• Massive demand from data centre companies
• CPPA announcement coming in next few months
• Shift towards baseload PPAs

Drax Energy Solutions has seen a “massive” amount of renewable energy demand from data centre companies, with many eyeballing corporate PPAs following the 10-year Global Switch offtake in the UK in June in which Drax acted as intermediary to an undisclosed solar generator.

Callum O’Reilly, renewables origination and deal structuring manager at Drax expects to see even more data centre developers signing up for CPPAs and flagged that the company is gearing up to announce another deal shortly.

The new CPPA partnership will be announced within the next few months, according to O’Reilly.

“We’re finding that our customers are recognising value in corporate PPAs, particularly because it’s a long-term hedge which is super valuable in a market where there are regular price shocks,” O’Reilly said.

“The value add here is that it’s a sustainable form of energy procurement in that it supports businesses decarbonisation goals.”

The CPPA acts as a risk mitigation strategy in that it protects electricity costs from market volatility, according to O’Reilly.

The structure of the CPPA means that customers sign their own PPAs with the generator, while Drax structures the trading agreement to manage the PPA on behalf of the customer.

In recent years, there has been a shift to baseload PPAs, according to O’Reilly.

“Five to ten years ago the majority of deals would be pay-as-produced, whereas the demand right now is for baseload structures,” he said.

“Customers are keen on fixed price PPAs that are index-linked,” he added.

In addition to the shift towards baseload PPAs, O’Reilly added that one of the other biggest changes Drax have seen over the last 12 to 24 months is that PPAs are not being benchmarked to where the CfD is.

“Generators have a choice to either sell their power through the CfD or sell privately to a corporate – hence generators typically benchmark CPPA prices against the CfD strike price.”

He said this is particularly true for new build projects, while old operational projects are seeing shorter contracts with easier approval processes.

Current data centre PPAs

This comes just a month after it was announced that Drax had secured a 10-year CPPA with Global Switch in a bid to meet the data centre’s UK power demand.

A solar generator will supply 55 GWh of baseload power each year, and Drax will act as an intermediary between the generator and Global Switch.

The CPPA will start in January 2027 and will cover about 30% of Global Switch’s UK electricity demand.

This is the second agreement Drax has arranged for Global Switch. Together, the two agreements cover more than 70% of the company’s UK electricity use, all backed by renewable energy.

In January of this year, Global Switch signed an eight-year power purchase agreement with RWE to supply renewable electricity to its London Docklands data centre.

RWE will supply the site will 70 GWh of electricity per year – until 2033 – from the 57.4 MW Brechfa Forest West wind farm in southwest Wales.

To date, Drax has complete two CPPAs for data centre customers, and five to six in total.