What is a power purchase agreement?
A corporate power purchase agreement (PPA or CPPA) with Ørsted creates a relationship between your company and one of our green assets. Usually lasting for 10-20 years, the agreement covers your consumption with a specific volume of green energy at a fixed price. This volume can – but doesn’t have to – cover 100 % of your consumption.
The relationship between a renewable energy source and your business doesn’t involve a direct, physical connection. Instead, it guarantees that the energy that you offtake from the grid can be traced back to a specific wind or solar farm that feeds the equivalent amount of energy into the grid. This is evidenced with certificates.
- A renewable PPA is a long-term power contract between a customer and Ørsted.
- The customer buys renewable power and certificates from one of our renewable assets.
- The customer receives the corresponding number of certificates from the renewable asset to validate that the electricity bought comes from the same renewable source. We issue certificates for every single MWh generated.
- Certificates support your scope 2 GHG (greenhouse gas emissions) reporting.
What are the benefits of an Ørsted PPA for your business?
Reduce your carbon footprintCompanies around the world are committing to sourcing their electricity from renewable sources. A PPA is one way to achieve this. Energy use from fossil fuels is responsible for almost 75 % of global carbon emissions, so by switching your long-term power supply to renewables from Ørsted, you’re sending a clear signal that you support the global transition to a better energy future.
Be compliant and increase your sustainability profileSustainability is increasingly something that customers, shareholders, employees, and supply chain partners expect of a business. There are also high reporting and compliance standards from schemes like the Carbon Disclosure Project (CDP), RE100, and the UN Global Compact, which large numbers of the world’s leading businesses have signed up to.
Enter an agreement with an experienced partnerØrsted is one of the world’s leading renewable energy companies and the world leader in offshore wind. We built both the world’s first and the world’s largest offshore wind farms, and bring decades of experience building, owning and operating wind farms around the world.
We’ve provided PPAs to leading customers, including Amazon, Danfoss, Covestro and Nestlé, and we signed a landmark renewable PPA in terms of size with TSMC. If you enter a PPA with Ørsted, you’ll be engaging with our experts from the beginning and throughout the entire agreement.
CreditworthinessØrsted A/S and Ørsted Salg & Service A/S are each rated by Moody’s, and Ørsted A/S is also rated by Standard & Poor's and Fitch. View our credit ratings and ESG ratings.
Scale and flexibilityBy 2030, we aim to reach 50 GW of installed capacity across renewable technologies and geographies. This means that we can tailor PPAs for a wide range of business types across a broad geographical area, whether from existing assets or new ones seeking investment.
Budget with confidence
A PPA offers long-term budget certainty that can’t be achieved by purchasing certificates that aren’t attached to a PPA. The price of buying certificates to cover your normal energy supply is as volatile as the energy market it represents. By contrast, a PPA linked to one of Ørsted’s generating assets fixes the price of every certified MWh we supply to you, so you know exactly what you’ll be spending on your green power supply for the next decade or more.
With Ørsted’s operational and upcoming renewable energy projects we can structure long-term offtake agreements to match your demand and renewable energy goals.
With great power comes green responsibility
Depending on the type of agreement, your Ørsted PPA will guarantee demand for the output of one of our existing renewable power assets, or it can help make a new project financially viable - your contribution to increasing the world’s total renewable energy capacity.
The role of your energy supplier
Entering a PPA with Ørsted doesn’t entail switching energy supplier. With a sleeved PPA, you can keep your current energy supplier or switch to a different one in the future. With this type of agreement, your supplier handles the final shaping and delivery of the power, while we handle the generation, price, and certification.
We offer green corporate PPAs across our global footprint in Europe, North America, and the Asia Pacific region.
Here, we answer the most frequently asked questions about power purchase agreements. And if you want to find out more, get in touch.
What are megawatts (MW), gigawatts (GW), and terawatts (TW)?A megawatt is a unit of power which is equal to one million watts:
1 megawatt = 1 million watts
1 gigawatt = 1 billion watts or 1000 megawatts
1 terawatt = 1 trillion watts or 1000 gigawatts
What is a megawatt hour (MWh)?A MWh is the amount of electricity generated by one megawatt in one hour.
What do these other acronyms and terms mean?ESG: environmental, social and governance
GHG: greenhouse gas
CPPA: corporate power purchase agreement
PPA: power purchase agreement
VPPA: virtual power purchase agreement
GoO/GO: guarantee of origin
RE: renewable energy
REC: renewable energy certificate
REGO: renewable energy guarantee of origin
What’s the difference between a physical PPA and a virtual PPA?Both physical and virtual PPAs are attractive green power procurement options.
A PPA is a contract for the purchase of power and associated certificates from a named renewable asset. PPAs allow both the energy generator and the customer to hedge against price volatility in the electricity market. It offers the customer a predictable cost for their electricity use and therefore budget certainty. At the same time, it offers project developers such as Ørsted a predictable revenue, which is key to the continuous build-out of renewable energy assets such as wind or solar farms. Such agreements promote growth in the renewable energy sector.
