Photo: Preferred power-generating technologies for corporate PPAs in Europe; Source: Fieldfisher survey, October 2019

Offshore wind third most popular for corporate power purchase agreements in Europe

Offshore wind is the third most opted for energy source for corporate power purchase agreements (CPPAs), according to a survey of the European CPPA market carried out by law firm Fieldfisher.

Some 54 per cent of survey respondents said they would consider signing a power purchase agreement (PPA) for offshore wind energy. This ranks offshore wind behind onshore wind (77 per cent) and solar energy (69 per cent), sharing the third place with with hydro-electric power.

Fieldfisher found that more flexibility is the main sticking point in many deal negotiations, including that in sharing construction, balancing, price and contract risks between purchasing and generating parties in PPAs.

Opportunities for corporate buyers seeking long-term clean energy deals are opening more and more as renewable energy in Europe becomes increasingly subsidy-free.

“Buy-side drivers for entering CPPAs include the opportunities these agreements offer to hedge against fluctuating wholesale energy prices; profitability stemming from long-term price certainty; and the brand kudos that comes with procuring energy from renewable sources”, Fieldfisher states.

On the other hand, reasons for not entering CPPAs include unpalatable risk-sharing arrangements, difficult strike price negotiations, inflexible length of contract term, prohibitive transaction costs, and regulatory barriers, according to the report.

“With the exception of the EU’s Renewable Energy Directive (RED II), there is no specific regulatory framework for supporting or promoting CPPAs at the level of European law, and currently no standardisation of CPPA contracts across the EU”, the law firm says.

Fieldfisher further added that market participants recognise that anticipated regulatory changes and greater standardisation of CPPA contracts will help adjust the balance of risk, making deal terms more acceptable to a wider range of corporate buyers.

Growth of the renewables CPPA market partly depends on expanding the pool of potential power purchasers, as the market is still in its infancy, according to the law firm.

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