Europe PPA market “possibly to cross 10 GW”

Europe PPA market “possibly to cross 10 GW”

As per data from tech outfit Pexapark, the Power Purchase Agreement (PPA) of the European Renewable demand is likely to surpass 10 GW in the year 2021. In 2020, almost 9 GW of the PPA deals were signed, amid a rise in market uncertainty due to epidemic lockdowns. Data from Pexapark showed that Spain, which has 3.4GW of green energy PPAs negotiated in the area over the last year, dominated the market due to favorable prices. A sell-side controlled by 30 firms, comprising RWE, Orsted, Iberdrola, Lightsource BP, and WPD, also was signed in the year 2020 with a record number of corporate PPA transactions.

In terms of value, Spain is poised to be a dominant market in the forthcoming year, given that the emerging German PPA market, which is supposed to take off in 2021, is expected to threaten it. Pexapark added that as offshore wind developers prepare for gigawatt-scale developments in the coming years, 2021 will probably see the first big capacity deals come online in 2023. It is possible that the vast amount of resources involved in these transactions would drive further consolidation of industry leaders with access to adequate money, he added. A variety of developments are anticipated for PPAs signed throughout European markets in 2021, centered on Pexapark’s price data as well as insight into continuing deal activity.

Pexapark is also forecasting continued price and volatility problems, especially in areas with a strong number of projects constructed due to initially favorable prices, without a corresponding increase in demand. For instance, due to the cannibalization impact, record low costs in Sweden and Norway are likely to make funding non-viable for potential projects without substantial reductions in turbine technology costs or improvements in storage.

And investors, utilities, and independent power companies would need to invest more in innovative energy risk management technologies in order to cope with these industry challenges. “Over the last year, energy firms have come to realize that progress in a post-subsidy energy market requires sustainable energy risk management,” stated Luca Pedretti, who works at the Pexapark as a Chief Operating Officer as well as co-founder. “In specific, we have seen this across M&A activity throughout 2020, as firms strive to incorporate technologies, structures, and talent from the conventional field of power trading.”

“However, even smaller businesses, particularly with the recent emergence of the digital ‘operating systems,’ will respond to these business challenges to cover critical roles, from PPA beginnings to pricing analytics to the management of the portfolio. 2021 has the capacity to be a prosperous year for PPAs for clean energy. Still, the sector must take note of the realities of risk and uncertainty in energy markets in preparation to get there as well as ensure that it has the expertise and resources to handle these challenges.”