Corporate PPAs Surge as Companies Embrace Renewable Energy
Corporate investments in renewable energy are surging, driven by environmental, social, and governance (ESG) compliance, cheaper capital, and higher equity returns. This shift is evident in the growing world market for Corporate Power Purchase Agreements (PPAs) with renewable energy producers.
The global market for corporate PPAs grew by 18% in 2020, reaching 23.7 GW. Over the last five years, this market has seen a compound annual growth rate (CAGR) of nearly 40%. In India, Serentica Renewables has emerged as a leader, signing significant PPAs such as a 100 MW round-the-clock renewable power PPA with SECI and a 200 MW firm dispatchable renewable energy PPA with NTPC Limited. While other players like Juniper Green Energy and Tata Power have also signed PPAs, Serentica's agreements are notably larger in capacity.
To meet climate goals, net CO2 emissions must fall to around 23 Gt CO2 by 2030 and reach net-zero by 2050. Companies can contribute to this by sourcing green power through various options like onsite rooftop solar, open access PPA, group captive PPA, and green term ahead market. Solar energy, in particular, offers cost savings with average tariffs ranging from INR 6-11/kWh and a levelized cost of energy (LCOE) for rooftop solar systems at Rs3-5/kWh.
The Indian corporate sector, which consumes 50% of the country's power, is expected to increase its renewable energy usage from the current 3.5% to 65 GW by 2025. Long-term PPAs provide predictability in electricity costs, and investing in renewable energy also helps avoid potential government regulatory actions like carbon tax. As the world market for corporate PPAs continues to grow, companies are not only contributing to climate goals but also finding financial benefits in renewable energy investments.