How Manufacturing Can Benefit from Power Purchase Agreements (PPAs)

Introduction

The UK manufacturing sector is the backbone of the economy, producing essential goods and driving innovation. But its reliance on energy-intensive processes makes it vulnerable to volatile energy prices, supply instability, and increasing regulatory pressure to cut carbon emissions.

A Power Purchase Agreement (PPA) offers manufacturers a way to secure a stable, predictable energy supply while accelerating progress toward net-zero targets.

Energy Challenges in Manufacturing

1. Energy Dependence

Processes such as steel production, chemical synthesis, and cement manufacturing demand continuous, uninterrupted power. Energy interruptions risk costly delays, production losses, and reputational damage.

2. Rising and Volatile Energy Costs

Wholesale electricity prices in the UK surged over 70% between 2021 and 2022 (Ofgem). For manufacturers with high base-load demand, even small price shifts can cause significant budget strain.

3. Pressure to Decarbonise

Manufacturing is responsible for a substantial share of the UK’s carbon footprint. Tightening ESG and net-zero regulations mean decarbonisation is now a commercial necessity, not an optional extra.

What is a Power Purchase Agreement?

A PPA is a long-term contract between an electricity generator and an end consumer, typically spanning 10–25 years. In a renewable energy PPA, manufacturers can source electricity directly from solar farms, wind projects, or other green energy facilities.

This arrangement locks in price stability, improves budget forecasting, and supports ESG compliance through verifiable renewable energy sourcing.

Learn more in our in-depth guide: Power Purchase Agreements for UK Manufacturers: Benefits & Opportunities.

How PPAs Support the Manufacturing Sector

1. Stable and Predictable Power Supply

Manufacturers depend on reliable power to maintain operational efficiency.
A PPA:

• Provides a dedicated renewable energy source.
• Offers long-term price stability for predictable financial planning.
• Reduces reliance on volatile fossil fuel-based grid electricity.

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Explore our corporate PPA solutions to see how these contracts are structured for manufacturing.

2. Financial Advantages

PPAs allow manufacturers to manage costs effectively by:

• Locking in electricity rates for the duration of the contract.
• Shielding against future price hikes.
• Potentially accessing tax incentives and renewable energy subsidies.
• Reducing operational expenses over time as renewable energy becomes increasingly cost-competitive.

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Compare this approach with CapEx vs PPA models to determine the right fit for your business.

Manufacturing PPA Financial Model Example

Annual Consumption: 20 GWh
Contract: 15-year fixed-price PPA at £75/MWh (vs £110/MWh current grid rate)
Annual Saving: £500,000
15-Year Saving: £7.5 million (without inflation)
Carbon Reduction: ~4,800 tonnes CO₂e annually

Result: A single long-term PPA can deliver multi-million-pound savings while meeting Scope 2 emissions goals.

3. Accelerating Net-Zero Progress

PPAs help manufacturers:

• Reduce Scope 2 emissions in line with GHG Protocol.
• Strengthen ESG reporting for investors and customers.
• Comply with SECR, TCFD, and CSRD disclosure frameworks.

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Our net-zero consultancy services integrate PPAs into a wider decarbonisation roadmap.

4. Enhancing Energy Resilience

For manufacturers, operational continuity is non-negotiable. A PPA:

• Secures long-term, traceable renewable energy supply.
• Mitigates risks from blackouts or grid instability.
• Can be paired with behind-the-meter rooftop solar to create a hybrid supply model.

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Meeting Net-Zero Targets: A Strategic Imperative

The UK’s commitment to net-zero by 2050 demands rapid industrial decarbonisation. PPAs enable:

• Transitioning from fossil fuels to renewable energy.
• Meeting customer and supply chain sustainability expectations.
• Creating competitive advantage in tenders and partnerships.

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Why Stable Power Supply is Critical for Manufacturing

• Operational Continuity: Avoid production halts.
• Process Integrity: Maintain output quality and efficiency.
• Innovation Enablement: Support adoption of automation and advanced manufacturing tech.

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Conclusion: A Win-Win for Manufacturers

Adopting a PPA is a strategic decision that balances economic resilience with environmental leadership. Manufacturers that act now can secure competitive pricing, improve ESG performance, and future-proof their operations.

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