171. PPAs and Tolling: lessons for the future - Mar25
Mar 3, 2025
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Explore the shifting landscape of Power Purchase Agreements with insights on the stable corporate demand and the rise of innovative deal structures. Discover the impact of new technologies like battery storage on the market, and how hybrid models are changing the game. The podcast also dives into predictions for 2025 and the growing influence of negative pricing. Plus, celebrate Pexapark’s first venture into the US market with the acquisition of Renewafi, marking a significant step in their American expansion!
Corporate buyers dominate the PPA market, representing 80% of deals, reflecting a shift towards smaller-sized agreements amidst evolving energy demands.
The integration of battery storage within PPAs is essential for enhancing flexibility and functionality, allowing for optimized energy delivery according to demand.
Deep dives
Transformation of the PPA Market
The PPA market in Europe is experiencing significant transformation as it faces challenges like negative pricing and low capture rates. Over the past five years, a strong demand for standalone solar projects has led to saturation, pushing the market to adapt. This evolution compels producers to meet specific buyer demands, which now include a variety of energy production profiles such as solar during different times of the day. The integration of different renewable technologies, like combining solar and wind with energy storage, is becoming essential to create the desired energy profiles for buyers.
Rise of Corporate Buyers
Corporate buyers are significantly dominating the PPA landscape, making up around 80% of all deals, with over 150 of these entities being first-time participants. Despite a decrease in reported PPA volumes, the actual capacity under these agreements has grown, indicating a shift towards smaller-sized deals. Countries like Spain continue to lead the market in PPA activity, but the report suggests a gradual move towards co-located projects that integrate wind and solar energy. While the majority of participants are corporate entities, there is potential for a renewed influence from utility companies in the future as the market demands increased energy intelligence.
Impact of Battery Storage on PPAs
Battery storage is becoming a crucial component within PPAs, enhancing their flexibility and functionality by allowing for energy to be shaped according to demand. Different contractual structures are emerging, where agreements specify volume commitments for high-value hours or grant offtakers the optimization rights over both renewable assets and battery storage. This strategy is particularly important as the energy landscape prioritizes longer-duration contracts to manage financing costs effectively. As demand for batteries grows in both Europe and the U.S., understanding their role in energy arbitrage and grid services will become increasingly vital for stakeholders in the renewable energy sector.
It has become a tradition to welcome Luca Pedretti, Co-Founder of Pexapark, to the show to discuss the evolving PPA market, especially now that Pexapark has released its annual State of the Market report. Laurent and Gerard are joined by Luca to highlight the key insights from this year’s findings:
Corporate PPA demand remains stable, but with new entrants
More deals, but smaller sizes: The number of transactions increased by 16% (+37 deals), even as total volumes declined.
Innovative deal structures on the rise: Hybrid models, such as solar-wind PPAs, multi-buyer/portfolio arrangements, and cross-border agreements, are gaining traction, offering enhanced flexibility and risk-sharing.
The continuous rise of 24/7 energy with the need to track and trade GoOs
We also delve into the topic of negative prices, capture prices, and their implications. The conversation extends to Pexapark’s predictions for 2025.
Additionally, we explore the growing role of batteries, new tolling agreements, and their impact, along with how batteries are increasingly incorporated into PPAs.
Finally, we turn our attention to the US market, discussing Pexapark’s first acquisition of a US company, Renewafi, marking a significant step in Pexapark’s american expansion.