As companies across the globe pursue decarbonization targets and the need for green power generation grows, 24/7 clean power purchase agreements (PPAs) are playing an increasingly important role. With their unique ability to provide constant green power, time-matched to demand, these next-level PPAs are helping to unlock investment in nascent technologies and scale their deployment—especially combined with advances in storage and flexible generation.
Demand from leading hyperscalers, including major cloud and data service providers, is driving this trend. However, 24/7 clean PPAs demand sophisticated trading, structuring, and risk-management capabilities. Around the world, renewable power providers are looking to step up their game to take advantage of these new opportunities.
PPAs are on the rise
The deployment of renewable energy sources across the world has been largely driven by government-backed subsidies and tariffs. Now, as subsidies are lowered or even completely removed, market-based finance instruments are becoming more prevalent—in particular, corporate PPAs have proved effective and popular.1
This PPA surge plays an important role in boosting renewables uptake. For example, in Spain, PPAs have acted as a catalyst for renewables development alongside advantageous resource endowment, established supply chains, and favorable regulation (Exhibit 1).
In 2019–20, the Spanish government approved legislation that provides credit risk guarantees for energy-intensive companies engaging in large-scale corporate PPAs.2 This, alongside good natural resources and a large pool of experienced developers, has made Spain one of the most attractive locations for renewables development: for five consecutive years, the country has seen the highest contracted corporate PPA capacity volumes in Europe.3
This has boosted Spanish renewables. Before 2019, Spain installed under 1.0 gigawatt (GW) of new renewables capacity per annum, while from 2019 to 2023, these rates exceeded 2.7 GW—reaching a peak in 2022 with almost 12.0 GW of newly installed renewables capacity.4
However, there are headwinds: the Spanish power wholesale spot price, a key PPA indicator, was, on average, lower in the first half of 2024 than in 2023 and more volatile.5 Day-ahead prices in the same period fell to 40 euros per megawatt hour (€/MWh), less than half of what they were a year before. While the wholesale price in the third quarter indicates a recovery, market conditions remain unstable—not helped by pressure on prices from significantly higher solar production.
Hyperscalers are driving the trend
As part of the RE100 global corporate renewable energy initiative, more than 400 companies from over 175 markets, with a combined annual power demand of over 500 terawatt-hours (TWh), have committed themselves to 100 percent renewable power consumption.6
Against this backdrop, certain energy-intensive data center hyperscalers have gone a step further than the RE100 commitment, promising to time-match demand and generation; these companies are driving the move to 24/7 clean PPAs. For example, in its 2030 sustainability goals, Google has announced its plan to procure clean energy around the clock by 2030 on every grid where it operates.7 At the start of 2024, Google contracted its largest PPA so far, with 478 megawatts (MW) in new offshore capacity, allowing it to achieve 90 percent hourly clean energy consumption in its Dutch operations.8
Similarly, Microsoft has committed to becoming carbon-negative by 2030, with green power for all its data centers.9 A pilot 24/7 clean PPA was contracted in 2020 with Vattenfall to cover Microsoft’s Swedish power consumption.10 Together, Microsoft and Google have launched the Granular Certificate Trading Alliance, which enables hourly certificate trading to help match supply and demand around the clock.11
However, implementation pathways vary. At the end of 2022, an alliance of companies, including Amazon and Meta, was formed to create the “Emission First” approach.12 At its core is a new accounting framework that focuses on emission impact rather than hourly power matching. These approaches are not necessarily conflicting but could be complementary efforts to drive the deployment of carbon-free generation and flexibility instruments.
The update to the Greenhouse Gas Protocol will be a key signpost for efforts to account for and document decarbonization. Draft standards are expected to be released in 2025 for public consultation, with final guidance published in the latter half of 2026.13 Companies across industries will likely review their energy procurement policies against these new guidelines. For most, PPAs will form a large part of their strategy.
Additional capacity is urgently needed—and a new kind of PPA
Currently, global data centers are powered by 500 to 600 TWh, which equals 1 to 2 percent of the total global power supply, but McKinsey analysis shows that this could increase three- to fourfold by 2030, representing over 2,000 TWh.14 The emergence of AI applications across the globe is a significant contributor to this surge—take, for example, a ChatGPT query, which consumes almost ten times more power than a Google search query.15
Substantial new (clean) generation capacities are needed to cover these consumption requirements. For example, if half of the 2030 global power consumption linked to hyperscaler data centers (owned or leased) were to be powered by renewables, the necessary dispatchable generation, such as long-duration energy storage (LDES), would amount to 65 to 85 GW—roughly the size of the total installed power generation capacity of a country such as Poland or Vietnam (62 GW and 83 GW, respectively).16 This represents a significant opportunity, especially with the further development of high-cost technologies that provide flexibility. Exhibit 2 illustrates how much capacity could be unlocked by 24/7 clean PPAs in this example.
