Covid-19 halting European PPA market

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German energy advisory Enervis has told pv magazine the market for unsubsidized large scale solar projects in Europe may grind to a halt thanks to the effects of the Covid-19 pandemic.

Senior consultant Tim Steinert said that the consequences of the global outbreak are already visible. “With current spot price … levels in European markets, there is hardly any subsidy-free business model left,” he said. “If you compare current wholesale prices to full costs of the projects, you won’t see any market where a subsidy-free business model is still working in current market conditions. This will hopefully change again by end of this year [or the] beginning of next year.”

Enervis’ Steinert said the current market environment will put most of the unsubsidized PV development pipeline on hold, drying up the signing of power purchase agreements (PPAs) planned for this year, and possibly next year too. “We hope to see an ease from the end of this year and the beginning of next year but we don’t know yet how power prices driven by demand, CO2 and gas prices will develop in the next months,” said the consultant.

Investors

Investors are likely to gravitate instead to subsidized projects for the time being, said Steinert. “Nobody is really prone, at the moment, to look for projects with pure market risk,” he said. “Most of the negotiations we see at the moment will be put on hold and postponed at least until the end of this year.”

Enervis analyst Rita Kunert said even solar projects with a signed PPA could encounter problems, especially those which must be finalized this year. “The shutdown of industries in China could cause delays in product deliveries and the consequences for many projects [that are] under construction are obvious,” she told pv magazine.

Kunert said projects which need to complete permitting and grid access procedures are likely to face difficulties stemming from staffing problems at administrative departments and grid operators. “However, so far, nobody can foresee the magnitude of this event for the global economy,” she said. “But certainly there will be some disruption.”

Arij van Berkel, a director at New York-based data company Lux Research, this morning said early projections indicated a 20% fall in global demand for oil, only the second such slump on record, with the previous instance occurring in 1980, after the Iranian Revolution a year earlier. On that occasion, demand for oil fell only 5%, according to Van Berkel.

A recent report by Enervis estimated 8.4 GW of PPAs had been signed in the European solar sector in recent years. Based on data from 25 countries, the study revealed the largest European PPA market for solar plants was Spain. Last year alone, 4.39 GW of solar-linked PPAs were announced in the country. Italy and Germany followed, according to the report, with 1.91 GW and 1.05 GW of PPA deals, respectively, with demand also on the rise in Portugal (444 MW), Denmark (338 MW), France (158 MW), Ukraine (44 MW), Poland (35 MW), Sweden (16 MW) and the United Kingdom (6 MW).

Covid-19

Read pv magazine’s coverage of Covid-19; and tell us how it is affecting your solar and energy storage operations. Email editors@pv-magazine.com to share your experiences.