The changing balance of power on the PPA renewable energy sources market

“In August 2022, electricity prices were EUR 600-700/MW (USD 650.8-759.3/MW),” said Gabriele Martinelli, head of European energy research at LSEG Power Research. “It seemed crazy, but PPA prices at the time were not half of that, (around) 20-25% of that.

“Now energy prices are much lower,” Martinelli continued, speaking specifically about corporate PPAs. “They are returning to pre-crisis levels, around €95-100/MW (US$103.1-108.5/MW), and the relationship between PPAs and prices is returning to what it was before the crisis (crisis).

He also suggested that in these conditions Europe “should be a seller’s market”, but high market volatility keeps the balance of power in favor of buyers. Prices are getting “better,” he said, but recent volatility in both energy prices and PPA prices has made it difficult for power producers to sell at a higher price.

“Many investors had to step aside because, from an equity perspective, they weren’t comfortable with the commercial risk,” added Ricardo Folgado, managing director of mergers and acquisitions at Exagen, who then suggested that investors with a higher risk appetite could gain in this environment.

“(Corporate PPAs) can play a very valuable role, but they may take a year or two to come to fruition; (It is beneficial) for the investor who has a greater appetite for commercial risk,” he continued. “I think (the corporate PPA market) is more of a buyer’s market because buyers can afford to buy; Unlike before, when the price of energy was high, the balance has shifted towards businesses.”

Yesterday, during the panel, Ross Irvine from EDF talked about the challenges faced by new companies wanting to engage in the corporate PPA space due to the growing interest in acquiring renewable energy sources among customers and potential customers.

However, according to Alexandre Soroko, head of PPA consulting at Greensolver, corporate buyers are “not very sophisticated” compared to the off-taker utilities. He also suggested that this lack of sophistication influenced the decision-making process of corporate audiences, namely to invest in security as a way to counter the volatility present in the market.

“For PPAs that have access to physical assets, this is a hedge!” Soroka said. “(Acquirers) and corporations are looking for protections.”

Renewable energy PPAs are becoming more common in the enterprise space, and earlier this month Microsoft and Brookfield signed a massive 10.5 GW offtake deal in the U.S. and Europe worth more than $10 billion.

PV Tech publisher Solar Media hosted the Renewable Energy Revenue Summit on May 21-23, 2024 in London. The event will focus on PPA design, the role of effective policy, evolving strategies for large energy consumers, and more. For more information, go to the website.