PPAs: A sustainable solution for the energy industry

In recent years, electricity systems have been undergoing constant transformation. PPAs (power purchase agreements) are a stable, sustainable solution for the energy industry.

he rapid development of Renewable Energy Sources (RES), the important goal of decarbonization, the introduction of new technologies and the need for digitalization have brought a wave of changes to the energy industry. In addition to the high volatility of energy prices due to the war in Ukraine, energy companies, consumers and operators are changing the way they operate and how they organize their activities.

Due to the high penetration of RES systems in the energy mix, the need arose to change the financing model of investments in renewables. From a state-guaranteed environment with stable selling prices of electricity, a gradual transition is taking place to a new landscape which is closer and closer to price risk.

Renewable electricity producers are gradually finding that their projects sell part or all of their energy output on energy exchanges. On the other hand, consumers can see that the era of stable energy prices through long-term contracts is over and they are beginning to be exposed to the risk of price changes through suppliers on energy exchanges. Consequently, both sides are looking for ways and tools to hedge this risk.

Price and market stability

One tool that guarantees price stability for producers and consumers are green PPAs: long-term contracts for the sale and purchase of electricity from renewables. Producers and consumers come to an agreement on the quantity, price, guarantees of each side and other commercial, technical and legal issues, aimed at reducing risks throughout the duration of the contract. Thus, in several European countries like Spain, the United Kingdom and Germany, the market is growing rapidly, with ever-increasing contracted volumes.   

In the markets of the Iberian Peninsula and Italy, we lead the way with a portfolio that includes giants of the metal, pharmaceutical and IT industries. The Greek market is moving in the same direction, having already recorded the first such bilateral agreements. In this new landscape in Greece, we’ve entered mature negotiations with large industrial and commercial groups (Greek and multinational) and maintained a continuous presence in international tenders for all-European PPAs as well as short lists of buyers.

Growing for a greener future

It’s estimated that the market for green PPAs will grow enormously, reaching 10% of the physical market by 2030 and providing solutions to producers, consumers and financiers (such as banks and funds). At the same time, initiatives should be launched to resolve issues that are impeding the development of the sector. The relevant institutional framework is constantly changing, while the lack of electrical space in the grid leads to production cuts and loss of green MWh. Moreover, the relative resistance of companies to long-term planning is slowing down the pace of growth in the sector. By launching regulations and measures to address these issues, the market will move faster to utilize the many advantages of PPAs: price stability, expansion of green investment and reduction of carbon footprint.