WindEurope’s latest report on 2020 financing and investment trends confirmed last year’s record-breaking year for corporate power purchase agreement (PPA) announcements across Europe. There were nearly 4 gigawatts (GW) of capacity contracted with wind, solar, and other renewable projects.
Figure 21, Renewable energy corporate sourcing through PPAs (GW)
We see from the report that the number of PPAs signed each year has increased steadily since 2013. Until 2018, wind accounted for 90% of the contracted capacity in Europe but the last couple of years has seen a rapid expansion in solar PPAs. In 2020, a record 51 PPAs were signed in total, including 24 for wind power and 24 for solar power. Alongside this success story, the types of companies signing PPAs are more diverse than ever before. As we covered in a recent article, companies from a range of sectors are now sourcing renewable electricity through PPAs, from telecoms to pharmaceuticals.
In fact, it’s not just companies that are benefiting from PPAs. In 2019, 20 UK universities grouped together to buy clean wind energy and last year the City of London signed a solar PPA.
One of the reasons such a diverse group of organisations are signing PPAs is financial. A recent survey of 1,200 companies across six countries showed that, of those sourcing renewables, 92% are doing so to reduce energy costs. Simply put, renewable electricity is often the most cost-effective and financially prudent option. As renewable technology matures, the cost drops. Over 10 years, the price of solar electricity dropped 89% and onshore wind dropped 70%.
In addition to lowering costs, PPAs also offer protection from market volatility, as prices are agreed upon from the offset. PPAs allow companies to pay a fixed price for energy over a period of years, reducing electricity cost volatility and generating savings on energy bills over the long term. Wind and solar projects also benefit from PPAs. A guaranteed power purchaser, combined with long-term price visibility, help to secure project financing at lower costs.
Figure 22, Renewable energy corporate PPAs by country (MW)
We are also seeing PPAs being signed in a greater range of countries. Historically, the Nordic region led in corporate renewable PPAs but we can see from the chart above that Belgium and Germany have made significant increases in the past two years. Spain has also announced a stunning amount of renewable PPAs since 2018, including 1.3 GW in 2020 alone, taking it from one of the lowest-ranked countries to the third highest in only three years.
Are you interested in exploring the economic and environmental benefits of PPAs? Explore our Buyers Toolkit and access facts, advice and template contracts.