With a physical PPA, the energy generator, Ørsted, and the buyer must be located in the same power market, or in two markets with connected grids, to allow for physical delivery of the electricity. The buyer will also receive a certificate for every MWh purchased. The certificates prove that the energy purchased comes from a specific renewable asset and can be used to support their scope 2 GHG reporting.
With a virtual PPA, there’s no physical delivery of electricity; the buyer never takes legal title to the electricity. It’s a financial contract that provides a fixed price hedge. However, the buyer still receives certificates for every MWh purchased. The certificates prove that the energy purchased comes from a specific renewable asset and can be used to support their scope 2 GHG reporting.
The net result of a virtual PPA is a less volatile cost of electricity for the customer and therefore budget certainty.
What are the advantages of a PPA vs certificates?Each MWh of green electricity produced is worth one green certificate. Certificates are used for tracking the specific location where the renewable energy is produced and by which technology (e.g. wind or solar). It allows corporations to document their electricity consumption from a specific renewable asset, such as a wind or solar farm, and to report on their sustainability efforts.
When procuring energy through a CPPA with Ørsted, a certificate is delivered with every MWh purchased. In this case, the certificate is directly related to the renewable asset and the amount of electricity purchased. This is a very transparent way for corporations to report on their scope 2 GHG emissions.
Certificates that aren’t tied to a PPA can be sold on the open market as an energy commodity. In this case, the price of certificates is as volatile as the market it represents. Certificates alone aren’t linked to the power that a corporation buys.
How is the power delivered from Ørsted to my business?Ørsted will deliver the power to your energy supplier on your behalf. The renewable energy asset (e.g. a wind or solar farm) generates power that’s fed into the grid and will be transferred to your energy supplier. Your energy supplier will then deliver this volume to the point of consumption under your supply contract. This is referred to as a ’sleeved’ PPA.
Your energy supplier takes care of the final shaping to match your consumption and delivery of the power, while Ørsted handles the generation, price, and certification. Ørsted can also shape the delivery profile, for example to a baseload block where you’d receive the same power for every hour of every day.
Why choose Ørsted?Ørsted has undergone its own transformation from a fossil fuel company to being ranked the most sustainable energy company in the world, from 2019 to 2022, by Corporate Knights' Global 100 Index. Ørsted is the global leader in offshore wind. We have extensive experience in building, owning, and operating wind farms around the world and we offer a full range of renewable energy solutions in addition to wind power.
Our team members are experts in PPAs. We’re here to help you understand and navigate the complexities of the agreement, right from the initial contact. We can also help you gain buy-in within your organisation, for example by presenting our company to your internal stakeholders.
Ørsted A/S and Ørsted Salg & Services A/S are each rated by Moody’s, and Ørsted A/S is also rated by Standard & Poor’s and Fitch. View our credit ratings and ESG ratings.
Does it matter which energy source I get my PPA from?While offshore wind has a higher capacity factor, every renewable energy asset has its advantages. We recommend choosing an energy source that most closely matches your business’s sustainability goals, as well as your annual power demand.
What happens if there’s no wind?With an Ørsted CPPA, we can manage this kind of risk on your behalf and guarantee a fixed delivery volume of energy (baseload). This differs from some other PPA structures where no wind would mean no power.
Can I claim a reduction in emissions from a PPA?
Every MWh purchased with a CPPA comes with a REGO certificate. The certificate is associated with the 1 MWh of renewable energy generated and proves that the electricity purchased is renewable and comes from a specific asset. Certificates can be used to account for a corporation’s carbon emission reduction.
A certificate proves that electricity is generated using a renewable energy asset. Certificates bear different names in different regions:
- UK: REGOs
In the UK, the Office of Gas and Electricity Markets (Ofgem) issues renewable energy guarantees of origin (REGOs) to renewable energy generators.
- Continental Europe: GO
A guarantee of origin (GoO or GO) is the European scheme that provides information on the renewable energy source.
- USA: RECs
In the United States, renewable energy certificates (RECs) are also known as green tags, renewable energy credits, renewable electricity certificates, or tradable renewable certificates (TRCs).
- UK: REGOs
Is there a lower limit for the volume of energy my PPA covers?The volume doesn’t have to cover 100 % of your consumption. However, our PPAs normally have a lower total volume limit of 100 GWh. We recommend that you discuss your business need with one of our PPA experts.
I want to enter a PPA with Ørsted. How do I get started?Get in touch with us here, and one of our PPA experts will contact you to discuss your business needs.
What is additionality in the renewable energy industry?Organisations buying a PPA with additionality are guaranteeing to purchase the offtake of a new project at a fixed price. This positively influences the financial investment decision that allows a new renewable generation project to be built, which will bring additional green energy to the grid.