Sweden, Spain the cheapest european markets for wind and solar corporate PPAs

Precios máximos y mínimos de energía solar fotovoltaica y eólica terrestre, H1 2020. Fuente: BloombergNEF, partipantes en la encuesta, datos de Zeigo. Nota: Los datos se recopilaron de enero a marzo de 2020. Solo se muestran resultados de precios seleccionados para cada tecnología. / Maximum and minimum solar PV and onshore wind pricing, H1 2020. Source: BloombergNEF, survey participants, Zeigo data. Note: Data were collected January-March 2020. Only select pricing results are displayed for each technology.

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 €/MWh. Solar PV shows its lowest price levels in Spain at 35.30 €/MWh, but is generally more expensive across the region than wind. The report reveals big differences in renewable energy PPA prices across Europe.

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 € 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.

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 € 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 €/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.

Source: BNEF