Virgin Media O2 Signs Solar Power Purchase Agreement

Three major corporations sign long-term renewable energy contracts

Virgin Media O2, PepsiCo, and Mars have recently signed substantial renewable power purchase agreements. These deals show how businesses are using clean energy contracts to cut emissions and protect themselves against unpredictable energy costs.

The agreements vary in structure and scale. However, they share a common commercial logic. Long-term renewable contracts offer price certainty while supporting net zero targets.

For UK businesses watching these developments, the trend raises practical questions. What makes these agreements commercially viable? How do they affect energy budgets and carbon reporting? Moreover, what can smaller organisations learn from corporate approaches to renewable procurement?

Virgin Media O2 secures solar power from Suffolk development

Virgin Media O2 has signed a 10-year power purchase agreement with egg Power. The contract will source solar energy from a new solar farm in Suffolk, scheduled to begin operations in 2027.

The facility will supply approximately 5% of Virgin Media O2’s total energy requirements. This agreement builds on the company’s existing 2025 wind energy deal with The Renewables Infrastructure Group. Together, both contracts will provide around 20% of the company’s total energy supply.

The telecommunications company emphasises that these arrangements support its commitment to renewable energy at sites where it controls utility bills. Additionally, the contracts secure long-term clean energy at predictable costs. This matters because energy price volatility has caused significant budget pressure across UK businesses since 2021.

These renewable commitments align with Virgin Media O2’s Better Connections Plan. The plan includes a target to achieve net zero carbon emissions across its full value chain by the end of 2040. The deal also supports network resilience and renewable energy generation within the UK.

PepsiCo joins multi-party virtual agreement for Spanish wind asset

PepsiCo has partnered with Givaudan, Smurfit Westrock, and renewable energy provider Statkraft on a different contract model. The four organisations have signed a 10-year virtual power purchase agreement centred on repowering a Spanish wind asset.

Virtual PPAs differ from physical contracts. Instead of taking direct electricity delivery, buyers receive renewable energy certificates and financial settlements tied to market prices. This structure allows businesses to support renewable projects outside their operational footprint.

The agreement is projected to reduce carbon dioxide emissions by approximately 32,000 metric tons annually. For context, that equals the annual emissions from roughly 7,000 petrol cars. The initiative represents the first renewable electricity cohort in Europe under PepsiCo’s pep+ REnew program. It also marks the second such deal globally for PepsiCo’s supply chain.

The collaborative structure demonstrates how supplier partnerships can unlock favourable deal terms. Smaller buyers gain access to long-term renewable electricity typically reserved for large corporate purchasers. This aggregation model may become increasingly relevant for UK SMEs considering renewable procurement options.

Mars extends renewable coverage across entire value chain

Mars, Incorporated has launched its Renewable Acceleration program with contracts signed through Enel North America. This initiative represents Enel’s largest-ever power purchase agreement with a commercial and industrial customer worldwide. It also constitutes Mars’s largest contract to date.

The Renewable Acceleration strategy takes an unusually comprehensive approach. Rather than limiting renewable energy coverage to Mars-owned operations, the program extends across the company’s entire value chain. This includes ingredient farms, delivery vehicles, and consumer usage of Mars products.

The program is expected to contribute an estimated 10% reduction of Mars’s total carbon footprint by 2030, measured against a 2015 baseline. This potentially eliminates around 3 million tonnes of carbon emissions. For comparison, that equals the annual emissions from approximately 650,000 UK homes.

The value chain approach addresses a growing pressure point for many businesses. Public sector procurement rules increasingly require suppliers to demonstrate credible net zero plans. Consequently, organisations face questions about emissions beyond their direct control. Mars’s model shows one way to tackle Scope 3 emissions, though the commercial complexity and cost implications are substantial.

What these agreements mean for energy procurement strategy

These corporate deals reflect broader trends in how businesses approach energy purchasing. Power purchase agreements provide long-term price certainty in markets where fossil fuel costs remain volatile. For many organisations, this matters as much as the carbon benefits.

Physical PPAs involve direct electricity delivery from specific renewable projects. Buyers typically commit to purchasing a fixed volume of power at agreed prices over 10 to 25 years. This arrangement supports new renewable capacity because developers can secure financing based on guaranteed revenue streams.

Virtual PPAs operate differently. Buyers don’t take physical electricity delivery. Instead, they receive renewable energy certificates and enter financial arrangements tied to wholesale market prices. This structure allows businesses to support renewable projects anywhere on the grid, not just at their operational sites.

Both models carry risks. Long-term contracts lock buyers into fixed prices, which creates exposure if wholesale electricity costs fall significantly. However, recent market volatility has made price certainty increasingly attractive. Energy costs spiked dramatically in 2022 and 2023, causing budget overruns and operational disruption across UK businesses.

The commercial case for renewable PPAs strengthens when energy price risk combines with carbon reporting requirements. Many businesses now need credible decarbonisation plans to maintain public sector contracts or meet supply chain expectations. Renewable energy procurement addresses both objectives simultaneously.

Key facts about corporate renewable energy agreements

• Virgin Media O2’s two renewable contracts will supply approximately 20% of the company’s total energy requirements through a combination of solar and wind power.
• The PepsiCo virtual power purchase agreement will reduce carbon dioxide emissions by approximately 32,000 metric tons annually through a multi-party structure involving four organisations.
• Mars’s Renewable Acceleration program extends renewable energy coverage beyond company-owned operations to include the entire value chain, from ingredient farms to consumer product usage.
• Power purchase agreements typically run for 10 to 25 years, providing long-term price certainty but also creating exposure to market price movements.
• Virtual PPAs allow businesses to support renewable projects outside their operational footprint through financial arrangements and renewable energy certificate transfers rather than physical electricity delivery.
• The collaborative PepsiCo agreement demonstrates how smaller buyers can access long-term renewable electricity contracts through aggregation models typically reserved for large corporate purchasers.

