Sweden, Spain the Cheapest European Markets for Wind and Solar Corporate PPAs, BNEF Survey Finds

Sweden and Spain respectively have the cheapest average corporate PPA prices in Europe for wind and solar electricity, according to BloombergNEF’s (BNEF) 1H 2020 European Corporate PPA Price Survey. The first of its kind in Europe, the survey aims to provide pricing transparency and simplify the complexity around corporate power purchase agreements, or PPAs, helping buyers to understand this fast-growing market.

The survey finds that the lowest price levels for onshore wind corporate PPAs in Europe are available in Sweden at 30.50 EUR/MWh. Solar PV shows its lowest price levels in Spain at 35.30 EUR/MWh, but is generally more expensive across the region than wind. The report reveals big differences in renewable energy PPA prices across Europe.

Helen Dewhurst, an analyst at BloombergNEF and the author of the report, said: “The very wide range of results was particularly interesting, with the gap between the cheapest PPA you might sign in Sweden and the most expensive PPA in the U.K. being over 30 euros per MWh.”

BNEF’s 1H 2020 European Corporate PPA Price Survey looks at the minimum-maximum price range for the most common PPA scenario – a ‘base case’ – for both solar and wind across nine markets. The survey then shows how PPA prices change depending on three main adjustment factors: capacity, term length and contract structure.

PPA prices are not static and depend on many variables, so there is never just no one market price. However, with an understanding of the underlying power market and various adjustment factors, it is possible to arrive at a sensible range for a given PPA scenario. At present, any publicly available information is generally anecdotal and project-specific, while the majority of PPA data is obscured by non-disclosure agreements. As no two projects are the same, this means available corporate PPA data have had limited usefulness.

Image: BNEF

In addition to technology, changes in PPA contract terms can have a significant impact on price. For example, the survey found that annual baseload contracts for round-the-clock power are between 1.5 and 3.5 euros per MWh more expensive on average than standard pay-as-produced deals that directly track renewable output. The extent to which volume has an impact on price generally increases in inverse proportion to project size.

Term length is another key determinant of corporate PPA pricing. In Europe, a 1.5-2.5 EUR/MWh premium is typically charged for 15-20 year terms, compared with more standard 10-15 year terms. This is a key distinction between Europe and the U.S. – the world’s largest corporate PPA market (with 40.4GW activity, compared to 9.8GW in Europe) – where longer deal terms attract a discount.

Kyle Harrison, a BNEF analyst specializing in corporate sustainability, commented: “Nearly half of the world’s RE100 companies are based in Europe – we know the demand for clean energy is there. But for PPA activity to scale up to U.S. levels, more light needs to be shined on regional nuances around contract pricing, structure and term length.”

BNEF’s inaugural 1H 2020 European Corporate PPA Price Survey aggregated data from 25 players in the region’s clean energy space. Online PPA platform Zeigo also provided market data, while PPA pricing expert Pexapark provided ‘fair value’ data. The latter shows what optimal pricing would need to be for corporate buyers to save money on clean energy purchases, based on wholesale market trends.

BNEF will update the survey bi-annually, with the intention of expanding the group of participants and adding more countries as PPA activity in Europe increases. BNEF also updates its corporate procurement data each month and publishes a bi-annual corporate clean energy market outlook.