Private Wire PPA vs Sleeved PPA vs On-Site PPA: The UK Factory Guide
For energy-hungry UK factories and logistics hubs without a decade of capex to deploy, a Power Purchase Agreement unlocks immediate savings on grid retail electricity without owning the asset. This guide compares the three live models — on-site, private wire and sleeved — including the 2 km rule, non-commodity charge treatment, typical pricing and legal structures.
The Three PPA Structures at a Glance
| Dimension | On-Site PPA | Private Wire PPA | Sleeved PPA |
|---|---|---|---|
| Generator location | Your roof | Adjacent site within 2 km | Anywhere in GB |
| Uses public grid? | No | No | Yes |
| Savings vs retail | 20-35% | 25-40% | 5-15% |
| Non-commodity charges avoided | Most | Most | None |
| Typical demand threshold | 1 GWh/yr | 2-4 GWh/yr | 5 GWh/yr |
| Contract length | 15-25 yrs | 15-25 yrs | 5-15 yrs |
| Supports CBAM Scope 2? | Yes — physical | Yes — physical | Only with matching REGOs |
| Works on leased buildings? | Licence to Alter required | Possible via lease extension | Yes — no landlord impact |
On-Site PPA: Solar on Your Own Roof
The most common structure in UK C&I solar. A developer installs and owns a rooftop system at your factory or warehouse. You buy the electricity it generates at a fixed, indexed or discount-to-grid tariff. You do not own the asset — the developer holds it on their balance sheet and covers insurance, O&M and performance risk.
Typical pricing structures: fixed 12-18p/kWh for 15-25 years, or "grid minus 20-30%" indexed contracts. Developers typically require 70%+ self-consumption to make the commercial case.
Leased buildings: workable via a Licence to Alter with the landlord, or by assigning the rooftop lease directly to the developer. Eden Sustainable and Thrive Renewables have deployed this model across 75 MW of UK industrial rooftops.
Private Wire PPA: The Hidden Discount
A private wire PPA connects a nearby generator to your site through a dedicated cable — not the public distribution network. Because the energy never touches the grid, you avoid most non-commodity charges (BSUoS, DUoS, TNUoS, AAHEDC, CfD levy and Capacity Market levy), which now make up 40-55% of a typical UK retail bill.
The generator is licence-exempt under Class Exemption rules provided the arrangement fits Ofgem's thresholds. Typical cable distance is under 2 km — often a neighbouring field or an adjacent industrial unit.
Savings: 25-40% vs retail, but with meaningful upfront legal and engineering work. Worth the investment for sites with 2 GWh+ annual demand.
Sleeved PPA: Corporate Green Supply
A sleeved PPA is a contractual matching arrangement run through your licensed energy supplier. A named generator — typically a solar farm or wind project — sells electricity to your supplier, who then "sleeves" it through to your site on a half-hourly matched basis. You continue to pay all standard non-commodity charges, so the savings are smaller.
Where sleeved PPAs shine: matched REGO supply for SBTi and CBAM compliance, long-term price hedge on the wholesale commodity, and ease of execution (no physical build). Well-suited to large multi-site operators and data centres.
Worked Example: 8 GWh/yr Food Manufacturer, Midlands
- Current grid cost: £2.0m/yr at 25p/kWh retail
- On-site PPA (2 MW rooftop): ~ 1,900,000 kWh at 14p/kWh — saves £209,000/yr
- Private wire PPA (additional 5 MW ground-mount on adjacent land): ~ 5,250,000 kWh at 10p/kWh — saves £787,500/yr vs grid
- Sleeved PPA (residual 900,000 kWh): priced at ~ 23p/kWh with REGOs — saves £18,000/yr
- Total blended tariff: ~ 12.5p/kWh vs 25p grid
- Total annual saving: ~ £1,014,500
Which Structure Fits Which Site?
Choose On-Site PPA if...
You own or have a long lease on a suitable roof, demand is 1-8 GWh/yr, you want the simplest contractual structure, and you value predictability over maximum savings.
Choose Private Wire PPA if...
Your demand exceeds available roof area, you have an adjacent landowner willing to host ground-mount solar, demand is 2+ GWh/yr, and you want the deepest grid discount.
Choose Sleeved PPA if...
You operate across many sites, you need REGO-backed green supply for SBTi or CBAM, you cannot physically build on your roof, or you need a long-term wholesale commodity hedge.
Combine all three if...
You are a large single-site manufacturer — rooftop + adjacent private wire + sleeved residual is the blueprint that Tata, JLR and AB InBev are now using in the UK.
Frequently Asked Questions
What is a private wire PPA?
A private wire PPA connects a nearby generator to your site over a dedicated cable within the 2 km rule, bypassing the public grid and avoiding most non-commodity charges. Typical savings vs retail are 20-40%.
How does a sleeved PPA differ from a private wire PPA?
A sleeved PPA uses the public grid and your licensed supplier acts as the sleeving party. Electricity is matched on a half-hourly basis between the named generator and your meter. Savings vs retail are smaller (5-15%) but no cable or land rights are required.
What is the 2 km rule?
Ofgem's Class Exemption under the Electricity Act 1989 permits licence-exempt electricity supply between a generator and a consumer connected by a private network, generally where they are adjacent or within a short cable run, subject to volume and scheme size thresholds.
What annual demand justifies a private wire PPA?
Typical threshold is 4 GWh per year, but with current electricity prices and the £75m Thrive Renewables fund, industrial sites with 2 GWh+ annual demand now attract viable private wire proposals.
Related Reading
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