Practical considerations for smaller organisations evaluating renewable contracts

Large corporations can negotiate favourable terms because they purchase enormous volumes of electricity. Mars, PepsiCo, and Virgin Media O2 operate at scales that make 10-year contracts commercially viable. Smaller businesses face different constraints.

Contract volumes matter significantly. Most renewable PPAs require minimum purchase commitments that exceed the consumption of typical SMEs. However, aggregation models like the PepsiCo structure offer potential pathways. Several UK organisations now facilitate group purchasing arrangements that combine demand from multiple smaller buyers.

Credit requirements present another barrier. Renewable project developers typically require strong balance sheets or financial guarantees. This protects them against buyer default over long contract periods. Smaller businesses may struggle to meet these thresholds without external support or alternative structures.

Renewable electricity procurement also intersects with carbon reporting obligations. Businesses supplying public sector organisations often face requirements under Procurement Policy Note 06/21. This mandates carbon reduction plans and net zero commitments from suppliers. Renewable energy contracts provide evidence of serious decarbonisation efforts, which can strengthen tender responses.

The accounting treatment varies between physical and virtual PPAs. Physical contracts appear on balance sheets as energy costs. Virtual arrangements involve more complex financial reporting because they combine renewable energy certificates with market price settlements. Businesses should understand these implications before committing to multi-year agreements.

Timing matters as well. Renewable PPAs work best when aligned with wider energy strategies and carbon reduction plans. Rushing into long-term contracts without understanding consumption patterns, future operational changes, or carbon accounting requirements creates unnecessary risk. We support businesses in developing structured approaches to carbon reduction planning and renewable energy procurement that address these practical considerations.

How renewable procurement fits within broader compliance requirements

Renewable energy contracts increasingly connect to regulatory and commercial compliance frameworks. The UK government has strengthened environmental reporting requirements in recent years. Many businesses now face mandatory climate disclosures under the Streamlined Energy and Carbon Reporting framework.

These reporting obligations require organisations to calculate and publish greenhouse gas emissions annually. Renewable electricity procurement affects Scope 2 emissions, which cover purchased energy. Physical PPAs supported by Renewable Energy Guarantees of Origin certificates allow businesses to claim zero-emission electricity in their carbon accounting.

Supply chain pressures add another dimension. Large corporations increasingly require suppliers to demonstrate credible sustainability commitments. This cascades down through procurement chains, affecting businesses that might not otherwise prioritise environmental credentials. Mars’s value chain approach illustrates how corporate buyers now look beyond their own operations to supplier emissions.

Public sector procurement introduces additional requirements. PPN 06/21 applies to central government contracts above £5 million annually. It requires suppliers to publish carbon reduction plans and commit to net zero targets. Similar requirements are spreading to local government and NHS procurement. Consequently, businesses pursuing public contracts need demonstrable progress on emissions reduction.

Renewable PPAs provide tangible evidence for these frameworks. They show long-term commitment rather than short-term gestures. However, they represent only one element of comprehensive carbon reduction strategies. Businesses also need energy efficiency improvements, operational changes, and supply chain engagement. Our compliance support services help organisations navigate these overlapping requirements systematically.

Questions to ask before pursuing renewable energy agreements

Businesses considering renewable contracts should address several fundamental questions before entering negotiations. What proportion of total energy consumption could a PPA realistically cover? Virgin Media O2’s agreements supply 20% of requirements, not 100%. Partial coverage may make commercial sense, but organisations need realistic expectations.

How stable are future energy requirements? Long-term contracts assume relatively predictable consumption patterns. Businesses planning significant operational changes, site closures, or expansions face additional complexity. Contract flexibility varies, but most PPAs include limited provision for volume adjustments.

What price risk can the organisation accept? Fixed-price contracts provide certainty but eliminate upside if wholesale costs fall. Financial modelling should test scenarios across different market conditions. Energy consultants can help evaluate these trade-offs, though businesses should ensure advisors have relevant UK market experience.

Does the contract structure align with carbon accounting needs? Physical PPAs with valid renewable certificates support Scope 2 emissions reductions. Virtual arrangements require more careful accounting treatment. Businesses should verify that proposed contracts will deliver the carbon reporting benefits they expect.

What credit or guarantee requirements apply? Understanding financial thresholds early prevents wasted effort on deals that prove unaffordable or uncommercial. Some structures offer more accessible terms than standard corporate PPAs. However, all long-term contracts involve financial commitments that require proper due diligence.

Can the organisation manage contract administration effectively? Renewable PPAs involve ongoing monitoring, reporting, and reconciliation. Businesses need internal capability or external support to handle these requirements. Neglected administration can eliminate the commercial benefits of otherwise sound agreements.

Authoritative sources and further information

The Department for Energy Security and Net Zero publishes regular updates on renewable energy deployment and policy frameworks. Their statistics cover generation capacity, project pipelines, and market developments relevant to corporate procurement decisions. Visit the Department for Energy Security and Net Zero for official data and policy guidance.

Ofgem regulates UK energy markets and provides information on renewable electricity certification schemes. The Renewable Energy Guarantees of Origin scheme ensures renewable electricity can be properly tracked and reported. Details are available through Ofgem’s environmental schemes guidance.

Businesses requiring carbon reporting support should consult the UK government’s environmental reporting guidelines. These explain mandatory disclosure requirements under the Streamlined Energy and Carbon Reporting framework. Access the guidance at gov.uk SECR guidance.

For public sector suppliers, the procurement policy notes explain carbon reduction plan requirements. PPN 06/21 sets out the specific obligations for qualifying contracts. Review the details at gov.uk PPN 06/21 guidance.