Heavy industries and ICT sector signed most of power purchase agreements (PPA) with offshore wind farms in 2021 and 2022, as the European PPA market expect some further boost from the EU power market overhaul being drafted by the European Commission.
A Power Purchase Agreement (PPA) is a long-term contract under which businesses are purchasing green electricity directly from a renewable energy producers. Offshore wind PPAs have taken off since 2018 and are becoming increasingly popular, especially among energy-intensive companies, according to data showed by WindEurope.org.
In a record-high 2021 with almost 1.4 GW in contracted offshore capacity, 88% accounted for energy – intensive sectors such as chemicals, industrial gasses, ICT, and transport (mainly rail transport). Country-wise, Germany, Belgium and UK were leading the way. 2021 was also a record year for all renewable PPAs, as corporate clients signed 4.5 GW of wind energy capacity through PPA deals, Wind Europe noted on its website.
In 2022, heavy industries representatives such as Umicore from Belgium, Air Liquide from Netherlands, Salzgitter from Germany, Google in the UK or telecom KPN in Netherlands signed offshore PPA deals with suppliers such as Engie, Vattenfall, and EnBW.
„2022 data for offshore wind showed investments comparable with those in 2020 with a total contracted capacity of around 500 MW. Compared with 2021, when a record 1.4 GW of offshore wind PPAs were contracted, it was a less fruitful year. However, wind PPAs supported the market resilience this year, with more than 2 GW of contracted capacity via onshore wind PPA in addition. Many industries – notably the heavy industry – consider offshore and onshore wind projects as relevant sources to decarbonize their operations,” Stefano Miriello, Policy Advisor at the RE-Source Platform, told BalticWind.EU.
He noted that the total number of PPAs in Europe was impacted by the challenging market conditions exacerbated by fragmented market revenue caps in the EU.
„But the 6.6 GW of total contracted capacity and high demand demonstrated the reality that corporate PPAs are an important market tool for project developers and corporate buyers alike,” Miriello said. In his opinion, stable regulatory conditions are of crucial importance, if corporates are to be able to continue to contract renewable power via PPAs and support Europe’s transition to a carbon neutral society.
The European Commission intends to boost the European corporate PPA market under its proposal of electricity market reform expected to be released in mid-March. The proposal will “attempt to better protect consumer energy bills from short-term swings in fossil fuel prices” by expanding “Europe’s use of long-term contracts that provide power plants with a fixed price for their electricity – contracts for difference (CfD) and power purchase agreements (PPA)”, the Commission said as quoted by Euractive website on January 23. Yet, on February 13, the website noted that a group of seven EU countries called on the Commission to keep its upcoming reform of the electricity market “targeted and focused” on measures that will enable the green transition while ensuring affordable energy for consumers amid soaring electricity prices as the fallout of war in Ukraine.
The development of the PPA market in Europe, with particular focus on Poland will be discussed at the annual RE-Source Poland Hub conference on 21-22 March in Warsaw. Among the participants will be Catharina Sikow-Magny, Director of the European Commission, who will present details of the EC’s electricity market design proposal on PPA market. In addition, representatives of the green energy market will debate on the directions of RES development incl. wind projects, the main barriers, opportunities for strengthening the competitiveness of the economy and how to finance corporate PPAs. BalticWind.EU is a media patron of the event. More details on: http://konferencjaresource.pl/en/home/
More details on corporate PPA market development in Europe are available on: https://windeurope.org/intelligence-platform/product/the-corporate-ppa-tool/