Business Energy Glossary
What is a sleeved PPA?
A sleeved PPA is a structure used in corporate Power Purchase Agreements where a licensed electricity supplier sits between the renewable generator and the corporate buyer. The generator and the corporate sign a financial PPA agreeing volume and price. The supplier (the sleever) handles the physical and regulatory complexity: taking the generator output, balancing it against the corporate consumption, paying the generator under the PPA, and supplying the corporate meters under a standard supply contract. Sleeved PPAs are the most common way for UK corporates to buy renewable electricity directly from a specific generator without the corporate becoming a licensed supplier.
Sleeved PPAs sit alongside synthetic PPAs and direct supply PPAs as the three main structures for corporate renewable procurement. Understanding the sleeve mechanism helps evaluate corporate PPA proposals and the relative roles of generator, supplier, and corporate buyer.
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How a sleeved PPA works
A sleeved PPA is a power purchase agreement where a licensed supplier delivers a generator’s output to a business customer and handles balancing and other supply duties for a fee. It lets larger users buy from a specific renewable project without becoming a licensed supplier.
For the full explanation, see Renewable business electricity: what 100% green actually means.
A sleeved PPA has three parties: the generator (a wind farm, solar farm, etc.), the corporate buyer (the company purchasing the power), and the supplier (the licensed party doing the sleeving). The mechanism:
- The corporate signs a long-term PPA with the generator (typically 10 to 15 years) at an agreed strike price per MWh.
- The corporate signs a supply contract with the supplier covering its meter portfolio.
- The supplier takes the generator output, integrates it with other power purchases to meet the corporate consumption, and bills the corporate for actual consumption.
- The supplier pays the generator the PPA price for the volume produced.
- The supplier charges the corporate a sleeve fee for managing the structure.
The corporate sees a normal supply bill (with REGOs allocated from the generator output) and never directly interacts with the wholesale market.
The sleeve fee
The supplier charges a sleeve fee to cover:
- Balancing risk. The mismatch between generator output (intermittent) and corporate consumption (variable but typically more stable).
- Imbalance cost. Any imbalance settled with Elexon at the cash-out price.
- Credit risk. Working capital required to pay the generator before being paid by the corporate.
- Administrative cost. Settlement, reporting, REGO transfer, and contract management.
Typical sleeve fees range from £1 to £5 per MWh depending on contract size, complexity, and supplier appetite. Larger PPAs with more predictable shape attract lower fees.
Pros and cons
| Pros | Cons |
|---|---|
| Corporate gets fixed-price renewable power for the long term. | Long contract commitment (10 to 15 years). |
| REGOs are bundled with the physical power. | Corporate must work with the chosen sleever supplier. |
| No corporate licensing or balancing obligations. | Sleeve fee adds to the all-in cost. |
| Supports new renewable build (additionality). | Generator output may not match corporate shape, increasing sleeve risk. |
Sleeved vs synthetic PPA
| Feature | Sleeved PPA | Synthetic PPA |
|---|---|---|
| Physical power flow | Yes (sleeved by supplier) | No (financial only) |
| REGOs transferred to corporate | Yes | Usually separately purchased |
| Corporate supply contract | With the sleever | Independent of PPA counterparty |
| Settlement | Physical and financial via supplier | Pure financial (Contract for Difference) |
| Typical contract term | 10-15 years | 10-15 years |
Who uses sleeved PPAs
Sleeved PPAs are typically used by:
- Large corporates with annual consumption above 20 GWh.
- Multi-site portfolios able to absorb sleeved volume across many meters.
- Corporates with net zero, RE100, or similar sustainability commitments requiring additionality.
- Companies seeking long-term price stability against wholesale volatility.
For smaller portfolios (below 5 to 10 GWh), the fixed costs of structuring a corporate PPA typically outweigh the benefits, and green supply tariffs (with REGOs) are more practical.
Contracts in a sleeved structure
Four primary contracts:
- PPA between corporate and generator. Volume, price, term, REGO allocation.
- Sleeving contract between corporate and supplier. Sleeve fee, balancing terms, settlement mechanics.
- Supply contract between corporate and supplier. Standard supply terms covering the corporate meter portfolio.
- Sleeving contract between supplier and generator. Authorisation to take the generator output.
The contracts collectively define the rights, obligations, and cash flows between the three parties for the duration of the PPA.
a sleeved PPA FAQs
What is a sleeved PPA?
A corporate Power Purchase Agreement where a licensed electricity supplier sits between the renewable generator and the corporate buyer, handling balancing, settlement, and supply. The generator and corporate sign a financial PPA; the supplier sleeves the physical power.
How does a sleeved PPA work?
The supplier takes the generator output, integrates it with other power purchases to meet corporate consumption, and bills the corporate for actual usage. The supplier pays the generator the agreed PPA price and charges the corporate a sleeve fee.
What is the sleeve fee?
The fee the supplier charges for balancing risk, imbalance cost, credit risk, and administrative overhead. Typical sleeve fees range from £1 to £5 per MWh depending on contract size and shape.
How is a sleeved PPA different from a synthetic PPA?
Sleeved PPAs involve physical power flow through a supplier. Synthetic PPAs are purely financial: a Contract for Difference settling the strike vs market price, with no physical sleeving. REGOs in sleeved PPAs come with the physical power; in synthetic PPAs they are usually purchased separately.
Who uses sleeved PPAs?
Large corporates with consumption above 20 GWh per year, particularly those with net zero or RE100 commitments. Multi-site portfolios with predictable shape are best suited to sleeving.
How long is a sleeved PPA contract?
Typically 10 to 15 years. The long term provides the generator with revenue certainty to finance the renewable asset and gives the corporate long-term price stability.
Can a small business use a sleeved PPA?
Rarely. The fixed structuring costs and minimum sleeve volumes typically require corporate consumption above 5 to 10 GWh per year. Smaller businesses usually access renewables through green supply tariffs with REGOs.
Are REGOs included in a sleeved PPA?
Yes. The REGOs issued for the generator output transfer to the corporate via the supplier, providing the renewable energy certification needed for sustainability reporting.