However, the new, around-the-clock clean power comes at a cost. A report by the Long Duration Energy Storage Council and McKinsey in 2022 put the cost for a 24/7 green PPA that relies on a wind, solar, and a lithium-ion (Li-ion) hybrid system at above $200 per megawatt-hour (MWh) in most regions.17 When using novel storage technologies such as LDES, this could drop below $100 per MWh but still requires customers to pay a significant green premium—a premium that only a few industrial customers, such as hyperscalers, can afford. In parallel, alternative nonfossil power supply options, such as small modular reactors (SMRs), are also explored by hyperscalers.18
Irrespective of the technology, greater demand could unlock economies of scale, decreasing (currently high) capital expenditure—just as costs have declined in the solar and wind industries in recent years.19 Lower costs ultimately can drive widespread adoption.
At the same time, players with substantial financial resources, such as large technology firms, may crowd others out with their ability and willingness to pay premium prices for advanced flexibility solutions. Smaller companies and those with limited financial capacity may be discouraged from participating, limiting overall market growth and diversity. This concentration of demand among a few high-paying players could, in fact, inflate prices, creating barriers to entry and hindering the broader adoption of 24/7 clean PPAs.
New capabilities are required
Commercial expertise has always been essential for renewable power suppliers—not least in applying for subsidy schemes and managing budgets. However, with the emergence of 24/7 clean PPAs, maximizing returns requires capabilities not typically found in renewable developers and operators, who traditionally focus on technical and engineering excellence.
Indeed, the skill requirements resemble those of energy trading houses that manage complex contracts across oil, gas, and power in a global portfolio. To effectively engage, renewable developers, operators, and asset managers could develop the following capabilities:
- Supply origination and portfolio management: Sourcing diverse generation assets (and Energy Attribute Certificates) to build and manage a resilient supply portfolio requires deep technical and commercial expertise across renewables, flexible generation, and storage, and an understanding of the interplay of these technologies.
- Product development, pricing, and bid management: Accurately planning customer energy-demand profiles, developing tailored product solutions, and deriving fitting commercial propositions requires advanced power modeling and forecasting capabilities to match customer load curves under various scenarios while adequately pricing uncertainty.
- Trading and risk management (including financing): The inherent risks of these contracts need to be well understood in order to set up an adequate risk framework (including limits of operations, mitigation measures, tracking, and early-warning systems). Companies may engage in power and financial markets to hedge their positions and show a strong balance sheet to cover collateral or guarantees.
- Commercial asset optimization (including operations and dispatch): This involves ensuring the efficient operation of assets and real-time energy dispatch. Optimization may include providing balancing and ancillary services, such as frequency regulation and voltage control.
- Structuring contractual agreements: Translating commercial and technical requirements (such as minimum supply and offtake, hourly matching, and load peaks) into compliant and enforceable contractual frameworks requires legal specialists who can limit contractual risk exposure and manage claims.
Companies already active in power trading may possess many of the above capabilities. For instance, Statkraft operates a global trading desk that integrates and optimizes the company’s renewable, conventional, and flexibility assets. With a 97 percent share of renewable energy, the company is doubling down on providing green solutions to customers, including 24/7 clean PPAs.20 Unlike many other renewables providers, Statkraft can leverage a large portfolio of hydropower plants to provide flexibility. This offering is receiving much interest from European companies. In 2021, for example, Mercedes-Benz signed a contract with the Norwegian supplier, committing to run their manufacturing facilities and offices in Germany on green electricity supplied by wind, solar, and hydropower at all times.21
Companies with less experience in this area may choose to integrate existing expertise with newly developed capabilities. For example, unlike their European counterparts, Japanese companies have only just started to consider 24/7 clean PPAs. In 2024, Japanese power utility Jera announced a new venture, Jera Cross, that combines its energy, digital, and business transformation capabilities to give customers 24/7 carbon-free energy.22 Jera Cross also offers green transformation services, aiming to raise its industrial customers’ decarbonization ambitions and help them formulate energy transition strategies and roadmaps.
A third alternative is to strengthen capabilities through M&A. For instance, in 2018, Norwegian oil major Equinor decided to buy and integrate trading house Danske Commodities for €400 million. The acquisition extends Equinor’s expertise in gas and oil trading and strengthens its ability to capture value from the production of renewable electricity and grow profitable new energy solutions.23
PPAs have proven to be successful instruments in the power market, but time incongruence means their ability to achieve full decarbonization is limited. Next-level 24/7 clean PPAs could provide a solution by offering 100 percent green energy on an hourly basis—while opening up new opportunities for investment. However, organizations will be called on to strengthen their competencies in order to use this powerful instrument to their full advantage.
