PepsiCo and Partners Sign Renewable Energy Agreement

Major food and beverage brands team up to secure Spanish wind power

PepsiCo has signed a 10-year virtual power purchase agreement with Norwegian energy company Statkraft to source renewable electricity from a repowered wind farm in Spain. The deal includes suppliers Givaudan and Smurfit WestRock. Together, the three businesses expect to avoid 32,000 metric tons of carbon dioxide emissions each year.

The arrangement marks a significant shift in how large corporations approach decarbonization. Rather than acting alone, PepsiCo aggregated demand from its suppliers to secure better commercial terms. This approach addresses a persistent challenge for small and medium businesses trying to access long-term renewable energy contracts.

Virtual power purchase agreements allow companies to buy renewable energy attributes without taking physical delivery of electricity. The mechanism has become increasingly popular as businesses face pressure to reduce supply chain emissions. However, smaller suppliers often lack the buying power to negotiate favorable terms independently.

The Spanish wind project involves upgrading existing turbines with more efficient models. This repowering approach reuses grid infrastructure like substations and transmission lines. Consequently, the project can deliver renewable electricity faster than building entirely new wind farms.

PepsiCo’s supplier aggregation model opens renewable markets to smaller businesses

The agreement emerged from PepsiCo’s pep+ Renew program, launched in 2022 with Schneider Electric. The initiative specifically targets supply chain decarbonization by helping suppliers access renewable energy markets. For many small businesses, the complexity and financial commitment of long-term energy contracts create insurmountable barriers.

Givaudan supplies flavors and fragrances to PepsiCo. Smurfit WestRock provides packaging materials. Neither company would likely secure equivalent terms negotiating independently. By joining forces under PepsiCo’s lead, they gain access to renewable electricity at competitive rates typically reserved for much larger buyers.

SE Advisory Services, Schneider Electric’s consulting arm, structured the deal. This represents the second completed cohort under the pep+ Renew program and its first renewable electricity initiative in Europe. Previous agreements focused on the United States market.

The 10-year duration provides price certainty for all participants. Energy costs represent a significant operating expense for food processing and packaging operations. Locking in renewable electricity rates protects against price volatility in conventional energy markets. Additionally, the agreement supports compliance with European Union sustainability regulations.

Statkraft, Europe’s largest renewable energy generator, will supply the electricity from the Spanish wind farm. The Norwegian state-owned company operates wind, solar, and hydroelectric projects across Europe. Its involvement provides technical expertise and financial stability for the long-term commitment.

Wind farm repowering delivers faster results with lower environmental disruption

The Spanish project focuses on repowering rather than new construction. Existing wind turbines will be replaced with larger, more efficient models. This approach delivers several advantages for all parties involved.

Grid connection infrastructure already exists at the site. Substations, transmission lines, and access roads remain in place. Therefore, the project avoids lengthy planning processes associated with new grid connections. In many European markets, grid connection delays can push renewable projects back several years.

Repowering also minimizes additional land use and environmental impact. The wind farm’s footprint stays largely unchanged. Local planning authorities typically view upgrades more favorably than entirely new developments. This speeds approval processes considerably.

Modern turbines generate significantly more electricity than older models. Efficiency improvements of 20 to 50 percent are common when replacing turbines installed a decade or more ago. Consequently, the same site can deliver substantially more renewable energy without expanding its physical footprint.

Spain ranks as Europe’s third-largest wind energy market. The country has invested heavily in renewable capacity over the past two decades. However, many early wind farms now operate with outdated technology. Repowering these sites represents a major opportunity to increase renewable generation without new land requirements.

The timing aligns with Spain’s broader energy transition goals. The government has committed to generating 74 percent of electricity from renewable sources by 2030. Upgrading existing wind capacity helps meet these targets while minimizing environmental disruption.

Supply chain emissions dominate carbon footprints for consumer goods companies

Scope 3 emissions account for over 90 percent of the carbon footprint for most consumer goods manufacturers. These indirect emissions occur throughout the supply chain, from raw material extraction through manufacturing and distribution. Consequently, companies cannot reach net zero targets by focusing solely on their own operations.

PepsiCo’s approach recognizes this reality. The virtual power purchase agreement directly addresses emissions from suppliers. Givaudan’s flavor production and Smurfit WestRock’s packaging manufacturing both require substantial electricity. Switching to renewable sources cuts emissions across the entire value chain.

The European Union’s carbon pricing system creates financial incentives for emission reductions. Carbon allowance prices have risen substantially in recent years. Businesses face increasing costs for fossil fuel-based electricity. Therefore, long-term renewable energy agreements provide both environmental and economic benefits.

Many small suppliers struggle to respond to decarbonization pressure from larger customers. They lack dedicated sustainability teams or capital for major energy transitions. However, they face growing requirements to report emissions and demonstrate progress. Large retailers and manufacturers increasingly screen suppliers based on climate commitments.

Public sector procurement in the UK follows similar patterns. PPN 06/21 requires suppliers bidding for central government contracts above £5 million to publish carbon reduction plans. Many local authorities and public bodies apply comparable standards. Suppliers without credible decarbonization strategies risk losing access to lucrative public contracts.

The aggregation model offers a practical solution. Smaller businesses gain access to renewable energy without shouldering the full complexity and cost independently. Meanwhile, lead buyers like PepsiCo accelerate supply chain decarbonization at scale. This collaborative approach proves more effective than requiring each supplier to act alone.

Corporate renewable energy agreements reshape European electricity markets

Virtual power purchase agreements have grown rapidly across Europe. Corporations signed record volumes in recent years as they pursue net zero commitments. However, the market remains concentrated among large multinationals with sophisticated energy procurement teams.

