Market briefing: understanding the market dynamics that influence short-term PPA agreements 

Author: Juliane Bjerkan, Data Analyst at Renewable Exchange

UK Anaerobic Digestion facilities that produce and sell electricity for export could be losing hundreds of thousands of pounds in revenue by selling their energy to the wrong energy supplier.

Data* from Renewable Exchange shows that for an AD plant with an export capacity of 1MW, over £100k in annual revenue could be lost when generators don’t get competitive bids for their power.

Renewable Exchange is the UK’s largest Power Purchase Agreement (PPA) marketplace. Renewable power generators enter asset-specific information such as their technology type, export capacity, grid connection and the date they want to sell their power. When market conditions are favourable, generators can tender their power to over 30 active UK offtakers, who enter blind bids, mainly on short-term PPA contracts that range in length from 6 months to 3 years.

The median bid spread – the difference between the lowest and highest bids for exactly the same power over the same date range – was £19 per MWh for AD plants over the course of 2025 (Jan 1 to June 30). For a 1MW capacity plant producing 6,000 MWh per year, that equates to £114,000 in annual revenue.

The data below shows how this PPA bid spread compares across technology types for typical 1MW capacity assets:

Why is there such a difference in price for the same power?

 1. Competition from tendering

When suppliers are aware that their competitors are bidding for the same site in a competitive tender process, they tend to offer better prices than if they were approached directly for a quote. Your current supplier is no longer complacent that you will stay with them and quotes their best price to retain your site.

 2. Concentration risk

Energy companies aim to balance their portfolio with different types of technologies and assets from different geographic locations to de-risk their portfolio. For example, If a supplier has purchased plenty of hydro power for a particular season and the year turns out to be dry, they will not have enough power and will need to purchase this from the wholesale market exposing them to price risk. So, to derisk their portfolio, each supplier has a different strategy (share of technology type in their mix, geographic location of generation etc). Until they have purchased enough energy to cover their portfolio, they will bid aggressively. The trick here is to identify that supplier who required plenty of AD in their portfolio.

3. Your generation profile

If your plant is generating the most power when there is high demand by the supplier’s customers, they are likely to bid higher.

For example, a supplier who has plenty of commercial buildings on their supply books will pay more for a site that is generating more electricity from 9 to 5 rather than a site that produces most of its energy overnight. So it is important that you are matched with an offtaker whose demand curve matches your generation profile.

Under License Exempt Supply or sleeving PPA, offtakers pay up to an additional £25/MWh for your half hourly export that can be matched with their consumer.

4. Fuel mix

Each energy supplier has to meet specific ‘fuel mix’ targets, and demonstrate that they have hit this target each year, as part of Ofgem’s Fuel Mix Disclosure Regulations.

This mix usually comprises of renewables, natural gas, nuclear and other. When suppliers have bought almost enough renewable power to meet their targets, the prices they are willing to offer will drop. Conversely, if a supplier is struggling to buy enough green power to meet their renewable energy target, they will bid above the market rate.

5. Pricing models

Each PPA supplier will have a different models on forward power pricing, balancing costs and market volatility.  Suppliers with a more bullish outlook may expect prices to rise, and will be more willing to pay a little more than others to lock in PPAs at current prices. The same applies to REGO (renewable energy guarantees of origin) certificates, where each supplier will use different models to forecast where they expect green certificate prices to move in the future. 

What can generators do to make the most from your power? 

Owners and managers of AD facilities need to make sure that when they are ready to sell their power they offer it to the whole market of suppliers, ask about Licence Exempt Supply options, and compare bids carefully – taking into account all aspects of the PPA.

*Data gathered from 3,900 bids on the Renewable Exchange platform between Jan 1 to June 30 2025. 

Several ADBA members offer PPA services, including PPAYA – an AD Rising Star award winner in the AD & Biogas Industry Awards. Many other members are involved in both development and sales arrangements.