Aggregation: Opening up the market with ScottishPower

Posted 22nd September 2020 | 1010 words | 5 minutes

In conversation with Taylor McKenzie

In conversation with Taylor McKenzie - Scottish Power

This October, Zeigo is hosting a renewable energy hackathon to explore how smart tech can help overcome obstacles in procuring renewables with ScottishPower and DLA Piper.

In the lead up to EcoHack®, we put the following questions to Taylor McKenzie, Origination & Offtake Manager at ScottishPower.

Zeigo: Zeigo and ScottishPower are collaborating to host EcoHack®, the renewable energy hackathon focused on democratising PPAs and finding tech solutions for issues around aggregation. One of the key challenges we are trying to overcome is aggregation. Energy aggregation is when a group of companies partner together to buy energy from a single developer, or multiple developers, at smaller volumes while keeping the advantages of economies of scale. Why are you motivated to be involved in this project?

Democratising PPAs is a great way to put it. We see aggregation as a fantastic way of opening up the market to all buyers. This not only facilitates bringing new renewable energy onto the grid, but it also brings benefits such as price certainty to smaller players in the market. Being able to open the market and allow everyone to support new renewable energy onto the grid is outstanding.

Zeigo: How can improving accessibility, for example by securing multiple off-takers, be beneficial for the growth of renewables?

In my team at ScottishPower, we keep a close eye on what the corporate PPA market looks like and one of the key things we realise is that you don’t want to isolate one part of the market, hence why it’s crucial to open the market to as many customers as possible.

If you look at the Sustainable Development Goals, one of them is about ensuring access to affordable, reliable, sustainable and modern energy for all. Apply this in a business sense and what you get is the promotion of accessibility to all, you get more buyers and therefore more capacity that can come onto the grid through corporate PPAs. There are few downsides to bringing more players onto the market.

Zeigo: What are the biggest challenges that will need to be overcome?

There’s far too many! Multiple difficulties are raised simply due to the fact you have several off-takers to deal with. Nevertheless, we do see the benefits of ensuring consistency across off-takers and standardising CPPAs where possible. Standardisation is both a challenge and a solution.

Another challenge is credit. For long term contracts like CPPAs, the credit rating will always be paramount. However, from a risk perspective, we see huge benefits to having multiple off-takers. There are concerns around the potential impact of one party’s involvement (or lack thereof) in a buying group so it’s vital to make sure there is a certain level of protection for all parties involved. Everyone has to manage risk through the contract and there are multiple ways of dealing with that.

So, there are challenges but by no means any showstoppers. If it was easy everyone would do it.

Zeigo: Also, aggregation could be a great option for reducing scope 3 emissions. For example, you could be an anchor off-taker and facilitate access to clean energy for your supply chain.

Are there some specific pockets in Europe where we should expect to see the most growth in PPAs and aggregated PPAs?

The latest Bloomberg NEF European PPA Price report picks out the most attractive aspects of each European market. We’ve seen a growing interest in the UK and our parent company Iberdrola has seen a huge growth in Spain, Italy and the Nordics. It’s great to see growing interest from the market as it puts the decarbonisation agenda at the forefront and therefore promotes building new renewable energy capacity.

Zeigo: If we look at the last 5 years, how has the PPA market evolved over that time? Especially with regards to pricing structures and additionality.

When you look at why you’d sign a CPPA from a corporate buyer perspective, the price certainty is a key benefit but also the idea of going a step ahead and supporting investment for bringing new capacity onto the grid. Additionality is key and we are seeing a growing number of people wanting to take that step further. That will continue to grow as companies see the benefits and values in that.

At the same time, CPPAs are a new concept and the idea of corporates having a direct relationship with developers is new. We’ve seen buyers become more attuned with what’s available to them. At ScottishPower, we’re trying to be proactive in driving that education piece and show them what they can achieve through CPPAs.

Finally, I’d say we’re not seeing enough standardisation in terms of how things are structured. But equally, CPPAs are long term contracts with a high value so there’s only a certain level of consistency you’ll see across them so there may be limited progress on this.

Zeigo: In terms of standardisation, we believe technology and innovation will increase the number of deals being signed in the future. What do you think is going to happen in the next 5 years if we include technology in the mix?

With CPPAs being a new concept, we have to think outside the box. Being part of EcoHack® is an innovative way of coming up with a solution. Zeigo is like tinder for wind farms, the platform can bring buyers and sellers closer together. But at the same time, you are also trying to tackle the issue of making business easier – how can we make CPPAs easier to do?

Just look at how innovation has changed how the legal sector has worked over years. Lawyers are an important part of the CPPA process. With technology coming into the mix, it’s going to be interesting to see how that will progress.

Zeigo: One of our strongest focuses is on the simplification of the contract. Historically, it’s the thing that derails most PPAs. I think we’re just scratching the surface of what’s possible in terms of standardisation. That’s why we’re looking forward to seeing you at EcoHack® alongside DLA Piper.