Corporate Power Purchase Agreements (PPAs) are a useful way of establishing security and commitment to enable operators in the solar sector to commit the resources required to complete ambitious projects. This is due to the PPA establishing a long-term contract wherein a stable energy supply will be provided at a fixed price without the upfront costs that many businesses can find off-putting. In general, a PPA will last between five and 20 years (or be linked to the length of a lease). Recent global issues around the supply of fossil fuels have seen a sharp increase in domestic demand for solar energy and this is likely to be mirrored by businesses. As this should lead to an increase in the number of corporate PPAs being sought, we consider below what the legal risks are and how these can be effectively managed.
What are the legal risks of corporate PPAs?
A significant driving factor behind the adoption of renewable energy is a desire to tackle rising costs, so it is important to understand what would happen if those costs are not properly managed. Businesses can become insolvent, at which point their ability to honour the PPA would be impossible, and the project would potentially collapse. There is also a risk that if the solar generator faces delays in getting the project underway, the buyer might have to source energy from elsewhere, likely at a higher cost. This will not only sour relations between the generator and the buyer, but also leave the buyer in a financially challenging position.
Depending on how the PPA is established, there may be risks of the solar development underperforming. While it may be possible to design and establish a solar-array that will meet the full agreed-upon volume of energy at all times, preparations must be made in case this falls short. The responsibility can be pushed onto the buyer if the PPA follows a pay-as-produced model, wherein the buyer pays for the amount of energy provided and tops up with other sources if that is insufficient. The alternative is for the solar generator to shoulder the risk if they choose a fixed volume model, wherein any deficits will need to be topped up at the generator’s cost.
While considering whether the solar array will be sufficient to meet the terms established in the PPA, it is worth factoring in the relevant environmental and planning considerations. Solar generators would not want to be in a position where they have overpromised the energy supply available and the only way to deliver would be to break the law.
How can the legal risks of corporate PPAs be mitigated?
In order to reassure buyers that the PPA is of value to them, it should be made apparent what they can realistically expect from the arrangement. It should be clear upfront the expected levels of power produced by the development and the timeframe for bringing online any parts of the development that are not operational when the PPA is established. Planning ahead of time for any shortages of power and finding ways to keep the supply up, even if the array itself performs below expectations, will also prevent legal issues arising should the buyer become displeased.
Renewable Energy Certificates (RECs) or Guarantees of Origin (GOs) need to be clearly defined and attributed correctly. Businesses engaging in PPAs will hopefully be committed to genuine sustainability goals and the threat of greenwashing accusations may hinder these efforts.
Before entering into a long-term partnership, it is best practice to determine the financial health of the other party to the extent that it is possible to do so. This will reduce the risk of the project collapsing should the buyer become insolvent. Obviously, there is little reassurance that a business will remain solvent for the entire time of the contract, but steps should be taken to avoid establishing a PPA with those unlikely to see it through to completion.
The Birketts view
Ultimately, seeking professional legal support is the best way to manage the legal risks of PPAs. This can help solar network operators and businesses approach the contracts with confidence, knowing that their legal rights and responsibilities are being properly managed.
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The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at April 2026.