Figure 2 A visual representation of a typical private wire PPA
A private wire PPA tends to be agreed where the buyer’s site is close enough to the generation site that they can be connected through a physical wire. For instance, a community solar installation on a school lends itself well to a private wire arrangement where the school is the main off-taker of the electricity generated. Private wires can serve multiple buildings, although this becomes more complex in both regulation and in terms of cost and legal issues.¹
In a private wire arrangement, the buyer will typically still require additional electricity from a licenced supplier to meet their full demand (assuming that the generator will not cover 100% of their demand 100% of the time), which will require renegotiating their supply contract with their licenced supplier.
A buyer will also typically be required to secure a grid connection agreement to export any excess energy not used from the generator at times where the electricity generated exceeds the needs of the premises (e.g. during the school holidays for solar on school projects). Exceptions to this include where there is substantial on-site storage.
It can also be the case that an agreement might need to be met between the parties on the shared maintenance of the infrastructure installed. This was a noted challenge for the Dundee Renewable Energy Society² project, who had to agree that the off-taker – in this case the James Hutton Institute – would own the private wire in order for the project to progress.
Establishing a private wire PPA first means establishing a relationship with a prospective off-taker within a reasonable distance of the generation site. From there, the PPA can be agreed between the two parties directly and shaped to meet their needs.
Non-commodity relief: Under a private wire arrangement, if the generator is under 5MW and does not at any time supply more than 2.5MW to domestic consumers, it is exempt from all environmental and policy costs, and network costs. This equates to approximately 11.15p/kWh by summer 2024 prices.
¹ Llywodraeth Cymru Gwasanaeth Ynni, 2022. Power offtaker options.
