Corporate power purchase agreement (CPPA)

As energy costs rise and sustainability becomes a top priority, corporate power purchase agreements (CPPAs) are emerging as a critical tool for businesses to secure renewable energy at stable, long-term prices. For property managers, controlling operational costs and meeting green initiatives can be a challenge. These agreements offer a solution that not only locks in energy rates but also supports the transition to renewable energy sources like solar and wind.

At MRI Software, we understand the unique energy needs of property managers and landlords. With years of experience providing property management solutions, we’ve seen how strategic energy decisions can enhance profitability and tenant satisfaction. In this post, we’ll explore what CPPAs are, their benefits and how they can help your business meet both financial and sustainability goals.

What is a CPPA?

A corporate power purchase agreement is a contract where your business buys electricity directly from a renewable energy generator. You agree on a price for a fixed term, typically between 10 and 25 years. This can help you protect against fluctuating energy costs while supporting renewable energy projects.

Imagine it like signing a deal to get your energy from a solar farm or a wind farm. Instead of relying on standard utilities, you cut out the middleman and go straight to the source. That’s what makes these agreements an attractive option for businesses looking to lock in lower, stable energy prices while being more eco-friendly.

Benefits of a CPPA

These contracts offer several compelling benefits that go beyond just saving money. They support sustainability initiatives and provide long-term financial predictability, which is crucial for property managers. These agreements can also position your business as a leader in renewable energy adoption.

Additionality

One of the most important benefits of corporate power purchase agreements is additionality. By committing to this contract, you are directly contributing to the development of new renewable energy projects. Without this investment, many solar or wind farms wouldn’t exist, which makes your participation vital for green energy growth.

When you opt for one of these agreements, you’re not just covering your energy needs – you’re playing an active role in expanding the renewable energy landscape. Imagine funding a new solar farm that will generate clean power for years. That’s the power of additionality at work.

Long-term price certainty

Power purchase agreements provide long-term price certainty, which is invaluable in an unpredictable energy market. With costs often fluctuating due to supply chain issues or global events, securing a fixed rate ensures you can plan your budget more effectively. This benefit is especially helpful for property managers who need to keep utility costs predictable.

If energy prices suddenly spike, this agreement shields you from paying more than what’s agreed upon in your contract. It’s like locking in today’s rates for the next 15 to 25 years, which can result in significant savings. For property managers, this stability allows for more accurate forecasting of operating expenses.

Kickstart your net-zero and ESG initiatives

These contracts can be a key component in your net-zero emissions or ESG (Environmental, Social, and Governance) initiatives. By sourcing renewable energy, you are actively reducing your carbon footprint and aligning with global sustainability standards. This helps you meet tenant and investor expectations around eco-friendly practices.

For example, if your goal is to achieve a 50% reduction in carbon emissions within a decade, this agreement can provide the renewable energy needed to make those cuts. It’s a practical, scalable way to ensure you’re hitting your sustainability targets year after year. This, along with a few other energy saving tips, will help you kickstart your net-zero.

Secure REGOs

When you enter into a corporate power purchase agreement, you can also obtain renewable energy guarantees of origin (REGOs). These certificates verify that the energy you’re using comes from renewable sources, which is important for your business’s green reputation. REGOs can be particularly valuable in communicating your sustainability efforts to stakeholders.

In practice, this means that you have certified proof to show tenants and investors that your properties are powered by renewable energy. For businesses looking to demonstrate transparency, REGOs offer an easy and verifiable way to support those claims.

Brand image

These agreements don’t just reduce costs—it also strengthens your brand image. In a market where consumers, tenants and investors increasingly prioritise sustainability, aligning your business with renewable energy can make a lasting impression. Going green can elevate your brand and attract tenants who value environmental responsibility.

Imagine marketing your property as one that runs entirely on renewable energy. This message not only appeals to environmentally conscious tenants but also sets you apart from competitors who haven’t adopted green energy solutions.

What are the different CPPAs?

There are two primary types of corporate power purchase agreements: physical and virtual. Each type offers distinct benefits depending on your business’s energy needs and operational setup. Understanding the differences can help you choose the right option for your properties.

Physical or direct CPPAs

A physical agreement involves the direct purchase and delivery of electricity from a renewable energy generator. The energy flows directly into your business through the grid, making it a tangible way to power your operations. While it offers direct access to renewable energy, it can be more complex due to grid management and transmission requirements.

Virtual or synthetic CPPAs

A virtual agreement is a financial arrangement rather than a physical energy transfer. The business doesn’t directly receive electricity but enters into a contract where it agrees to pay a fixed price for renewable energy. The contract acts as a hedge against volatile market prices.

In this case, you’ll still get your energy from the local grid, but the financial agreement smooths out price fluctuations. It’s an easier option for companies that want the benefits of renewable energy without the infrastructure complexities.

What should you consider when getting a CPPA?

Before entering a corporate power purchase agreement, it’s crucial to assess your business’s energy needs and goals. You want to be sure that the agreement aligns with your operational requirements and long-term strategy. First, look at your current and projected energy consumption.

Do you expect a significant increase in usage, such as adding electric vehicle (EV) charging stations for tenants? This future planning is essential when choosing the right agreement. Tools like an energy management system can help you monitor consumption patterns and make more informed decisions.

Next, evaluate potential renewable energy providers. Do they have a reliable track record? Are they located near your operations, which could lower transmission costs? These factors play a crucial role in finding the right partnership.

Are there any risks with CPPAs?

While CPPAs provide many benefits, they do come with certain risks. A key risk is market price fluctuations—if market prices drop below your contract rate, you may end up paying more for your energy. Long-term contracts also present challenges if your energy needs change during the 10 to 25 years of the agreement.

It’s important to thoroughly review the legal terms before signing these agreements. Pay special attention to clauses about penalties for early termination or underperformance of the renewable project. Proper planning can mitigate most of these risks, ensuring a smoother experience.

Are CPPAs only for large businesses?

No, these agreements aren’t just for large corporations. Today, many small and medium-sized businesses are also adopting them as renewable energy providers now offer more flexible contract terms. This shift has made these contracts widely accessible to companies of all sizes, including property managers.

If you manage a smaller property portfolio, a corporate power purchase agreement can still provide value. It offers price stability and helps enhance your company’s green credentials, even for businesses with lower energy demands. With tailored agreements, small businesses can also benefit from the advantages of renewable energy.

How long does a corporate power purchase agreement typically last?

Corporate power purchase agreements typically last anywhere from 10 to 25 years, depending on the terms agreed upon. This long-term commitment offers the advantage of price stability but requires thorough planning to ensure it aligns with your business goals. It’s important to assess your future energy needs and growth plans when entering a long-term agreement.

For example, if you anticipate expanding your property portfolio or adopting new technologies, you’ll need to factor those changes into your contract. Planning ahead ensures that your CPPA will continue to meet your energy demands over time.

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Contact MRI Software

At MRI Software, we’re passionate about helping you leverage technology to drive greater operational efficiencies. With over 30,000 users across more than 260,000 buildings using our energy management software, contact us today to find out more about how our solution can enable you to gain total visibility and take full control over your energy consumption.