Q&A – OVO Energy: Harnessing subsidy-free funding

OVO Energy is an electricity supplier based in the UK. Over the past few years, the company has committed to supporting the country's net zero ambitions through subsidy-free renewable generation, particularly for smaller-scale projects.

In February this year [2023], it became a principal supporter of Community Energy England, a non-profit focused on delivering community-led renewable energy. OVO agreed to finance the company's development and provide access to subsidy-free power purchasing agreements (PPAs). Meanwhile, in January [2023], it signed two PPAs with Genatec's Pond Farm Wind project and Ambition Community Energy C.I.C, two subsidy-free onshore wind farms.

inspiratia speaks to Susie Leppard, head of renewables at OVO, about its role in the energy transition, helping smaller projects achieve subsidy-free funding.

What role does OVO see itself playing in developing renewable energy?

OVO launched Plan Zero, its sustainability strategy, in 2019 with the ambition of leading the transition to a zero-carbon energy system. As part of this, OVO has become a leading supporter of subsidy-free renewable generation in the UK energy retail market. We will continue developing these relationships and forming new ones to incentivise smaller-scale generation, particularly community-led schemes, which we see as a key part of a fair net zero transition.

In 2022, OVO committed £1 million (€1.16m $1.25m) to support subsidy-free generation and has already exceeded this with £2.2 million (€2.56m $2.74m) committed in signed PPA agreements to date. Our portfolio of partners includes Ambition Community Energy, Genatec, St Fergus Energy Park, and Atrato Onsite Energy.

OVO focuses a lot on small-scale renewable generation projects. Why are these important?

By supporting smaller wind and solar projects which don't receive industry-wide subsidies, we're stimulating further growth in the renewable energy sector, which is essential as the UK strives for net zero by 2050. This is also key to OVO's own 2035 net zero target.

Increasing the amount of renewables feeding the grid is the most effective way of decreasing our dependence on fossil fuels and creating a self-sufficient energy system free from geo-political constraints. Achieving this will lower the risk of blackouts, reduce consumer costs, and lower the overall carbon output of the UK.

How is OVO using subsidy-free funding for its pipeline of UK projects?

OVO is partnered with 5 subsidy-free renewable generators, which are expected to generate enough to supply green power to 30 thousand homes once they are all up and running. Homes are at the heart of OVO's sustainability strategy. 16% of a person's carbon footprint in the UK comes from how they power and heat their home, and 14% comes from transport. As such, OVO has the opportunity to decarbonise 30% of a customers' carbon footprint via sustainable power sources and technologies. To make this renewable power as accessible as possible to its customers, OVO recently launched greener energy, one of the UK's greenest tariffs in the market which, as well as being 100% PPA backed, also includes funding for subsidy-free PPAs.

OVO recently announced its partnership with Community Energy England as a principal supporter – a not-for-profit organisation that represents and supports 310 community energy organisations and other stakeholder organisations that are delivering community-led renewable energy services across England. OVO is helping smaller projects secure additional revenue, including providing community energy organisations access to subsidy-free PPAs, which could make the difference between renewable energy developments going ahead or not.

How do you use Renewable Energy Guarantees of Origin (REGOs) within your PPAs?

The REGO scheme has run for a number of years and played an important role in allowing customers to signal their desire for greener energy supplies, but it isn't working as effectively as it should. The vast majority of REGOs are issued to renewable generators who have already received significant support from UK energy bill payers through government subsidies. At OVO, we believe if you buy a green product, like an energy tariff, it should lead to a genuine green benefit. For us, that means channelling customer funding into subsidy-free renewables. Our subsidy-free PPAs include the purchase of renewable energy at premium rates. We know that customers want green tariff choices to make a real impact, and 81% already believe that buying a green tariff leads to more renewables being built. Subsidy-free PPAs can help to make that a reality.

OVO has recently signed a number of PPAs lasting for two to three years. What are the advantages of that compared to long-term PPAs?

It's important that renewable generators have access to a range of PPA products so that they can choose the best contract for their needs. Long-term PPAs can provide a good option for generators looking for price security. However, shorter-term contracts carry less risk for suppliers and so can provide better value for generators who are willing to take on some merchant risk themselves.