By Daniel Logue
Economist Impact hosted the 2nd annual Energy Transition Summit on 10 March 2025 in London, as part of the 10th anniversary edition of Sustainability Week. The Energy Transition Summit explored the energy transition through a technology lens, looking at the impact and potential of AI, renewables, electrification and advanced energy storage, among others, and examining the investment opportunities which could be unlocked by innovation.
One of the panel sessions at the event, moderated by Laveena Iyer from the Economist Intelligence Unit, delved into the topic of power-purchase agreements (PPAs), which are becoming the backbone of long-term clean energy strategies for companies worldwide. The panel considered how PPAs were aiding the global transition to renewable energy production and identified some of the hurdles that companies must overcome to make the most of these agreements.
Focus on net zero commitments
The panellists were united in undertaking net zero commitments with fixed targets. Ilkem Yildiz, energy and decarbonisation procurement lead at Unilever, explained that their aim was for the company’s scope 3 emissions (also known as ‘supply chain’ emissions beyond the direct control of the company) to reach net zero by 2039. Ulrika Leverenz, head of green investment at H&M group, highlighted that the group was aiming for net zero emissions across all scopes by 2040. Zephyr Taylor, global category director for renewable energy at Mars, stated a commitment to net zero by 2050.
Ulrika Leverenz outlined that “PPA agreements are a very good tool to reach those targets”, with Zephyr Taylor describing them as “one of the principal tools in the corporate renewable sourcing toolbelt”.
Challenges around scope 3 emissions
Ulrika Leverenz explained that electricity demand in H&M’s stores and distribution centres is naturally high, adding: “For them, we have PPA agreements up and running for Spain, the UK and the US. The nature of the business means that the electricity consumption is very widespread – we are present in very many markets and over thousands of stores.”
She detailed H&M Group’s solution to this level of electricity usage, stating: “We chose so-called virtual PPA agreements. In a VPPA, the electricity is sold on your behalf but you receive certificates or the receipts for this.”
She continued: “For us, additionality is important. We would like to be able to actually make sure that we increase the renewable electricity into the grid and you do that with a PPA agreement. Secondly, you have a possibility to secure a more stable pricing so that is the solution for scope one and two.”
Ilkem Yildiz said that supply chains are also responsible for most of Unilever’s emissions, citing that this is a challenge for his company in emerging countries. He explained that these emerging countries may have “a lack of infrastructure, a lack of legislation for the environment. There might even be a lack of economic and political stability as well.”
To combat these challenges, Ilkem Yildiz underlined: “What we are doing is trying to invite our partners, like in India for example. When we are planning a PPA, we are looking at our suppliers as well. We have publicly announced one in India going live this year. Ten of our business partners are coming together under this umbrella PPA which is going to help scope two and scope three for us.”
Ilkem Yildiz outlined that Unilever saw these joint PPAs as providing the necessary financial security to give investors more confidence to invest in them.
The reliability and utility of PPAs
Asked about how to convince stakeholders to invest in PPAs, Zephyr Taylor said: “In terms of long-term supply security, price risk management and supplier relationships, the PPA model sells easily internally, and particularly if you have an organisation that fully understands and appreciates the value that this long-term agreement can offer versus a short-term, normal commodity market-esque sort of approach.”
“With that said, there are quite a number of challenges in terms of accounting treatment, obviously getting your legal teams aligned, and getting the businesses, that are ultimately the customers who are paying for these agreements, to appreciate what that looks like across all of their contractual obligations.”
Zephyr Taylor praised the evolution of PPAs, stating: “Nonetheless, I feel like the PPA model is quite well-developed and mature enough at this point to where it’s not necessarily ground-breaking, and it’s not the vanguard financial and commercial instrument that it used to be when PPAs were first being piloted by large corporate buyers.”
Regulatory ‘asks’ advocated by the panellists
In response to the question of what ‘asks’ he would have in the regulatory domain, Ilkem Yildiz stated that his answer would vary depending on different geographical contexts. “If I had to start from the UK, I would say stick with Europe so you have more connection points. “Don’t try to deface yourself from the European grid, which is going to be very useful in the future for renewable energy deployment or the trading of it. For Turkey or South Africa, provide some political stability for the future – enable the market for private PPAs to be developed.”
Zephyr Taylor said: “First and foremost, the ability to do a bilateral transaction directly between a renewable energy project developer and a corporate buyer in this context. I think that is a critical component of the enabling environment that you see absent from many of the emerging markets where we’re looking to have the PPA model develop and be replicated.”
His second regulatory ask, which Ulrika Leverez agreed with and seconded, was: “Having a financial version of the PPA. Not just the ability to bilaterally transact, but having that virtual PPA, that Contract for Difference settlement, be an option. There are many markets where a physical PPA is available, but a virtual PPA is not. When you have decentralised load and when you want the relative simplicity, a VPPA model, specifically as a subset of the PPA umbrella, is quite effective and efficient.”
Ulrika Leverez concluded: “I would have an extra wish for a sort of VPPA, or financial PPA, that could work in a collaborative sense, because for any individual brand that would like to invest and support a PPA or an equity investment, they cannot do so only for their share because the supplier obviously needs to cover the full volume of the demand.”
