How Power Purchase Agreements (PPAs) Support CSRD Compliance and Corporate Sustainability

Did you know that Power Purchase Agreements (PPAs) not only help stabilize your energy costs, but can also assist with compliance under the new CSRD reporting requirements? As sustainability regulations tighten across Europe, PPAs are becoming a cornerstone for companies aiming to future-proof their operations and reporting.

Long-term electricity contracts are more than just a cost factor – they can become a strategic building block of your sustainability strategy. This article shows how PPAs not only reduce emissions, but can also substantially improve your CSRD reporting, aligning your business with evolving EU expectations and investor demands.

The Corporate Sustainability Reporting Directive (CSRD) requires companies in the EU to provide comprehensive sustainability reports. PPAs – long-term contracts for renewable energy – offer a practical solution to meet these requirements. They enable:

• Measurable data: Concrete figures on CO₂ savings and energy consumption, which are essential for robust sustainability disclosures.
• Climate targets: Support in reducing emissions through renewable energy sources, directly impacting Scope 2 and, in some cases, Scope 3 emissions.
• Planning security: Stable energy prices and risk minimization, which is increasingly important given recent volatility in European energy markets (IEA, 2023).

Who is affected?

• Large companies (from 250 employees, €50 million turnover, or €25 million balance sheet total).
• Listed SMEs (from 2026, with an “opt-out” option until 2028).

PPAs are not just a tool for CSRD compliance, but also a step towards sustainable corporate management. Smaller, non-listed companies should not dismiss PPAs as “only relevant for corporations.” At the latest, when facing Scope 3 requirements from major customers or ESG-focused financing rounds, they too will be held accountable. Early action pays off twice over, especially as supply chain transparency becomes a global expectation (McKinsey, 2022).

How PPAs work

CSRD Basics and Requirements

The Corporate Sustainability Reporting Directive (CSRD) marks a milestone for sustainability reporting in Europe. The goal of this EU directive is to elevate sustainability information to the same level as financial reporting, improving transparency and comparability. Below, we explain the key aspects and the implementation timeline.

Key Components of the CSRD

The CSRD is based on three essential elements:

• Double materiality: Companies must disclose both the impact of their business activities on sustainability factors and the risks that sustainability aspects pose to their business (EY, 2023).
• European Sustainability Reporting Standards (ESRS): These standards define clear requirements for:
  • Environmental factors (e.g., climate protection, resource use, waste management)
  • Social factors (e.g., working conditions, diversity)
  • Governance topics (e.g., corporate governance, risk management)
• External audit: Sustainability reports must be certified by independent auditors in the future.

CSRD Timeline and Scope

In Germany, it is expected that around 14,600 companies will be subject to the reporting obligation. Across the EU, the CSRD will expand the number of companies required to report from about 11,700 to over 50,000 (Deloitte, 2023).

* Large companies must meet at least two of the following criteria:

• Balance sheet total: over €25 million
• Net turnover: over €50 million
• On average more than 250 employees

** Listed SMEs can claim an “opt-out” until 2028.

“The aim of the directive is to provide publicly accessible and comparable information about the risks and opportunities companies face in relation to sustainability aspects, to direct financial flows towards sustainable economic activities (Sustainable Finance), and ultimately to promote the transition to a sustainable and competitive economy in line with the European Green Deal.”

In March 2023, the EU Commission proposed limiting the reporting obligation to large companies with more than 1,000 employees and either net turnover above €50 million or a balance sheet total above €25 million. This would reduce the number of affected companies by 80 percent. This phased introduction provides a basis for considering the role of PPAs in meeting CSRD requirements.

PPA Basics

Power Purchase Agreements (PPAs) are long-term contracts between electricity producers and buyers. They govern key points such as electricity volumes, prices, and contract terms, and make a significant contribution to the supply of renewable energy. Below, we look at different PPA models and their benefits for corporate environmental, social, and governance (ESG) objectives. For a global overview of PPA trends, see BloombergNEF, 2023.

PPA Options and Models

PPAs come in various forms, differing in structure and implementation:

These models offer companies different approaches to tailor their energy supply to specific needs. The choice of model can affect the credibility and impact of your sustainability claims (CDP, 2022).

PPAs and Corporate ESG Goals

PPAs play an important role in achieving ESG goals. They help companies operate more sustainably while ensuring financial stability. The main advantages include:

• Planning security
  Fixed electricity prices over longer periods make it easier to calculate energy costs and create stability for sustainability strategies.
• Promotion of renewable energy
  PPAs enable the financing of new solar and wind energy facilities, which have high initial investments but low operating costs.
• Protection against price fluctuations
  PPAs help minimize risks from volatile electricity prices. However, careful contract design is crucial to avoid disadvantages in unfavorable market conditions.

