Renewable Energy & Cleantech

Contributed By: Alexander Quarles, Client Development Manager, Renewables & Cleantech

The market for renewable energy in Europe is shifting toward deregulation of energy supply, allowing corporations to consider new ways to secure affordable and reliable clean power. As a result, commercial and industrial (C&I) renewable power purchase agreements (PPAs) have seen dramatic growth in the past few years.  2018 was a landmark year, with 7.2 GW worth of global corporate renewable PPAs already signed year-to-date. In 2019 we are already seeing heightened corporate PPA activity in key European markets, following fast on the progress driven by the U.S.

Intricacies within each region can make it challenging to decipher which market is best to transact in; depending on a company’s goals, the answer to this question will vary. Going further, there is growing interest in pan-European virtual PPAs, where a financial agreement for renewable energy in one country can be used to address electricity usage across the interconnected European portfolio.

To highlight current opportunities, Schneider Electric’s renewable energy experts have compiled a 5-minute review of the top European countries for companies to consider.

Spain

Cost-competitive renewables and availability of flexible contract structures make Spain a target market. Due to volatile commodity costs, relatively high energy prices and strong renewable energy resources, renewable PPAs are emerging as a cost-effective way to ensure stable energy prices and achieve carbon-reduction goals. A variety of PPA options are available; direct (sleeved) and virtual (synthetic) deals are possible and can be structured both with traditional fixed prices as well as market-following structures. Interested companies with electricity load in Spain will find a solution with a risk profile that suits their needs.

UK & Ireland

Historically, most C&I PPAs in the UK were direct (sleeved) under a subsidy scheme. Despite the withdrawal of subsidies, wind and solar projects are becoming competitive with traditional energy generators. As renewables become more economically attractive, companies and developers are beginning to consider virtual (synthetic) deals. One market dynamic pushing corporates to explore more innovative energy strategies is the increase in transmission and distribution charges – a good PPA deal could allow companies to mitigate the net impact of these charges.

With its rich wind resources and track record for C&I renewable PPAs, including deals by IKEA, Facebook and Microsoft, Ireland is also a market to keep an eye on. The country has seen delays in its energy market reform, which has led to some uncertainties. But for companies with environmental goals, wind farms could be a source for clean energy attributes.

Belgium and Netherlands

Corporate PPA offers from developers in Belgium are emerging, coming from both new and existing projects. Offshore wind farm developers are also keeping their eye on the potential for corporate offtake, though many remain loyal to auctions. Developers have been open to both direct (sleeved) as well as virtual (synthetic) deals.

The Netherlands has seen some exciting action on the C&I front – most notably a buyer’s consortium deal arranged by Google, Philips, DSM and AkzoNobel. Subsidies do still exist for renewables in the Netherlands, but new wind and solar deals are increasingly cost-effective on their own. Supply issues around guarantees of origin (GOs) in the Netherlands have caused a spike in price (almost double in the past 12-18 months), squeezing C&I budgets for energy attribute certificates. Renewable PPAs are an effective way to ensure GO availability at a stable price for companies who have long-term renewable and carbon reduction goals.

The Nordics

Though commodity costs have remained lower than many other European nations, companies continue to execute renewable energy deals here. For companies with a long-term mindset and renewable energy goals, there is attractive pricing, particularly for new wind projects. Not many PPA deals have been done in the Nordics, but rather a small number of very large deals, some of which have involved buyers relinquishing GOs to improve economic returns.

Poland

While the Polish government has introduced an auction system to stimulate new renewable energy, project owners and developers are still seeking alternate forms of revenue (such as corporate offtake) to support either existing assets or the development of new projects. The main opportunity in Poland is for virtual (synthetic) PPAs, and buyers entering this market can stake a leadership claim. Because Poland has a notoriously dirty grid, corporate renewable PPAs can have an outsized environmental impact compared to PPAs in other markets. With significant increases in energy prices in 2018 compared to 2017, the economic returns on offers are also improving.

France

France’s electricity grid has historically depended on nuclear power. Since 2011, alternative suppliers to the central utility have benefitted from the ARENH (Regulated Access to Historical Nuclear Energy) mechanism, which provides a natural cap for French customers against market price spikes. However, this mechanism has been questioned by different market players and could be reviewed in the future. The market for corporate offtakers to date has not been very active due to the government’s appetite for wind and solar and the nature of subsidies, but this could change. Potential market movements could bring about the development of corporate PPA opportunities as price caps rise and developers shift their focus to alternative routes to market.

5 minutes down… ready to learn more? Reach out to the author, Alexander Quarles, at alexander.quarles@ems.schneider-electric.com to discuss your company’s renewable strategy in Europe.