RE100, a global initiative bringing together businesses committed to 100 percent renewable electricity, counts over 400 members. These companies collectively represent massive electricity demand. Nevertheless, their suppliers and smaller businesses in the same sectors often lack comparable renewable energy access.

The PepsiCo-led deal demonstrates how market leaders can extend benefits throughout their supply chains. By aggregating demand, they create opportunities for businesses that would otherwise remain dependent on grid electricity mixes. This multiplies the climate impact beyond direct operations.

Critics raise concerns about additionality in renewable energy agreements. Additionality means the project would not proceed without the corporate commitment. When companies buy attributes from existing renewable projects, the climate benefit becomes less clear. The electricity would be generated regardless of the corporate agreement.

Repowering projects generally demonstrate stronger additionality. The investment in new turbines requires long-term revenue certainty. Corporate power purchase agreements provide the financial foundation for these upgrades. Therefore, the renewable electricity generation genuinely increases as a result of the corporate commitment.

Grid integration remains a technical challenge for renewable energy expansion. Wind and solar generation vary with weather conditions. Balancing supply and demand requires flexible backup capacity or energy storage. As renewable penetration increases, these grid management challenges intensify.

Nevertheless, Spain benefits from strong interconnections with neighboring countries and substantial hydroelectric capacity. These factors help integrate variable wind generation. The country has successfully managed high renewable penetration for several years. Therefore, adding repowered wind capacity should not create major grid stability issues.

What this means for UK businesses facing supply chain emission requirements

• Large manufacturers increasingly require suppliers to demonstrate credible decarbonization plans, particularly for businesses seeking contracts above £5 million in the public sector under PPN 06/21 requirements.
• Virtual power purchase agreements provide long-term price certainty for electricity costs while reducing carbon emissions, protecting businesses against energy market volatility.
• Supplier aggregation models allow small and medium businesses to access renewable energy terms typically available only to large corporations, removing a significant barrier to decarbonization.
• Repowering existing wind and solar projects often delivers faster results than new construction, with reduced planning complexity and environmental impact.
• Scope 3 supply chain emissions comprise over 90 percent of the carbon footprint for many consumer goods and manufacturing businesses, making supply chain collaboration essential for reaching net zero targets.
• European Union sustainability regulations continue to tighten, with renewable energy requirements affecting competitiveness and market access for UK businesses operating in European supply chains.

How UK suppliers can respond to renewable energy expectations from customers

British businesses facing pressure from customers to decarbonize have several practical options. Understanding the full range of approaches helps identify the most suitable path for your circumstances and sector.

Start by measuring your current carbon footprint accurately. Professional carbon reporting support ensures you capture all relevant emissions sources and calculate figures correctly. Many businesses underestimate their supply chain emissions or miss significant sources entirely. Accurate baseline data informs realistic reduction targets and demonstrates credibility to customers.

Investigate whether industry peers or trade associations coordinate renewable energy purchasing. Sector-specific aggregation initiatives are emerging in food manufacturing, packaging, chemicals, and other industries. Joining an existing program often proves simpler than negotiating independently.

Consider on-site renewable generation where feasible. Solar panels on factory or warehouse roofs provide direct electricity generation you control entirely. While capital costs require consideration, government incentives and falling technology prices have improved the business case substantially. On-site generation also builds resilience against grid disruptions and price volatility.

Evaluate your current electricity contract carefully. Many UK suppliers now offer renewable electricity tariffs backed by Renewable Energy Guarantees of Origin certificates. These provide a simpler entry point than virtual power purchase agreements. However, scrutinize the additionality claims carefully. Some tariffs simply rebadge existing renewable generation without driving new capacity.

For businesses with substantial electricity demand, explore whether your customers would support a joint renewable energy agreement. The PepsiCo model demonstrates how this benefits all parties. Customers accelerate supply chain decarbonization while suppliers gain access to better terms than they could secure independently.

Document your decarbonization efforts thoroughly. Carbon reduction plans meeting PPN 06/21 standards require specific information about emission sources, reduction targets, and concrete actions. Poor documentation undermines otherwise genuine efforts and can exclude you from tender opportunities.

Energy efficiency improvements often deliver the fastest return on investment. Before committing to renewable electricity agreements, ensure you have maximized efficiency in your operations. Reducing total electricity demand lowers costs regardless of your energy source. Moreover, efficiency improvements demonstrate operational competence to customers evaluating your sustainability credentials.

Training teams on carbon management and sustainability creates internal capability to respond to evolving customer requirements. Structured sustainability training helps your business stay ahead of regulatory changes and customer expectations rather than reacting under pressure.

Where to find authoritative guidance on renewable energy and carbon reporting

The Department for Energy Security and Net Zero publishes detailed guidance on renewable energy policy and support schemes for UK businesses. Their website at gov.uk includes information on current incentives and regulatory requirements.

For carbon reporting standards and methodologies, the UK government’s greenhouse gas reporting guidance provides the framework most businesses need. This is available through the gov.uk greenhouse gas reporting collection, which includes conversion factors updated annually.

Ofgem regulates the UK electricity market and oversees renewable energy schemes. Their guidance on Renewable Energy Guarantees of Origin certificates helps businesses understand how renewable electricity claims work. Visit ofgem.gov.uk for current information on energy market regulations.

The Institution of Environmental Management and Assessment provides professional standards for carbon management and environmental reporting. Their resources at iema.net include technical guidance on emission calculations and reporting best practice for UK businesses.

Understanding these developments helps UK businesses respond effectively to changing customer expectations around supply chain emissions. The shift toward collaborative renewable energy purchasing is likely to accelerate as more large buyers recognize the benefits of supplier aggregation models.