The market for PPAs – contracts through which utilities or industrial companies buy electricity from renewable energy projects under fixed terms – is weakening dramatically and undergoing a major transition. These were the two key takeaways from RE-Source, held this week at the historic Amsterdam Stock Exchange, where 1,450 experts from energy trading, renewable generation, and industrial power consumption convened.
Guy Brindley, head of market intelligence at WindEurope, estimated that around 60 GW of capacity is traded under PPAs in Europe, including 25 GW of solar, representing roughly 130 TWh – nearly one-quarter of Germany’s annual electricity consumption. Nearly one-third of this volume is contracted by IT offtakers, primarily data centers, another third by energy-intensive industries, and the remainder by sectors such as retail, pharmaceuticals, and automotive, or through consortia in multi-buyer PPAs.
Deal volume has dropped from a peak of around 230 in 2024 to roughly 115 this year, declining steadily since summer 2024. This is significant, as PPAs are a major financing tool for subsidy-free renewable energy projects. A continued contraction could increase the need for public financial support to stay on track with climate targets.
Market transition
However, the sold-out RE-Source event suggests the market remains active and should not be written off too quickly. Organizers reported 300 industrial and commercial power buyers among attendees, alongside a large contingent of project developers, independent power producers (IPPs), and utilities. Matchmaking remains a key part of the event.
Daniel Dang, director of business development at SolarPower Europe, one of the event’s organizers, said the participant mix now reflects a broad cross-section of the economy. In addition to global IT firms with ambitious climate goals, energy-intensive industries such as chemicals, aluminum, steel, and cement were present. Automotive and medium-sized companies are also increasingly joining.
Dang said he does not interpret the decline in deal volume as a backlash against sustainability. Companies remain committed to renewable energy procurement, he said, but market conditions – falling wholesale prices, high volatility, financing costs, and regulatory uncertainty – are complicating price agreements.
He said he assumes that official statistics may underestimate actual market activity, as many smaller, aggregated, or privately negotiated PPAs are not publicly disclosed. “With faster permitting, improved grid access, and supportive market frameworks, Europe’s corporate PPA market can continue to grow and mature,” he said optimistically.
To strengthen the corporate renewable PPA market, Dang and other industry representatives advocate expanding risk-sharing mechanisms to help medium-sized companies and smaller buyers and developers participate. He pointed to a new PPA guarantee product from the European Investment Bank. Other measures include promoting cross-border PPAs, multi-buyer models, and enhancing flexibility to integrate more renewables and ease regional bottlenecks.
Hybrid PPAs
The market is becoming significantly more complex in many respects. Price is no longer the only factor – PPAs must also address cannibalization and regulatory uncertainty, said Adrien Coudurier, head of global account management at Enel. Many participants noted that simple pay-as-produced contracts are no longer sufficient and that flexibility on the offtaker side needs to be integrated.
The major trend is toward hybrid PPAs, combining solar with storage, wind with storage, or all three technologies together. However, the development of how hybrid PPAs can be structured is still at an early stage – a topic that provided plenty of material for discussion at the conference.
Asked about the biggest blocker for hybrid PPAs, Natasha Luther-Jones, partner at the law firm DLA Piper and active in the PPA business for 17 years, said that both sides first need to fully understand the concepts.
When flexibility is to be included in the system, things become even more complicated. One way to promote and develop this is through time-stamped guarantees of origin, as demanded by Google. They ensure that renewable generation corresponds to consumption in data centers in 15-minute intervals rather than only on an annual balance-sheet basis. This still does not apply to all of Google’s consumption, but increasingly so. The IT giant uses various ways to procure electricity. In some cases, contracts are based on specific profiles that sellers must meet, for example, with 95% reliability.
However, this is a concept that not many sellers or buyers are probably yet able to implement. It is therefore to be expected that – as is already the case today – electricity traders will continue to play a key role. Whether it is crucial for them to conclude a hybrid PPA including a battery with the generator remains to be seen. In principle, they can also contract the batteries separately.
Negative prices
As a short-term solution for current deals, it is crucial for how pure solar PPAs handle hours of negative power prices. A fair approach, said Phil Dominy – director of corporate finance, energy and infrastructure at EY – is when the risk is shared. For example, if a PPA is priced at €70 ($80.60)/MWh and the market price drops to –€15/MWh, the buyer pays €70 for the generated volume, while the generator covers the €15 loss resulting from the negative power price.
It is in everyone’s interest that a plant stops feeding into the grid when prices turn negative. However, this is only possible if the PPA contract includes a clause specifying how deemed volumes are determined in such cases. In principle, it should remain the generator’s decision whether or not to curtail. If the offtaker decides, an audit accountant could conclude that the offtaker, through the contract, effectively exerts control over the asset. In that case, the offtaker would have to include the plant in its balance sheet under international accounting standards.
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