Power purchase agreements (PPAs) can shield German wind farm operators from price volatility as 20-year tariffs under the country’s renewable energy law, known as EEG, expire, renewable energy software company Pexapark suggested at the Husum Wind 2021 event in northern Germany.
The Switzerland-based company recently helped three German independent power producers sign power purchase agreements (PPAs) – which offer a fixed price per MWh – for five onshore wind farms, with an average age of 20 years.
It comes as power prices soar to all-time highs in Germany and developers with projects approaching 20 years of age face imminent exposure to market forces.
From 1 January 2021, 4GW of German onshore wind capacity became ineligible for support under the EEG, and around 16GW of capacity is due to exit the support scheme by 2025.
“Short-term PPAs can help reduce the financial risks of operating aging wind farms out of subsidy and will provide greater optionality around asset lifetime extension decisions,” said Jonas Nihoj, head of portfolio and trading services at Pexapark.
“Ultimately, it will enable them to keep important generating capacity online and optimise their portfolio.”
Last year, the German government convened a roundtable with industry players to work out how to support projects exiting the EEG support system. One method due to be discussed was PPAs.
However, no legislation materialised ahead of the German federal election taking place later this month.
Earlier this year, several wind industry groups, turbine manufacturers and project developers called on the German government to help boost the German wind sector, including by enabling the development of corporate PPAs.