To select the right PPA model, companies should first analyze their energy needs and review available options. This way, benefits can be optimally linked to corporate objectives.

Using PPAs for CSRD Compliance

Impact of PPAs on ESG Metrics

PPAs (Power Purchase Agreements) offer companies clear opportunities to improve their ESG metrics and integrate them into CSRD reports. PPAs have particularly positive effects in the following areas:

In 2022, the number of PPAs concluded in Europe rose by 20%, reflecting a record 8.7 GW of new corporate PPA contracts signed (Reuters, 2023). This shows that PPAs are an important tool for meeting CSRD requirements, with direct impact on reporting.

PPA Data in ESG Reports

To integrate PPA data into CSRD-compliant sustainability reports, precise recording of relevant metrics is necessary. Guarantees of Origin play a central role here. They enable accurate documentation of electricity production from renewable sources and support the concept of 24/7 green power supply (IEA, 2023).

For effective reporting, companies should pay particular attention to the following aspects:

• Quantitative performance indicators: Document energy volumes, CO₂ savings, and the share of renewable energy. The EU plans to increase renewable energy capacity by 605 GW by 2030 (IEA, 2023).
• Risk management and governance: PPAs provide predictability through stable energy prices and facilitate financing of new renewable energy projects.
• Sustainability contribution: Record how PPAs contribute to sustainable development, such as investments in green energy projects.

The CSRD, according to ESRS E1 (Climate Change), requires specific disclosures on Scope 1, Scope 2, and – where material – Scope 3 emissions. With Guarantees of Origin (GoOs), Scope 2 emissions saved through PPAs can be clearly attributed (SBTi Technical Annex).

Tip: Companies should also transparently disclose their emission factors and calculation methodology in the appendix (e.g., according to GHG Protocol or ISO 14064).

PPAs as a Building Block of Climate Strategy

Those aligning their climate targets with the Science-Based Targets initiative (SBTi) or Net-Zero Guidance can use PPAs specifically to reduce Scope 2 emissions. Important: The accounting is market-based and should be backed by credible Guarantees of Origin. Ideally, PPAs also promote new renewable energy facilities (“additionality”) to maximize impact (Renewable Energy World).

Steps to Implementing PPAs

PPA Suitability Assessment

The first step in introducing a Power Purchase Agreement (PPA) is to assess suitability. The following aspects should be considered:

“Companies can’t just say they’re green.”

After this assessment, the appropriate PPA type is selected.

Selecting PPA Types

Companies can choose between different PPA models:

• Physical PPAs: These enable direct or mediated electricity delivery via on-site, off-site, or sleeved models.
• Virtual PPAs: These separate physical and financial electricity flows, simplifying management.

Once the suitable model is determined, continuous monitoring is essential.

Monitoring PPA Results

Structured monitoring is essential to integrate results into CSRD reports. According to CDP, best practice includes real-time tracking of renewable energy generation and transparent reporting on contract performance.

“There really aren’t any standardized PPAs.”

Important points that should be regularly recorded and documented:

• Energy volumes and CO₂ savings
• Guarantees of Origin for renewable energy
• Price guarantees as part of risk management

The European PPA market has now reached a capacity of 26 GW, with Germany accounting for about 9% of this (Statkraft, 2023). These figures are an important basis for transparent reporting under the CSRD.

German PPA Success Stories

The German market for Power Purchase Agreements (PPAs) demonstrates how companies can fulfill their obligations under the CSRD (Corporate Sustainability Reporting Directive) and achieve their sustainability goals through long-term contracts. Here are some concrete examples that illustrate the practical benefits of PPAs.

The Wieland Group has strategically integrated PPAs into its CSRD compliance strategy. In March 2024, the company signed a 10-year PPA with Vattenfall. Starting in 2025, the contract will supply around 46 GWh of solar power annually from a new 46 MW solar park in Nauen, Brandenburg (Vattenfall Press Release).

“Demand for fossil-free power partnerships for our solar and wind power plants is currently rising noticeably.”

Another example is SHS Stahl Holding Saar, which signed a 15-year PPA with Iberdrola Deutschland in June 2023. This contract secures the annual delivery of 200 GWh of offshore wind power from the Baltic Eagle wind farm with a plant capacity of 50 MW (Iberdrola News).

“The collaboration with Iberdrola helps us secure the supply of renewably generated electricity for the transformation process of our companies Saarstahl and Dillinger. Our production is still based on traditional blast furnace technology. By 2030, we aim to produce 3.5 million tons, about 70 percent of our steel, with lower emissions, and by 2045 achieve largely CO₂-neutral production.”

