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In this blog we explain how sleeving energy works and highlight the benefits and challenges associated with it.
Posted on Oct 22, 2023
Put simply, sleeving energy is a process of directly trading energy from a specific source of renewable energy such as a solar farm or a wind turbine to a buyer through a utility supplier.
By choosing Sleeving instead of buying electricity from the wholesale market, where you don’t know who is producing the electricity, how they’re doing it and what their technology type is, you have a direct arrangement with a green energy generator that produces renewable energy. This way, you can support renewable energy projects, reduce your carbon footprint and lock in a fixed price for your electricity supply, helping to avoid market fluctuations and manage your budget better.
Sleeving energy involves three parties:
The buyer and the generator sign a corporate Power Purchase Agreement (cPPA), which is a contract that specifies the amount, price, and duration of the electricity trade.
A utility Power Purchase Agreement (uPPA) is also signed with the utility supplier, either directly with the generator or via the buyer, which is a contract that enables the trade of electricity from the generator to the buyer’s utility supply agreement. The utility supplier acts as a facilitator and buys the energy directly from the renewable generator and ‘sleeves’ (sells) it to the buyer, for a fee.
This process of transferring electricity from the generator to the buyer’s supply agreement is called ‘sleeving’. Sleeving is like a triangle: you have your supply agreement, which is your normal contract with your electricity supplier. You also have your corporate Power Purchase Agreement (cPPA), which is your contract with the renewable energy generator. And then you have your utility Power Purchase Agreement (UPPA), which is the contract between the generator/buyer and the supplier that enables sleeving.
Sleeving energy may seem simple, but it can be complex. You have to consider how much electricity the generator is producing, and how that affects your electricity consumption.
For instance, for your public sector organisation, you might have a relatively steady or flat demand for electricity throughout the year, with a slight increase in winter. But if you sign a PPA with a solar generator, you will get more electricity from the PPA in summer than in winter. This means that you will have a greater proportion of your demand covered by the PPA in summer and less in winter. This can affect how you buy the remainder of your electricity, your overall costs and the savings from sleeving which is where it becomes more complex.
That’s where LASER can help, our team of experts can help you deal with this mismatch by actively managing the trading of your electricity requirement in the market.
Sleeving energy has several benefits for both buyers and generators.
Now let’s examine the challenges for both parties.
If you are considering owning and running a renewable asset our next blog will delve deeper into what to think about, the challenges of this ownership and how we can help you overcome them.
Whether you want to buy green electricity, invest in a renewable asset, or sell renewable energy, we’re here to help you find the right solution to meet your sustainability goals.
Our Net Zero team can assist you in financial modelling, and locating the appropriate suppliers (from PPA suppliers to legal, operations, and maintenance) through our Frameworks.