Re-wiring routes to market: six PPA trends in 2026

The Greenhouse Gas (GHG) Protocol sets the global standard for how organisations measure and report their greenhouse gas emissions. An organisation’s ‘Scope 2’ emissions are emissions from purchased or consumed electricity, steam, heat and cooling. Earlier this year, the GHG Protocol consulted on proposed updates to Scope 2 emissions reporting, in particular on the use of ‘market-based’ methods which currently allow for the use of PPAs and REGOs. The outcome of this consultation is expected later this year. 

Proposals set out in the GHG Protocol consultation included requiring (i) hourly matching of renewable generation and consumption and (ii) narrower locational matching. The EU’s Carbon Boarder Adjustment Mechanism (CBAM) rules also dictate hourly matching when it comes to demonstrating the ‘emissions factor’ of goods – so both EU/GB electricity market integration and linking of ETS schemes will also put pressure on GB aligning with the EU on hourly matching. 

The PPA market can be agile to the requirements of closer time and location matching. We are seeing an increased interest in on-site PPAs and in PPAs sourcing electricity from close to the point of generation. 

We are also seeing an increasing interest in the co-location of renewables with storage and the continued role of the hybrid PPA, enabling corporates to cover more of their consumption with eligible renewable generation. Tighter load profiles to match supply and consumption are likely to be prevalent in this climate. These moves could result in less market appetite for the longer distance virtual arrangements. 

In addition, we have seen a depression in REGO prices on a sustained basis since the peak in 2023 , and anticipate that REGO prices will continue to be depressed unless generators are also able to demonstrate hourly matching. 

As highlighted above, hourly matching also drives the interest in hybrid PPAs, under which generation is combined with storage. Data centre demand profiles will also need renewables and storage to compete against increasing data centre offtake from the gas network and on-site gas. The increased interest in co-location to maximise grid capacity also supports hybrid PPAs – we need BESS to maximise value from solar. Due to grid reform, for some projects, despite development in parallel, the BESS and solar elements could have different connection dates.

There is an expansion in the offtaker profile. These are no longer limited to large corporates but also increasingly capture medium-sized businesses or groups purchasing across linked businesses to increase negotiation leverage. We have also seen significant interest from public bodies on tendering for PPAs over the last few years. This development requires generators to engage with the heavily regulated public procurement space, which they may not have previously experienced tendering into. Recent procurement reforms introducing the competitive flexible procedure may provide some increased flexibility for innovation and developing collaborative solutions, though time will tell! There is also increasing interest in on-site solutions from public authorities and utilities that own land where on-site solutions could be developed, for example, water utilities and transport authorities.

The downside of greater renewables saturation is the increase in the number of negative pricing hours on the grid. 

Consideration should be given to the treatment of negative price events at PPA negotiation stage, particularly around which party will take the risk of it. Consideration should also be given to the obligations to track and notify negative pricing events before they occur, to reduce exposure as much as possible. 

The Labour government's mandate, GB Energy and the Warm Homes Plan all place emphasis on the rooftop revolution. An increasing focus on on-site solutions, driven also by grid connection delays, is the best way to show for corporates to show ‘greenness’ without reliance on REGOs. Private wire power is, after all, the cleanest power available to a corporate user.

We are also seeing increasing interest in on-site microgrids, being small scale energy networks that generate and distribute electricity to a particular area, such as a community of new build houses or a university campus. These combine behind the meter power generation with behind the meter storage, and on-site consumption.

The government’s call for evidence into CPPAs floats the proposal of government intervention to improve CPPA market, particularly guarantees / underwriting to address issues of credit support for offtakers and again expand typical offtaker profile. The call for evidence cites state-backed guarantee schemes that provide partial coverage (up to 80%) of counterparty default risk. Any changes introduced following this call for evidence would not come into force until 2027 at the earliest, following the conclusion of the design process. Due to increasing calls for re-integration of the UK/EU electricity markets, PPA market participants would be well advised to keep an eye on the results of ACER’s public consultation on developments and initiatives in EU PPA markets, as this may prove informative.