Europe enters 'golden age' of renewable power purchase agreements

According to a Swiss research report, European countries signed 23 power purchase agreements in March this year, with a total installed capacity of about 2.5GW. This is a 14% increase compared to February. Although the number of purchase agreements in March was seven fewer than in February, it was still higher than in any month in 2022.

According to statistics, the price of the European renewable energy power purchase agreement index increased by 0.5% compared with the previous month. Spain and Portugal maintain the lowest prices in Europe. Meanwhile, Poland's index rose the most, rising 28.9% compared to the previous month. In contrast, the Nordic countries saw the largest decline, down 11.5% month-on-month.

The European Commission finally published a proposal to reform the design of the EU's electricity market on March 14. The research report expressed their excitement after analyzing how a number of proposed reforms would affect the power purchase agreement (PPA) market in continental Europe. But final legislation from the European Commission is not expected until 2025, they noted in the report. Nonetheless, the European Commission's new electricity market design reform proposals have the potential to usher in a golden age of renewable power purchase agreements.

At present, Europe signs 100 to 150 renewable energy power purchase agreements every year, with a total installed capacity of 10GW to 20GW. It is estimated that the European Commission's electricity market reform measures can generate more than 1000TWh of electricity demand. This corporate demand will grow in tandem with European GDP and electrification efforts, with hundreds of new power purchase agreements to support increased renewable energy capacity.

Europe's shift towards a larger and more dynamic PPA market is being supported by allowing new and increased investment in renewable energy generation facilities. In addition, the proposed credit support mechanism will unleash the need for electricity procurement contracts. “From experience, credit has been the main barrier to holding more PPAs,” the authors of the study explain. Allocated to buyers who have difficulty entering the PPA market, such as small and medium enterprises.