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PRACTICE NOTES
Types of
Liquefied natural gas (LNG) is often handled as a portfolio commodity, whereby a participant may break up several long-term sales agreements into short-term transactions to optimise transport costs and balance supply obligations with market conditions. The LNG sector also maintains its own spot-trading market, in which cargoes are bought and sold through competitive tenders and brokered trades. Alternatively, swap arrangements—under which two buyers or two sellers agree to swap cargoes—are becoming a more common trading model in the LNG industry. The common types include:
short-term sales agreements—one to five-year bilateral agreements, often with little flexibility of terms
master agreements—a popular arrangement under which seller and buyer sign an agreement that sets out the general terms under which they will buy and sell LNG, without committing the parties to an obligation to actually buy or sell specific quantities...
Energy
PRACTICE NOTES
What is a power purchase agreement?
A power purchase agreement (PPA) is a contract between an electricity producer (generator) and the buyer of that electricity (offtaker) that sets out the commercial terms governing the sale and purchase of power from a generation project. For our comprehensive suite of resources and precedents on power purchase, see: Power purchase agreements and routes to market—overview. A PPA offers a route to market for electricity produced by the generator and, for renewable generating stations, any green benefits the generator receives for producing electricity from renewable sources, which may be sold on to electricity suppliers. It is the agreement under which a significant share (if not all) of a project’s revenues are earned and, as a result, the PPA supports the economics of most power projects. Most PPAs include provisions addressing the following matters:
Energy
7 Contributions by Shakespeare Martineau LLP Experts
PRACTICE NOTES
For additional hands-on guidance on financing energy, power and resources projects across multiple sectors, including those covered in this Practice Note, see also the textbook titled Energy and Resources Financing: A Practical Handbook for reference.
What is a CHP project?
Combined heat and power (CHP) is an efficient cogeneration approach that can draw on many different fuels, capturing and making practical use of the heat created during electricity production.
Producing heat and electricity at the same time from a fuel source allows CHP to reach efficiencies beyond those of separate heat generation, for example a gas-fired boiler, and a conventional power station operating separately.
Where both heat and power are required on the same site, CHP can cut energy expenditure, as well as carbon output and air pollution, meaning significantly lower operating costs.
CHP is applicable to many thermal plant types, including energy from waste, biomass with CCUS
Energy
PRACTICE NOTES
What is the policy and legislative background to the support for community energy projects?
Legal and policy backing for community energy schemes is comparatively new; although early pledges prompted some movement, progress then remained modest for several years. A concise overview follows. The Community Energy Strategy arose from a 2010 Liberal Democrat manifesto promise to ‘encourage community-owned renewable energy schemes where local people benefit from the power produced’. That pledge appeared, unchanged, in The Coalition: programme for government. In 2014 the then coalition administration, through the former Department of Energy and Climate Change (DECC), issued the UK’s first Community Energy Strategy. DECC then released an update in March 2015. Like the original, the update emphasised enabling localities to make their own advances towards a more decentralised energy system with active community involvement. Further information on the Strategy update is set out in the
Energy
PRACTICE NOTES
For fuller analysis of how the net zero energy transition is regulated, consented and incentivised under the law of England and Wales, consult Collinson and Hockman on Energy Law: Regulating, Consenting and Incentivising the Energy Transition. That textbook provides comprehensive treatment of the topics addressed in this Practice Note.
What is a grid connection?
A grid connection enables a party to link to the local electricity network, or ‘grid’, so they can take (import) and/or send out power. An agreed grid connection is fundamental to maintaining that link and to trading the electricity a project requires through the grid. From a developer delivering a small housing scheme to a utility constructing a nuclear plant, a connection is necessary whenever no pre-existing link is available. In every case, the absence of an existing connection means one must be sought and secured. This is as true for
Energy
PRACTICE NOTES
Power offtake arrangements
In project-financed power generation schemes, a central document is the power offtake agreement. Commonly termed a ‘power purchase agreement’ or PPA, it is usually a contract between the generator and a licensed electricity supplier acting as offtaker for the plant’s entire output. PPAs of this sort are typically on the supplier’s standard terms, which most funders recognise. For our key resources on PPAs, see: Power purchase agreements and routes to market—overview. These agreements tend to favour the offtaker and securing substantial revisions is generally challenging. An alternative offtake model arises where the generator links directly to one or more local consumers via a ‘private wire’, with those customers purchasing electricity straight from the power station. In broad terms, ‘private wires’ refers to electricity distribution systems not owned or operated by a distribution network operator (DNO) licensed under section 6 of the
Energy
PRACTICE NOTES
What is an Energy Services Company (ESCo)?
There is no single, settled definition of an ESCo, and the term has no special legal status. It is used for organisations involved in generating, distributing and/or supplying energy to end users, as well as those focused on demand management, green retrofits and other efficiency measures. This Practice Note adopts ‘ESCo’ to mean entities engaged in producing and supplying energy—specifically heat delivered as steam or hot water—rather than energy efficiency projects.
An ESCo of this kind will often employ co‑generation of heat and electricity via a combined heat and power (CHP) plant. Variations include combined cooling, heat and power (CCHP), where absorption chillers utilise part of the heat from the CHP plant to create chilled water for air conditioning or refrigeration; and quadgeneration, which incorporates carbon‑capture technologies. For simplicity, this Practice Note refers to ‘CHP’, as many of the
Energy
PRACTICE NOTES
STOP PRESS: The Planning and Infrastructure Act 2025 received Royal Assent on 18 December 2025.
This content is presently being reviewed in line with the Act.
What is section 36 of the Electricity Act 1989?
Section 36 of the Electricity Act 1989 (EA 1989) places a statutory obligation on anyone proposing to construct, expand or operate an electricity generating station to secure consent from the ‘appropriate authority’—that is, the Secretary of State (SoS), Scottish Ministers or Welsh Ministers, depending on the location—unless an exemption applies.
Exemptions exist for particular capacities and types of generating stations, for example onshore wind stations in England and Wales, and projects authorised under other legislative consents such as the Planning Act 2008 (PA 2008). With the advent of the development consent regime under PA 2008, the need to seek consent under EA 1989, s 36 has been markedly
Energy
PRACTICE NOTES
For comprehensive and authoritative commentary on regulating, consenting and incentivising the net zero energy transition under the law of England and Wales, see Collinson and Hockman on Energy Law: Regulating, Consenting and Incentivising the Energy Transition. That textbook provides thorough, in‑depth analysis of topics addressed in this Practice Note.
How are renewable energy projects typically structured?
In most renewable generation schemes (particularly where project finance features), a special purpose vehicle (SPV) is formed to hold the assets and to enter into the key project contracts. Construction and operations are usually contracted out, and financiers may insist that main contractors sign direct agreements, deferring termination rights so the funders can exercise step‑in rights (these arrangements are not depicted in Diagram A below). That position will almost invariably apply where the renewable project is project financed. For additional practical guidance on financing energy, power and
Energy
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