End of subsidies could fuel the corporate PPA boom in Europe

With many of the owners of the first wave of European solar projects starting to contemplate life after subsidies, the corporate power purchase agreement (PPA) market could set for a rush of new generation capacity.

Flemming Sørensen, vice president for Europe at U.S.-based PPA platform Levelten Energy, said there was a slew of solar projects coming to the end of feed-in tariff (FIT) agreements which would need to look for alternative revenue streams on the open market.

“There is an abundance of projects coming to the market that have had 10 or 15-year subsidies but are nowhere near the end of their operating life,” Sørensen told pv magazine.

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That could mark a whole lot of new customers for Levelten, which last month said it was offering more than 25 GW of clean energy supply for private offtakers through its corporate PPA platform. Operating across 19 European countries , with its biggest markets in the north and south of the continent, Sørensen said “almost none” of that generation capacity related to already operational facilities, although that situation could change as FIT contracts come to an end.

Levelten has an eye on the European market and is hoping sub-national authorities follow the example of their transatlantic peers by directly procuring renewable energy from project developers as the City of London did last month, when the local authority signed a 15-year, £40 million (€44.2 million) deal to buy the electricity generated at a 49.9 MW solar park planned by French developer Voltalia in Dorset, in the southwest of England.

“Typically, a city will manage their energy costs through the local utility,” said Sørensen. “If they are interested in some form of renewable electricity, they will ask that supplier to then source the renewable electricity.” That will usually involve paying a premium for the clean power in order to avoid any bigger investment cost or financial risk, said Sørensen.

That means the decision by local authorities to commission clean power has no direct impact on new renewables generation capacity. The City of London deal meant Voltalia will be able to press ahead with the near-50 MW project planned while the council offtaker can anticipate saving money on its current electricity bills and removing the future pricing volatility characteristic of the wholesale electricity market.

It is a solution which has already been embraced Stateside, Sørensen added. In the U.S., he said, “PPAs are more common at local, city-level governments, but also [with] state governments.” “There are plenty of U.S. states that have set very ambitious [clean energy] targets,” said the Levelten representative. “The eastern seaboard is investing significantly in offshore wind through state-mandated PPA contracts.”

Ben Collie, of Oxford-based Aurora Energy Research has estimated unsubsidized, ‘merchant' solar projects in France, Germany, Italy, Spain, Portugal and the U.K. could be generating more than 70 TWh of clean power for PPA offtakers by 2030, with around 60% of it set to be bought by utilities and the balance by corporate customers in a market where it is thought demand could exceed supply.