Corporate PPAs are 'not the holy grail' for European wind

Are corporate power purchase agreements the future of wind farms in Europe, or are they a short-term bubble that is about to burst?

he Bassum wind farm is one of the six projects that will supply renewable electricity to Mercedes-Benz through a corporate PPA deal (pic: Daimler AG / Windwärts / MarkMülhaus)
he Bassum wind farm is one of the six projects that will supply renewable electricity to Mercedes-Benz through a corporate PPA deal (pic: Daimler AG / Windwärts / MarkMülhaus)

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Views differed among a panel of experts speaking at Windpower Monthly's Asset Life Optimisation forum this week. 

Speaking at the event, Jordi Francesch of clean energy fund management firm Glenmont Partners told attendants that "corporate PPAs are here to stay".

Large companies buying power directly from wind farms on long-term fixed-price contracts has long been the norm in the US, and will become a major trend in Europe as feed-in-tariffs disappear, he said.

"There is a market and there are opportunities. I am really optimistic," Francesch added.

However, Greencoat Capital’s Javier Serrano disagreed. He said he could see corporate PPAs flatlining in Europe, where "we don’t have the big corporates" in similar numbers to the US.

"My personal feeling is that corporate PPAs are not the holy grail for European renewables," he added.

Wind farms considering such agreements have to assess the long-term exposure to the fixed price on offer through a PPA against the shorter-term visibility over market prices for electricity, said Carly Magee of Foresight Group.

Because Europe does not have as many corporates as wind farms looking for PPAs, prices will be depressed and projects may struggle to make money as a result, she said.

But insurers might carve a role for themselves by providing revenue swap tools that would cover the gap between PPAs’ duration and the visibility over market prices, according to Magee.

The speakers agreed it was essential for investors to be educated on the switch away from feed-in-tariffs.

"Investors must understand that there will be more price exposure and more volatility," Magee said.

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