Key Insights from Practice

Another example of PPA success comes from the GMH Group, which improved its CSRD reporting through a contract with ENGIE. The GMH Group operates an inductive single-bar heat treatment plant entirely with renewable energy, saving more than 10,000 tons of CO₂ over ten years (ENGIE News).

“With ENGIE's cooperation on the coupled supply of electricity, we have now taken the important final step towards being able to operate our single heat treatment system in a holistically sustainable manner. Steel processing on the electrically powered EVA is not only more efficient and powerful than the previous heat treatment, but also runs on 100% green electricity.”

The key success factors for effective and CSRD-compliant implementation of PPAs include:

• Long-term contracts (10-15 years) to support sustainable transformations
• Clear and measurable CO₂ reduction targets for reporting
• Integration of modern plant technologies
• Combining multiple models for risk diversification

“Our goal is to make renewable energy available to companies. We are delighted to be able to support GMH Gruppe in its decarbonisation efforts. By combining a decarbonised wind farm with a new solar farm, the PPA also helps to ensure that both urgently needed wind turbines remain on the grid and new plants are built.”

These examples show that PPAs not only ensure a reliable supply of renewable energy, but can also play a central role in CSRD-compliant reporting. As the European PPA market continues to grow, companies that act early will gain a competitive edge in both sustainability performance and regulatory readiness (CDP, 2022).

PPA Market: Changes and Updates

In 2023, the German PPA market grew by an impressive 323% compared to the previous year. This makes Germany the second largest PPA market in Europe after Spain. This development highlights the increasing relevance of power purchase agreements in CSRD reporting. At the same time, these market dynamics are driving technological advances in PPA management.

Digital Tools for PPA Management

Digitalization is fundamentally changing PPA administration. Online marketplaces make the market more transparent and simplify the integration of PPA data into ESG and CSRD reports.

Leading platforms such as LevelTen, Pexapark, and Zeigo Energy not only facilitate PPA brokering but also offer tools for assessing price and volatility risks. Additionally, the EFET standard documentation for contract design supports legal certainty and traceability.

PPAs and Climate Neutrality

Regulatory changes are promoting the integration of PPAs into climate neutrality strategies. A growing trend is the expansion of renewable energy installations financed by PPA demand. Germany’s market share in Europe is particularly noteworthy.

“What’s new is that power purchase agreements finance new generation assets” – Tibor Fischer, German Energy Agency (dena)

“And we want to reach 100% renewable electricity by 2035” – Sylvia Baumheier, Covestro AG

Experts recommend combining different PPA models to minimize risks. Collaboration with financial institutions for improved project financing and use of EFET standard documents for contract drafting are also considered beneficial.

These developments make PPAs a central component of sustainable, CSRD-compliant strategies.

Conclusion

PPAs play a key role in supporting CSRD compliance. In 2021, 137 companies across 32 countries signed PPAs, resulting in 31.1 GW of renewable energy capacity. These figures demonstrate the potential for future-proof business models and new financing opportunities.

PPAs offer clear ESG benefits:

• Reduction of CO₂ emissions: Direct use of renewable energy measurably lowers CO₂ output.
• Planning security: Experts emphasize that PPAs provide stable revenue and reliable forecasting.
• Promotion of renewables: Involving private off-takers accelerates the transition to green energy.

The success of PPAs depends on careful implementation. Financial institutions strengthen the market with tailored solutions such as loans, equity participations, and loan guarantees. This enables PPAs to be effectively integrated into a comprehensive CSRD strategy—from precise reporting to targeted investments. A consistent application of PPAs not only improves ESG performance but also lays the foundation for long-term sustainability goals.

Frequently Asked Questions

After covering the basics and mechanisms of PPAs in the previous sections, we now address common questions about practical implementation and use across various industries.

How Do PPAs Support CSRD Compliance?

PPAs provide companies with a practical way to meet CSRD (Corporate Sustainability Reporting Directive) requirements by enabling measurable sustainability actions. This is particularly evident in tracking environmental impacts. A German example shows how an industrial company used a long-term PPA of over 100 MW to transparently document its CO₂ emissions for CSRD compliance.

Smaller companies can also more easily achieve their sustainability goals and benefit from additional advantages through PPAs.

Benefits of PPAs for Small Businesses

PPAs offer small businesses numerous advantages, including:

“Power purchase agreements provide renewable energy generators with a steady source of income in highly volatile power markets. For buyers, they offer not only a credible way to green their own operations, but also more certainty in their business planning.”

Industries and PPA Use

PPA usage varies by industry and its specific requirements. A prime example is the Markbygden ETT wind power project in northern Sweden, where a 19-year PPA was successfully implemented with a subsidiary of Norsk Hydro.

Especially active PPA markets include:

• The Iberian Peninsula,
• The Nordic region,
• Germany, and
• The Netherlands.