European RE PPAs To Exceed 10 GW In 2021

Nearly 9 GW Renewable Energy Power Purchase Agreements Signed In Europe In 2020, Says Pexapark; Expects Market To Exceed 10 GW In 2021

European RE PPAs To Exceed 10 GW In 2021

There was strong interest among corporates in Europe in 2020 for renewable energy PPAs with chemical firms especially opting for clean energy procurement. While Iberdrola led the companies securing a large number of such PPAs last year, it was followed by Lightsource BP, RWE, Orsted and WPD. (Photo Credit: Iberdrola, S.A.)

  • Pexapark says in 2020 8.9 GW of renewable energy capacity was contracted under PPAs in Europe
  • It was led by Spain with 3.4 GW signed here and Spain based Iberdrola signed PPAs for 1.6 GW
  • Corporate offtakers took more interest in clean energy procurement compared to utilities
  • In 2021, it expects over 10 GW capacity to be contracted under PPAs with strong interest in Germany

In 2020, the European renewable energy power purchase agreement market grew with deals signed for 8.9 GW. Spain led the Continent by contributing 3.4 GW thanks to favorable prices that were reported at around €35 per MWh for solar energy, according to Pexapark, a software and advisory services for renewable energy sales. In its Market Outlook 2021, it expects 2021 to see more than 10 GW of such deals being signed.

Interestingly it was solar power capacity that led these deals with 4.1 GW of 8.9 GW, accounting for 46% of the total. “This is likely due to economics with solar leading the new build league tables for non-subsidized renewable assets across many markets,” explained Pexapark.

Of the 2020 deals, 54% or 4.8 GW were signed by corporate offtakers, reflecting the growing interest of businesses in clean energy procurement. According to Pexapark, this is a 85% growth over 2.6 GW corporate offtakers signed up for in 2019, and at the same time corporate demand is more resilient to shocks which is what 2020 was all about with the COVID-19 related disruptions. Whereas utility demand ‘slumped on the back of reduced risk appetite’.

Further analysis of the numbers show chemical companies took over from tech companies to sign up for 1.6 GW of renewable energy capacity in 2020, compared to 900 MW by the latter. Most of the deals were signed by Spain’s Iberdrola that grabbed PPAs for 1.6 GW capacity, followed by Lightsource BP, RWE, Orsted and WPD.

According to Luca Pedretti, Chief Operating Officer and co-founder of Pexapark, “Over the past year, renewable energy companies have come to realise that success in a post-subsidy power market requires robust energy risk management. We’ve seen this in particular through M&A activity in 2020, as companies seek to integrate tools, systems, and talent from the traditional power trading world.”

Pedretti believes 2021 has the potential to be a boom year for renewable energy PPAs provided the industry takes stock of the ‘reality of risk and volatility in energy markets’ to ensure it has the talent and tools to manage these risks.

Going forward some of the trends for renewable energy PPA market in 2020 as listed by Pexapark report are:

  • emergence of a strong PPA market in Germany,
  • oversupply of wind energy in the Nordics can impact PPA prices,
  • offshore wind is to grow, and
  • bigger consolidation activity in terms of mergers and acquisitions will concentrate the PPA market.

The last point, explains Pexapark, could further shape the PPA market in the hands of even fewer operators in the coming years.

The Pexapark report can be downloaded for free on its website.

About The Author

Anu Bhambhani

Anu Bhambhani is the Senior News Editor of TaiyangNews

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