There is currently little to no overlap between the buyer bids and seller offers of power purchase agreements (PPAs) in some of Europe’s major markets, according to analysis by Swiss-based price intelligence platform Pexapark.
In its latest report, Pexapark applies its transactable price range model, which identifies the range in which PPA deals can realistically occur by mapping the overlap between the highest buyer bids and lowest seller offers, to shed light on the lack of pricing consensus in Germany, Great Britain, France, Spain, Portugal and the Nordic region.
During the third quarter of this year (Q3), Pexapark found no such PPA pricing overlap in Germany, leading to German PPA activity falling to three announced deals covering 169 MW. Pexapark says the gap in solar was driven by continually lower capture assumptions from buyers, who are pricing in greater risk from oversupply and negative pricing.
There was also no transactable price overlap recorded in Great Britain during Q3, which Pexapark attributes to high price points from the Contracts for Difference scheme setting seller expectations significantly above corporate willingness to pay. A similar outlook was observed in France, where a standstill is being created by developers basing offer prices on elevated government auction benchmarks, while buyers apply for larger discounts.
Solar PPAs are also waning in the Iberian markets of Portugal and Spain, Pexapark’s analysis adds, with the region facing rising capture and cannibalization risks, alongside surging curtailment in Spain. Meanwhile, in the Nordic region, Pexapark says corporate buyers are increasingly price sensitive and less willing to pay the premiums required to make projects bankable, bringing new development to a near halt.
Pexapark highlights Italy as a current outlier, with the country still enjoying investor confidence thanks to a structured, long-term regulatory framework. While overall PPA capacity is slowing, deal counts rose in Q3, with the battery energy storage system (BESS) market experiencing robust activity.
Pexapark COO and co-founder, Luca Pedretti, commented that the challenges observed in Q3 show the disconnect between price, driven by developer costs and regulatory benchmarks, and value, driven by forward prices, capture risk, and buyer appetite.
“When bid ranges fall short of minimum offer ranges, transactions stop,” Pedretti explained. “This isn't due to a lack of ambition – it’s a symptom of poor information and understanding of pricing by different counterparties.”
Pedretti added that the transactable price range forces honest conversation around where deals can actually close. “For renewables to scale quickly enough to meet energy transition targets, we need to stop debating value and start transacting with more pricing certainty,” he added.
Pexapark’s latest report also adds that against the current backdrop of market illiquidity, offtake arrangements connected to BESS are becoming increasingly popular in Europe, with market participants considering co-located storage critical to alleviating the volume and price risks associated with renewables.
The growing necessity for solar projects to be co-located with storage in order to reach PPA bankability has been highlighted by both research teams and industry experts in recent months.
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