ICIS Power Perspective Outlook for corporate PPAs in the Nordic region

Author: Matthew Jones


This story has originally been published for ICIS Power Perspective subscribers 03 May 2019 at 11:45 CET. 

The Nordic region has dominated the corporate PPA market in Europe over the past five years, accounting for 59% of all capacity contracted to date according to our new corporate PPA statistics page, launched today. We examined why the Nordic region has been a pioneer in the field of corporate PPAs in Europe, as well as analysing the prospects for future PPA growth in Norway, Sweden, Finland and Denmark.


  • Corporate PPAs are long-term contracts signed between a renewable generator and a company for the supply of electricity. The deals allow companies to meet sustainability targets and hedge against future price risk, while guaranteeing the renewable generator a route to market and a long-term income
  • Norway and Sweden have seen the greatest volume of PPAs signed in Europe over the past 5 years, accounting for 3.4 GW out of a total 6.3 GW in Europe
    • In the section below we assess the main factors that have contributed to this growth
  • Finland and Denmark are less established PPA markets, with a combined 310MW of deals signed to date, though both offer significant growth potential in the coming years

Nordic Corporate PPA Drivers

  • El-certificate scheme
    • The joint Norwegian-Swedish renewable support system (the el-certificate scheme), established in 2012, has been a key driver of corporate PPAs as it leaves renewable generators in both countries with some exposure to market prices and therefore the incentive to reduce this exposure by signing long-term deals to sell their output. This differs from most other countries, where the presence of feed-in tariffs has shielded generators from market price risk
    • The value of el-certificates themselves, which has ranged from around €6/MWh to €36/MWh over the past five years, also improves the economics of deals, allowing generators to accept a slightly lower price for the PPA deal than they would in a subsidy-free environment
  • Demand
    • On the demand side, large aluminium companies Norsk Hydro and Alcoa, which have high power consumption, have shown an increasing willingness to sign PPA deals in recent years, enabling them to hedge against future price risk while fulfilling sustainability objectives
    • Demand has also come from technology giants Google, Facebook and Amazon, with the region’s cool temperatures and comparatively low electricity prices making the Nordics an ideal location for energy-intensive data centres
    • However, it is noteworthy that these five companies account for all of the 3.4GW of PPA capacity signed in Norway and Sweden
    • At the European level, the five companies account for 65% of all the PPA deals signed to date, which highlights how consolidated the corporate PPA market is in Europe at present
    • Moving forward, the main limitation on corporate PPA growth in the Nordics, as in the rest of Europe, will be finding enough companies that have the requisite creditworthiness to sign deals
  • Resources
    • Both Norway and Sweden have high quality wind resources, with among the highest load factors in Europe, which helps to reduce project costs and improve the economics of PPA deals
    • Both countries’ vast hydropower resources, which account for 40% of the generation mix in Sweden and 95% in Norway, also reduce the risk of wind power curtailment as hydro availability can be lowered during times of excess production
  • Power prices
    • As stated above, the low power prices in the Nordics has made the region attractive for large companies with significant power demand, which has created a customer base for PPA deals
    • However, these companies will also be wary of the potential for rising prices in the Nordics in the early 2020s due to a combination of increasing carbon prices, nuclear closures and the construction of new interconnectors to higher cost markets
    • Our Horizon forecasts suggest that prices in both Norway and Sweden are expected to rise by €10-13/MWh between 2019 and 2023, which increases the incentive to hedge against this risk
    • Both countries also experience significant power price volatility by European standards as a result of extreme weather raising demand or snowfall levels affecting hydro availability. Again, this creates power price exposure that companies can hedge against by signing a PPA

  • Norwegian credit guarantee
    • The Norwegian position as the leading PPA market in Europe has also been boosted by the country’s export credit guarantee agency (GIEK), which issues an assurance to the power generator that they can make a claim against GIEK if the buyer fails to meet its contract terms
    • This state backing for PPA deals is not currently seen anywhere else in Europe
  • Snowball effect
    • Finally, Norway and Sweden have benefited from a snowball effect, whereby the signing of the first deals has generated experience and confidence for corporations to sign further PPAs, or for new companies to enter the market


