PPAs in Spain to continue growing over this decade

• At least 11 PPAs signed in Spain so far this year

• Energy players anticipate inevitable growth in PPA

• Renewable capacity expansion likely to come outside of state subsidy

LONDON (ICIS)–The number of power purchase agreements (PPAs) is likely to continue growing in Spain over this decade, highlighting utilities’ and corporations’ ongoing appetite for bilateral deals with renewable producers.

Spain has among the highest number of PPAs announced in Europe.

At least 11 PPAs have been signed in Spain so far this year, according to ICIS observations. Of these announcements, at least six are corporate PPAs (CPPAs). The large majority of the agreements involve solar power.

Power purchase agreements (PPAs) are long-term contracts signed between a renewable generator and a utility or wholesale reseller for the supply of electricity.

Corporate PPAs, meanwhile, are deals where the buyer uses the renewable power in its operations.

PPA EXAMPLES

On 25 September, French energy company Total announced it had signed a CPPA with developer Ignis for around 6TWh per year of Spanish solar power generation from 3.3GW of new capacity to be built before 2025.

This is reportedly the largest CPPA in the world and will be enough to power all of Total’s European industrial operations by 2025, the announcement said.

Total told ICIS it was confident that PPA growth in Spain will continue. It cited the fact that Spain was one of the first countries in Europe to commit to carbon neutrality by 2050 and has demonstrated clear renewable ambition as a key reason for investment in solar in the Iberian country.

On 8 October, Spanish energy supplier Fortia Energia and Norway’s Statkraft signed a PPA until 2029. The PPA will enable Statkraft to provide Fortia client industrial sites with around half of the electricity generated by two third-party wind farms totalling 93MW.

Continued growing demand for green power solutions from end consumers can lead to even further PPA growth in the years ahead, Statkraft told ICIS. The company aims to further contribute to renewable growth in Spain as a market integrator and PPA provider.

Also speaking to ICIS, a source from Fortia explained that PPAs are a way of having certainty about the electricity costs of its customers, thus making PPAs a valuable tool for risk price hedging.

“The downward trend in renewable energy sources’ installation costs will keep going down so PPA prices should (also) go down, making future PPAs (in Spain) even more attractive,” the source added.

RENEWABLE AUCTIONS

The renewable auction planned for 2020 faces the risk of a delay due to the coronavirus. Delays to construction of projects are also a possibility for the same reason.

The planned auction is the first of a new series that seeks to help Spain achieve its 2030 National and Energy Climate (NECP) targets, approved by a royal decree law in June.

Spain’s NECP had pledged a minimum of 3GW per year in new renewable auctions but this constant capacity target was scrapped in August.

Teresa Ribera, the minister of ecological transition, stated the Spanish government is preparing a five-year renewable auction calendar, where the volumes will instead be adjusted each year. 2021 will see between 2-3GW auctioned, with the following year either higher or lower than this total depending on annual growth, Ribera explained.

An average of 3GW auctioned per year over the next five years as previously stated falls below the required expansion rate to meet 2030 capacity targets for solar alone. ICIS estimates the required annual growth rate for all renewables at around 6GW in any case to meet 2030 NECP targets.

This would imply that the NECP and recent government statements assume a large proportion of solar capacity expansion – and other renewable growth – to come outside of government subsidy.