price cannibalization

The rising popularity of “baseload” power purchase agreements (PPAs) has posed questions to solar electricity suppliers in the German market. How can projects that do not generate at night, and with wide seasonal output variation, effectively supply constant power to consumers? More importantly, who shoulders the price risk?

Developers are making hay as far as PPA prices are concerned thanks to eye-watering wholesale electricity prices which mean they can just sell their solar and wind power on the open market.

Greater dispatchability will be required from solar as it becomes increasingly mainstream worldwide, or investors could experience diminishing returns as a victim of the technology’s success at bearing down on electricity prices.

The success of unsubsidized clean power facilities in the country – whether driven by corporate power purchase agreements or selling direct to the wholesale electricity market – has prompted the Department for Business, Energy and Industrial Strategy to ponder whether contracts-for-difference payments will be fit for purpose in the years ahead.