  • Norway
    • Norway will not accept new projects to the el-certificate scheme from 31 December 2021. As a result, there may be a rush to commission new projects over the next 18 months, which could lead to additional PPA deals being signed
    • The PPA market may slow down significantly, or even come to a standstill, in the early 2020s as project developers adjust to a subsidy-free landscape
    • However, given our expectations for rising power prices in Norway, as well as future technology cost reductions, we expect subsidy-free projects to come to fruition
    • The first proposal for a subsidy-free project was put forward in March 2019, with developer Norsk Vind Energi announcing initial plans for a 1.5GW wind farm to come online in 2025
    • With the lack of subsidy support reducing the bankability of future projects, the signing of PPAs will be essential for enabling projects to move forward. However, the absence of subsidy could also put upward pressure on the PPA price required by developers
  • Sweden
    • While Norway plans to prevent new projects from accessing the el-certificate scheme from 2021, Sweden has proposed a cut off of 2030
    • As a result, Sweden is expected to see a gradual increase in onshore wind capacity through the first half of the next decade, which is likely to ensure a steady flow of new PPA projects
    • However, this growth could put downward pressure on el-certificate prices, which would lower the subsidised income for projects and could lead to developers seeking a slightly higher PPA price
  •  Finland
    • The closure of the FiT support scheme in Finland in 2016 meant that there was around 4GW of wind capacity in a pre-licensed state but without a subsidised route to market
    • With technology costs continuing to fall, several projects were able to move forward without government subsidy, which led to three PPAs being signed in 2018
    • The country now has a route to market for wind projects that includes government subsidy, though there are only two such auctions, in 2018 and 2019, with no clarification on future subsidy support
    • The low strike prices achieved in the first auction, with an average of just €32.49/MWh, implies that projects are viable without subsidy at current market prices, which suggests that demand for PPAs in Finland has the potential to increase significantly
    • The biggest risk in the longer-term stems from the anticipated commissioning of the Hanhikivi 1 nuclear plant in 2028, which is expected to have a strongly bearish impact on power prices (see above graph), potentially threatening the economics of PPA deals
  • Denmark
    • The country saw its first corporate PPA in 2018, with Vattenfall signing a deal with Novo Nordisk for the Kriegers Flak offshore wind farm
    • While PPA deals in the rest of the Nordics have been dominated by onshore wind, Denmark could see further offshore wind PPAs given the government’s plans for capacity expansion and intention for future offshore wind projects to be subsidy-free
    • In addition, there may be some potential for onshore wind and solar PPAs in Denmark in the coming years, though a FiP subsidy system is likely to remain in place for both technologies
    • Our analysis, however, shows that due to the ambitious RES plans by Denmark, solar, onshore and offshore wind will experience price cannibalisation effects
      • From 2021 the average yearly capture prices for all three technologies will on average be below wholesale market prices
      • The gap will only increase through to 2030 when capture prices will on average be €10.3/MWh, €11.7/MWh and €8.6/MWh below the wholesale price for solar, onshore and offshore wind generation respectively, which means that RES producers will be incentivised to price their PPAs below expected wholesale market prices
      • This could have a positive effect on the number of PPAs signed


  • Potentially bearish impact for prices in the mid- to long-term if PPA deals are able to bring online additional capacity outside of government support schemes that would otherwise not have a route to market
  • However, the impact could be neutral to bullish if Nordic governments attempt to completely remove subsidies and rely solely on PPAs to enable new projects, as limitations on the number of creditworthy corporate buyers could lead to a slowdown in renewable capacity growth compared to long-term government expectations

Matthew Jones is Senior Analyst - EU Carbon & Power Markets at ICIS. He can be reached at Matthew.Jones@icis.com

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