On Tuesday 30 March RenewableUK and Solar Energy UK's Clean Energy Exchange webinar series continues with a focus on the water sector.
We caught up with panelist Jennifer Keogh, a Senior Associate at DLA Piper, focusing on renewable energy and specialising in corporate PPAs in particular.
Jen starts by highlighting the key opportunities in the water industry right now for utilising the benefits of corporate PPAs:
“When viewed in conjunction with waste water, the water sector is the fourth most energy-intensive industry in the UK. Therefore, any way of hedging energy costs will stabilise and hopefully reduce one of the most substantial overheads for water companies, providing financial benefits in addition to the clear sustainability advantages. The water industry is in a particularly great position because it can utilise a sleeved corporate PPA structure, or – due to the land often available to water companies on which their treatment facilities are located – there is opportunity to utilise a private wire PPA structure too, providing flexibility.
“There is also an industry-wide commitment to reduce carbon emissions. Water UK has published plans on how to achieve net zero by 2030, which includes utilising corporate PPAs, alongside electrification and the implementation of other energy-efficient infrastructure. This means corporate PPAs are already on the agenda internally for many water companies which is great news because the earlier you develop internal understanding of what you’re hoping to achieve and how, the quicker and smoother the process will be.
“Internal socialisation right at the start of any corporate PPA process is key. A lot of companies are developing wider sustainability plans, so any sustainability leads or responsible procurement officers need to be engaged from the beginning and throughout the process. This ensures the aims for the corporate PPA are aligned with those of the wider company sustainability strategy and message. At DLA Piper, we offer training for all teams within these companies right at the outset of a transaction to ensure that everyone is working from the same page. This is especially beneficial for teams who might otherwise be unfamiliar with corporate PPAs, their structure, benefits and risks. Ultimately, better knowledge means better teamwork.”
For water companies interested in taking the first steps, there is a lot of preparation to be done, as Jen goes on to outline:
“Before legal arrangements can be made, it is important for companies to understand their current energy consumption. This needs to be modelled on a forward-looking basis, taking a fairly commercial view in terms of whether any facilities are likely to close in the next 10-15 years for a sleeved PPA, or in the next 25-35 years for a private wire PPA. They also need to consider the impact on consumption if new infrastructure or energy efficiency measures are to be introduced.
“Another area that has historically caused delays for water companies looking to procure renewable energy is the accounting impact. If the offtaker wants to consume all of the energy, this can put the whole arrangement on balance sheet, which for a lot of water companies isn’t the preferred approach. This kind of issue needs to be identified and dealt with early, as it will go to the heart of how the legal documents are structured later on.
“As such, I would definitely recommend getting on top of due diligence at an early stage, especially for water companies considering a private wire PPA structure. It’s crucial to understand whether the developer with have a separate connection to sell any excess energy back to the grid, or if the developer will be utilising the water company’s own grid connection, and what implications all of this has on the connection and import supply agreements. Issues and permissions relating to the land should be explored as well.
“Regarding the legal documents, water companies need to establish their main drivers, red lines and any regulatory restrictions. Understanding these factors early means that bidders can be aware of the company’s requirements and restrictions and the process can be streamlined.”
With current net zero targets and a growing appetite from all industries to maximise on the opportunities available in renewables, this is not time for water companies to stand still.
“There will likely be an increased focus on renewables in the run-up to and after COP26. More than this, I believe more companies will want to clarify their own carbon zero commitments and efforts, therefore driving uptake of PPAs over the coming year. I think those not focusing on these opportunities will actively fall behind.”
Don’t miss Jen and the rest of the expert panel during our new Clean Energy Exchange 2021 webinar for the water industry – Tuesday 30 March. Register at https://events.renewableuk.com/cleanenergyexchange21-registration