When an industrial site decides to generate its own power, the next decision is who owns the plant. There are three common answers, and each moves money and risk to a different place.
Model 1: Energy-as-a-Service
Under Energy-as-a-Service — often documented as a power purchase agreement (PPA) or energy supply agreement — the supplier:
- develops and designs the plant;
- finances and builds it;
- owns it for the term of the agreement;
- operates and maintains it;
- sells you the energy (power, and often heat or steam) at an agreed price.
You provide the site, and often the fuel if it is your own residue. You pay only for energy delivered.
What it does to your balance sheet. No capital expenditure. Energy is an operating cost, as it was when you bought from the grid.
Where the risk sits. Construction, performance and maintenance risk sit with the supplier. If the plant under-performs, the supplier earns less.
Model 2: Customer-owned
You buy the plant. The supplier designs, builds and commissions it, then usually provides operations and maintenance support under a separate agreement.
What it does to your balance sheet. A capital asset, depreciated over its life.
Where the risk sits. With you, beyond the warranty period — including performance, availability and major maintenance. An O&M contract can transfer some of that back.
Why choose it. Companies with a low cost of capital, in-house engineering teams and a long planning horizon can achieve a lower lifetime cost of energy by owning.
Model 3: Joint development
For larger or strategic projects — multi-site programmes, or plants that also serve neighbours or export — the customer and supplier can co-invest through a project company. Returns and risks are shared according to the structure.
How to choose
| Question | Points towards Energy-as-a-Service | Points towards ownership |
|---|---|---|
| Is capital better used elsewhere in the business? | Yes | No |
| Do you want energy costs as opex? | Yes | Indifferent |
| Do you have engineers who can run a power plant? | No | Yes |
| Is your planning horizon longer than the agreement term? | Uncertain | Yes |
| How do you value a performance commitment from the operator? | Highly | Less |
In practice, most industrial customers choose Energy-as-a-Service. Their capital earns more in their own operations than in a power plant, and they prefer to pay for results rather than manage an asset outside their core expertise.
The accounting question
Finance teams often ask how each model appears in the accounts. The answer depends on the accounting standards that apply to you and the precise contract terms — some energy agreements can contain an embedded lease that brings an asset and liability onto the balance sheet. It is worth involving your auditors early, with a draft agreement, so the structure delivers the treatment you expect.
Risk, side by side
| Risk | Energy-as-a-Service | Customer-owned |
|---|---|---|
| Construction cost overrun | Supplier | Customer (beyond fixed-price terms) |
| Late completion | Supplier, with damages to customer | Customer, with damages from EPC contractor |
| Plant under-performance | Supplier earns less | Customer bears cost |
| Major maintenance | Supplier | Customer |
| Fuel quality | Allocated in the agreement | Customer |
| Technology obsolescence | Supplier | Customer |
The trade-off is straightforward: Energy-as-a-Service moves most of these risks to the party best placed to manage them, in exchange for a margin built into the energy price.
What to look for in the agreement
The headline price per kWh is only one term. The ones that decide whether the agreement works for you:
- Price and escalation. Fixed, indexed to inflation, or linked to the grid tariff? A price set below your grid tariff with a clear escalation formula gives certainty.
- Term. Long enough for the supplier to finance the plant at a good rate; with clear options to extend.
- Availability commitment. The share of time the plant must deliver, and the remedy if it does not.
- Take-or-pay. Whether you pay for energy you do not use, and how much.
- Fuel. Who supplies it, to what specification, and what happens if quality or quantity changes.
- Heat. Whether recovered heat is included and how it is metered and priced.
- End of term. Purchase option, extension or removal.
- Carbon. Who owns any carbon removal credits the plant generates.
How CNP structures agreements
Energy-as-a-Service is CNP's main offer: CNP finances, builds, owns and operates the plant, and the customer buys the energy under a long-term agreement priced below their current grid tariff. Customer-owned and joint development structures are available where they suit. See how we deliver projects.
Next step
Assess your site and we will set out how each model would work for your load and fuel.
