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PPA Transaction

Germany races out of the blocks in Q1

3 min read

Corporate power purchase agreements (PPAs) in renewables in the first quarter of 2021 shows that the German market is gaining momentum after a promising 2020.

Which corporate has had the most impact on power purchase agreements in Europe in the last two years? We can look at the obvious names, like the large global tech companies and lately also big chemical companies

But two names we’d also put in the mix are companies that represent different sides of transportation in Germany: car maker Daimler and rail operator Deutsche Bahn.

Both have signed significant corporate PPAs. In 2019, Daimler revealed a PPA with Statkraft to power its Mercedes-Benz factories in Germany, which it said made it the first major PPA energy buyer in the country. Daimler has since signed similar deals in 2020 and 2021 – including a hybrid wind, solar and hydro PPA this month.

Meanwhile, Deutsche Bahn signed the first corporate PPA for German offshore wind power in 2019 at RWE’s Nordsee Ost; agreed a set of wind, solar and hydro PPAs in 2020; and, in January 2021, signed a one-year PPA with Statkraft to extend the life of six German onshore wind farms where their government subsidies had expired.

Currently, Deutsche Bahn is the largest off-taker in Germany with a third of all volumes contracted over the last 18 months.

This puts those two companies at the forefront of the rise of corporate PPAs in Europe’s largest market by installed wind and solar capacity. Germany has more than 62GW wind and 54GW solar, according to the International Renewable Energy Agency. We are now seeing more companies following them and signing PPAs.

In this article, we will share some insights on the growth of wind and solar PPAs in Germany in the first three months of 2021, based on deals that we advised on. We will also look at what this will mean for PPAs in Germany in the year ahead.

German expansion

An explosion in the use of corporate PPAs in Spanish solar meant Europe enjoyed a record 2020. Nearly 4GW of corporate renewable PPAs were agreed in Europe last year, led by solar, onshore wind and offshore wind. This is up from 2.5GW in 2019.

We expect Spanish solar will continue to be an important driver of corporate PPAs in European renewables in 2021, due to the favourable economics of the sector. Even so, we may not see Spain enjoy the same leading position, given the new Spanish auction and recent drop in PPA prices and risk appetite. View our monthly PPA price reports for more details here.

We said in our market outlook at the start of the year that we expected to see major growth in the German PPA market this year – you can read that full outlook here – and at this stage, that forecast look like being proven right.

In the first three months of 2021, we worked with clients on 8 PPAs in Germany. That is ahead of three in Spain and two in Sweden.

This is a small sample size of course, but it shows that the German PPA market is coming out of the starting blocks fast. We expect to see many more such deals in the year ahead on the back of a wave of long-term PPA for new built solar projects and sizable short-term deals with wind parks falling out of the old subsidy regime.

The German PPAs we worked on included:

  • Renegotiating a large offshore wind PPA for a major European investor
  • PPAs for 120MW of post feed-in tariffs projects for a German investor
  • Using PPAs to support an up-to-100MW pipeline of repowering projects
  • A ten-year PPA with a corporate off-taker for a 150MW solar plant

This shows the huge amount of variety in the German PPA market, and we see a number of reasons to continue being optimistic about Germany.

Industrials and innovators

There is a large and dynamic industrial sector with an increasing interest and experience of deal making in PPAs. It is also one of the most liquid wholesale electricity markets in Europe, with a large number of professional energy buyers willing to provide long-term PPA services for both sellers and as facilitators for corporate PPAs

And, perhaps most importantly, we see a culture well set up to foster innovation in PPAs. While new wind projects in Germany are going through a tricky period due to trouble securing permits and pressures on profitability, there is a feverish interest in the build out of new solar projects given that project economics now work on non-subsidy basis.

The impact of these changes is that developers have been looking at new ways to take new renewable projects to financial close and arrange transactions on the basis of PPAs.

What happens next? We hope the German government responds to demands from the renewables industry to make it easier for companies to develop corporate PPAs, that permits for new solar projects keep flowing and that market price levels will allow for the extension of life-time of old wind parks falling out of the subsidy regime.
This would make for a booming PPA year in Germany.

Our intensive PPA activity so far in 2021 shows the German market is moving, and we look forward to announcing many more deals in the

You can keep up with all the latest European and US deals in our PPA tracker.

 

 

 

 

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