Universities to buy direct from windfarms

A collection of 20 universities, including Newcastle and Exeter, have combined their buying, and in a deal brokered by The Energy Consortium (TEC) and Squeaky Clean Energy, have signed a decade long deal worth £50m to use renewable energy.

The deal will see the institutions buying renewable energy directly from the UK under a power purchase agreement (PPA) and fixes prices at a competitive rate for the next decade – and in doing so, minimises the exposure to market volatility. This is the first time that public sector energy users have collectively purchased renewable energy.

Matt Dunlop, head of sustainability at Newcastle University said: “It’s fantastic that the University has been able to enter into this long-term contract for onshore wind power, under the PPA established by TEC. Under TEC’s frameworks, we have purchased 100 per cent renewable electricity since 2017, and the PPA is part of our strategy to diversify and increase our investment in both on and off-site renewables as part of our climate action plan to achieve net-zero CO2 emissions by 2040.”

The deal was structured so the power from the wind farms contractually flows with the Renewable Energy Guarantees of Origin (REGOs). The PPA will also help the participants meet the UK Government’s goal to build a net-zero carbon economy by 2050. Under the plan, emissions from estates will have to be completely eliminated or offset by schemes with clear, robust auditing of activity proving the removal of CO2 from the atmosphere. The energy is to be provided by windfarm owner Statkraft from its UK portfolio.

Once the exclusive domain of large corporates, this first of a kind transaction provides a platform to open up the market to much smaller companies and public sector bodies.

Until now, the cost and complexity of arranging PPAs meant their advantages could only be enjoyed by large corporations that had the in-house capability and resources needed to negotiate these agreements that typically ran to 120 pages. Additionally, there was little appeal from the other side of the equation – generators – to strike a PPA with smaller organisations as the scale of any deal was always too small. But the breakthrough came via the establishment of standardised and simplified documentation that cut the size of the contract down to a previously unimaginable 15 pages, lowering transaction costs to an affordable level.

“The PPA market has long been touted as a means for larger organisations to procure renewable power and enable subsidy-free development,” said Richard Murphy, managing director, TEC. “But to date, it has largely been the preserve of very large companies, requiring substantial commitments from buyers. By acting together in a collaborative approach facilitated by the energy expertise here at TEC, these institutions, whether large or small, have been able to navigate a previously inaccessible market.”

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