Spain is Europe’s cheapest market for corporate solar PPAs

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Spain is the best solar market for corporate power purchase agreements in Europe, according to BloombergNEF, with the lowest prices for PV projects coming in at €35.30/MWh.

Sweden, meanwhile, is the continent’s cheapest market for corporate wind PPAs, with the lowest prices averaging €30.50/MWh, the research outfit said in its recently published BloombergNEF 1H 2020 European Corporate PPA Price Survey.

It said that it aims to provide greater clarity around “fair PPA price ranges in Europe” in order to create more transparency in the continent’s rapidly evolving corporate PPA environment.

“The very wide range of results was particularly interesting, with the gap between the cheapest PPA you might sign in Sweden and the most expensive PPA in the U.K. being over €30/MWh,” said Helen Dewhurst, analyst for BloombergNEF.

The report focuses on the minimum-maximum price ranges for the most common PPA scenarios for solar and wind projects in nine different markets. PPA prices tend to vary across the continent depending on three key factors: capacity, term length, and the structure of contracts, BloombergNEF said.

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PPA prices depend on a range of variables and are not static, so one cannot pinpoint a single market price. That said, by looking at underlying power markets and a range of adjustment factors, one can determine a “sensible range for a given PPA scenario,” BloombergNEF explained. Accessible information on the corporate PPA environment tends to be “generally anecdotal and project-specific,” it claimed, noting how nondisclosure agreements make it difficult to get an accurate picture of what is actually happening on the ground.

Variations in PPA contract terms can also have a big impact on pricing, BloombergNEF said. It noted that annual baseload contracts for round-the-clock power can be up to €3.5 euros/MWh more costly than conventional pay-as-produced agreements that directly keep tabs on solar and wind output.

It also said that term length can have a big impact on corporate PPA pricing. In Europe, a €1.5-2.5/MWh premium is usually tacked onto 15-20 year terms, versus more conventional 10-15 year terms. The researchers argue that this marks an important difference between Europe and the United States, which is the biggest corporate PPA market in the world, with 40.4 GW of activity versus just 9.8 GW on the Old Continent.

BloombergNEF said it plans to update the corporate PPA survey on a biannual basis, with plans to add more countries as PPA activity ramps up across the region.

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