Energy markets glossary
The terms behind GB energy transactions, defined in plain language — PPA structures, certificates and support schemes, storage revenue models, and the market operations that sit underneath them.
PPA structures & contracting
Power purchase agreement (PPA)
A long-term contract between an electricity generator and a buyer that fixes the commercial terms of power supply — price, tenor, volume and shape — ahead of delivery.
Pay-as-produced (PaP) PPA
A PPA structure in which the buyer takes the generator’s output as it is produced, at an agreed price per MWh, carrying the asset’s shape and volume risk.
Baseload PPA
A PPA delivering a flat, constant volume in every settlement period, independent of how the underlying asset actually generates.
Shaped PPA
A PPA in which delivery follows a profile agreed up front — sitting between pay-as-produced and baseload, with the residual shape risk priced into the contract.
Sleeved PPA
A physical corporate PPA in which a licensed electricity supplier sits between the generator and the buyer, “sleeving” the power through its supply licence.
Virtual (financial) PPA
A PPA settled financially against a market reference price rather than through physical delivery — a private contract for difference between generator and buyer.
Route-to-market (RtM)
How a generator converts its output into revenue — through contracted offtake, merchant sales, or a route-to-market agreement with a supplier or trader providing market access.
Merchant exposure
Revenue earned at prevailing wholesale prices without contracted offtake — full upside, full volatility.
Offtaker
The buyer of power under a PPA — a utility, supplier, trading house or corporate that commits to purchase a generator’s output.
Certificates & support schemes
REGO (Renewable Energy Guarantee of Origin)
A certificate issued by Ofgem for each MWh of accredited renewable generation in Great Britain, used to evidence renewable electricity supply.
Guarantee of Origin (GoO)
The EU’s renewable electricity certificate — one certificate per MWh of renewable generation, used to evidence renewable supply across EU member states.
Contracts for Difference (CfD)
The UK government’s main support scheme for new low-carbon generation — a two-way contract that tops up or claws back the difference between an agreed strike price and a market reference price.
Capacity Market (CM)
The GB scheme that pays capacity providers to be available during periods of system stress, procured through auctions held ahead of each delivery year.
24/7 carbon-free energy (24/7 CFE)
Matching electricity consumption with carbon-free generation in every hour of every day — going beyond annual certificate matching.
Additionality
Whether a procurement action causes new renewable capacity to be built, rather than reallocating the output of assets that already exist.
Storage & flexibility
BESS (battery energy storage system)
Grid-scale battery storage — an asset that buys, stores and resells electricity, and provides flexibility services to the system.
Tolling agreement
A contract in which an offtaker pays the owner of a storage asset a fixed periodic fee for operational control, taking the market risk and the trading upside.
Revenue stack
The combination of income streams a flexible asset earns across different markets — frequency response, wholesale arbitrage, the Balancing Mechanism and the Capacity Market.
Co-location
Siting battery storage together with generation — most commonly solar-plus-BESS or wind-plus-BESS — behind a shared grid connection.
Dynamic Containment (DC)
NESO’s fast-acting frequency response service, designed to contain large post-fault frequency deviations — procured through daily auctions and dominated by batteries.
Firm Frequency Response (FFR)
A legacy GB frequency response service, now largely superseded by the dynamic suite (Dynamic Containment, Moderation and Regulation).
Grid & market operations
Balancing Mechanism (BM)
The real-time tool the National Energy System Operator uses to balance GB supply and demand, accepting bids and offers from market participants after gate closure.
Curtailment
Reducing a generator’s output below what it could produce — because of network constraints, system needs or market conditions.
Projects & investment
Notice to proceed (NTP)
The contractual trigger authorising a contractor to start construction — the conventional dividing line between a development-stage and construction-stage project.
Commercial operation date (COD)
The date a project is certified complete and begins commercial generation — the point where construction risk ends and operating revenue begins.
Pricing or structuring against one of these?
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