For renewable energy generators in the UK, Power Purchase Agreements (PPAs) are an essential means of commercialising electricity generated by their renewable assets, and underpin their projects’ viability. Among the different forms of PPAs, the utility PPA has historically been the primary means of selling power, particularly during the subsidised era of renewable energy development. But what exactly is a utility PPA, and how does it compare to other contracting options such as corporate PPAs (CPPAs)? This article explores the fundamentals, types, pricing mechanics, and relevance of utility PPAs in today’s evolving energy landscape.
What is a Utility PPA?
A utility PPA, sometimes referred to as an offtaker PPA, is a contractual agreement between a renewable electricity generator and an energy supplier (or licensed utility offtaker) for the purchase of electricity generated by a specific renewable asset. This was historically the primary route-to-market for renewable projects developed under the UK’s support schemes - including the Renewables Obligation (RO) and Feed-in Tariff (FiT) - particularly between 2002 and 2020, and to this day the majority of renewable generators sell their power through utility PPAs.
Utility PPAs are not to be confused with corporate PPAs, which involve direct contracts between generators and corporate end users and are far less prevalent (by volume) in the UK.
Subsidies, PPAs, and the evolution of route-to-market for renewable energy generators
In the subsidised era, the length and nature of utility PPAs was generally dictated by the type of subsidy that the generator had applied for.
Those accredited under the FiT would generally opt for shorter-term fixed-power price contracts, ranging from 6 months to 2 years, given that this generally yielded the highest returns in a backwardated market (where power trades for a lower value the further into the future its traded), and because the FiT scheme offered an in-built layer of insurance in the form of the FiT export tariff, a floor price designed to offer long-term price security.
Whilst those generators accredited under the RO also have the option of looking at shorter-term contracts with a fixed commodity value, many lenders on these large scale projects often required long term contracts with investment-grade counterparties to ensure the projects had a viable route-to-market for their power and ROC subsidy throughout the lifespan of the asset. As a result, the majority of PPAs ranged from 10-20 years in duration, and were of a variable power price, which is explained later in this article.
While these agreements are still the dominant model for operational assets, today's landscape for those in development is more fragmented. Although long-term fixed-power price utility PPAs are achievable, the price levels offered are generally eclipsed in both price and duration by CfDs and corporate PPAs.
Types of utility PPA
There are several types of utility PPAs, each with different levels of price certainty and exposure to market risk. For more information on this visit our PPA structuring article.
Fixed Price PPA
Offers a flat £/MWh rate over the contract period, providing budgetary certainty for generators on a pay-as-produced basis. Typically ranges from 1 to 3 years.
Indexed PPA
Tracks a market reference price, less a fixed or percentage discount. Common for more sophisticated generators with merchant risk appetite, or those managing unpredictable export profiles. Indexes include day-ahead (DAH) indexes and the system sell price (SSP) index.
Framework / Flexible PPA
Allows generators to "lock in" prices for specific delivery windows (e.g., seasons or quarters) based on market conditions, under a pre-agreed framework. Offers flexibility with trading services.
Route-to-Market (RtM) PPA
Sometimes used interchangeably with "CfD PPA," but refers to the PPAs indexed against the intermittent market reference price (IMRP) that are required to facilitate the CfD scheme.
Utility PPA pricing: How is it calculated?
Utility PPA prices are influenced by multiple components beyond simply wholesale power. The following elements typically contribute to the headline PPA price offered by a supplier:
The Renewable Exchange PPA price engine calculates this PPA price daily, for your renewable asset(s), totally free of charge or obligation. All you need to do is register your site on the platform here to get access to price forecasts.
Market trends – past 3 years
Over the last three years, PPA prices have experienced significant volatility. The rolling average PPA price for a standard onshore wind asset (5-year fixed) has ranged from £55/MWh in 2021, peaking to over £130/MWh in late 2022, before stabilising around £70–£85/MWh in 2024–2025. Prices have been driven by global energy shocks (e.g., gas prices, Ukraine conflict), inflation, and tightening balancing services.
How to secure a Utility PPA
Securing a utility PPA involves several steps:
At Renewable Exchange we take our generators through this whole process, giving them daily price forecasts for their renewable assets, connecting them to a network of pre-vetted offtakers and giving them total control over when and how they sell their power in order to maximise revenue and control risk. Contact Us now to arrange a consultation.
Who are Utility PPAs for?
Utility PPAs are suitable for:
Note: These are not typically used for standalone battery storage, which requires different commercial structures focused on flexibility, trading, and ancillary services.
Utility PPA vs Corporate PPA – Key differences
While utility PPAs were ideal for new builds during the subsidised era, modern new-build projects typically pursue either the CfD or a CPPA to secure long-term revenue certainty.
Summary
Utility PPAs are a critical commercial option for large renewable generators seeking flexibility, proven bankability, and a streamlined route to market. While the CfD and corporate PPAs dominate new-build development today, utility PPAs are vital for operational assets and projects outside subsidy or long-term offtake frameworks.
For generators, understanding the nuances of PPA structures and pricing is key to maximising project value and aligning with long-term market trends. Choosing the right offtake structure now can make a significant difference to your asset’s future performance.
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