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What is power balancing and shaping, and how does it work?

By Talk Power Team | Posted April 11, 2024

You may have heard the term ‘balancing and shaping’ being referred to in some of our recent announcements explaining how we facilitate Corporate Power Purchase Agreements (CPPAs). But what does this actually mean, and how does it work in reality?

Power Purchase Agreements (PPAs) are contractual agreements between an energy generator, and an energy supplier, whereby the energy consumer agrees to purchase the energy directly from the generator at an agreed, fixed price.

One specific type of PPA contract is a Corporate PPA (CPPA), involving a direct contractual agreement between a business and a renewable energy generator. The power still comes via the grid (there’s no physical connection), but the contract is with a named generator. CPPAs provide long-term financial certainty through agreeing a fixed price for the power produced by the generator. Therefore, increasing the bankability of a new renewable project, and enabling the corporate to say that their energy is coming from a specific authentic and traceable source.

As with any CPPA, there are three parties required to make it a success. A renewable developer, a corporate customer, and a balancing and shaping partner. Balancing and shaping partners are usually large energy suppliers, like EDF Business Solutions. Their role is to transfer the power from the generator, into the corporates supply contract so the power is readily available and accessible when the corporate needs it.

Balancing services – managing the difference between the forecast and actual generation

The balancing and shaping partner manages the risk of a renewable generation asset producing more or less power than it was forecast to produce the day before. This is done by seeking to forecast the generation as accurately as possible by using information provided by the generator, to continuously revise the forecast up to the point of generation. The balancing and shaping partner will update these forecasts by taking trading actions (buying and selling the power) to balance out the differences that can occur between the forecast the day before and the actual generation produced.

Shaping services – converting the as-produced power into a baseload block of power

This is when the balancing and shaping partner takes the variable power that the renewable generation asset produces (i.e. the power is only generated intermittently because the sun doesn’t shine, and the wind doesn’t blow all the time), and converts it into a baseload block of power. The baseload block covers the amount of power that is required to meet the demand of the corporate as per the agreement, therefore producing a consistent and useful power source for the corporate buyer. Once the balancing and shaping is complete, the baseload block is then transferred (or sleeved) into the supply agreement of the corporate buyer.

What is our role in this?

EDF Business Solutions have extensive experience as credible and reliable balancing and shaping partners for many CPPAs in the market. As well as this, EDF offtake the most renewable electricity of any energy supplier in Great Britain, with the highest PPA market share of capacity under contract.* As a trusted industry counterparty, EDF can facilitate the delivery of the baseload CPPA power blocks we have created, by utilising relationships with other suppliers to transfer the power to the corporate’s incumbent energy supplier so it can be sleeved into the corporate buyer’s supply agreement - even if they are not an EDF customer.

This means we can remove restrictions and limitations, creating more opportunities for creative and innovative CPPAs and enabling more projects to get off the ground and accelerate Net Zero. You can read about a recent example where we facilitated a CPPA with Low Carbon (renewable developer) and Lloyds Banking Group (corporate buyer), by providing just the balancing, shaping and sleeving services, here.

In the majority of cases, CPPAs and their associated balancing and shaping service agreements are for a longer duration that any energy supply agreement. Therefore, having flexibility in how the power from a CPPA is delivered ensures a continuous power supply for the length of the contract, in a service that works for all parties.

How this helps Britain achieve Net Zero

CPPAs play a huge part in enabling Britain to achieve Net Zero. For developers, it increases the bankability of the project and provides revenue certainty, helping to build renewable projects and get them off the ground. This is one of the main reasons why they are so critical to delivering real change, as they enable the build of renewable projects, that otherwise wouldn’t be possible. 

Each new agreement forms milestones in the progress towards meeting the UK government’s decarbonising targets and reaching Net Zero. CPPAs are becoming more sophisticated as demand is continuing to increase, meaning there will be an increasing need for power balancing and shaping services moving forward. This increase is largely driven by more corporate organisations seeking to gain financial security over a longer period of time, authenticity of supply and improvements in their environmental impact. There are multiple economic, social and environmental advantages to CPPAs, you can read more about this in our latest blog.

Looking for a balancing and shaping partner?

Through the strength of the EDF group, we are able to offer all three partnerships to deliver a CPPA (developing the renewable project, suppling the power, and providing the balancing and shaping services). Whilst having all three elements with the same supplier can provide multiple benefits and synergies, this doesn’t have to be the case to facilitate successful CPPAs. EDF Business Solutions are well placed to provide just the balancing and shaping services, should this be required, which is especially important as CPPAs are having to adapt and evolve to meet the demands of the growing energy landscape.

Find out more here or get in touch with our PPA experts to discuss your options and find out how we can help your renewable project!

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*Cornwall Insight PPA Market Share report February 2024

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