanisms;
      • Contractual penalties and collateral/security arrangements;
      • Liability for unavailability of the installation, production shortfalls, and regulatory changes.

Clearly defined provisions can help prevent disputes throughout the term of the agreement.

Usually, a minimum annual energy consumption of 8–10 GWh is required.
However, companies with lower consumption or limited organisational resources can participate in a cPPA through a purchasing group, which reduces transaction costs and enables smaller consumers to take part.