How will corporate PPAs transform European wind?

The smell of the greasepaint. The roar of the crowd. There’s nothing quite like the buzz of treading the boards – and then discussing big trends in the wind industry.

This Thursday, I’m looking forward to getting back on stage and moderating at the launch event for our European PPA Trends report, which we’re publishing with the financial advisory firm Augusta & Co. This is our first networking event of 2019 and we’re looking forward to seeing plenty of you at the offices of law firm Bird & Bird. You can book your place here.

It’s an interesting time to be discussing the PPAs that companies in the wind sector are signing with corporates and other long-term energy buyers across Europe. We are seeing plenty of trends that point to why PPA structures could be a transformative trend for renewables in Europe over the next five years.

First, the negative. No doubt we all saw the WindEurope figures last month showing that the amount of wind capacity in Europe, both onshore and offshore, completed in 2018 was its lowest level for a decade. We should always be wary of drawing simple conclusions from figures such as these, but in our view this does show how the shift from government-decided feed-in tariffs to competitive auctions is affecting activity.

But it is in this trend that we see the opportunity for PPAs. Governments have been looking to cut the subsidies they pay wind developers. However, most of these same governments also have ambitious targets for renewables: Germany is committed to phase out coal power by 2038 and Spain wants 100% renewable electricity by 2050.

This means that developers and investors will need to find ways to take schemes to financial close. Signing PPAs with corporates and other buyers will help them do so.

And there is no shortage of projections for how far wind and solar could grow over the next 20 years. This year, we have seen a forecast from Bloomberg New Energy Finance that renewables could make up more than 50% of global power generation by 2050, along with similar projections from BP and McKinsey & Co. If governments aren’t opening their own wallets then PPA deals will prove to be an invaluable tool.

So the European wind industry looks to be on the cusp of major growth. Politicians want to facilitate more wind development. Companies in the wind sector are seeing an increase in the level of new capital flowing into the sector, continuing a trend we have seen since 2012.

And we see companies that want to buy wind power.

This is another reason why we see this as a great time to discuss PPAs. In Europe last year, we saw first corporate wind PPAs signed in countries including Denmark, Germany, Poland and Spain; and debut deals from companies in sectors including car-making. Historically, corporate wind PPAs in Europe have been dominated by tech and heavy industry giants in Scandinavia, but this is starting to change.

It’s fair to say that these PPA deals could be transformative. That also means that we will see pressure on companies in the wind sector to adapt to this new world.

How can wind developers and investors make the accurate long-term power price forecasts they need to determine the power prices at these PPAs now? What are the challenges of dealing with companies big and small that may not have bought power from renewable energy schemes before? What are the regulatory hurdles that could crop up and derail the renewables growth plans of even the most ambitious nations?

These are all questions that we cover in the European PPA Trends report, which we are set to publish on Thursday, and which we should discuss at the event too.

In short, there is a major opportunity for corporate PPAs to support faster growth in the European wind industry, and help companies ride out the short-term challenges caused by the shift to competitive auctions. But this will also put the onus on firms in the wind industry to adapt to this fast-changing world.

We look forward to thrashing out all of these topics on Thursday – and hope to see you there.