As curtailment implications extended beyond the immediate crisis, the incident underscores the importance of clearly defined force majeure clauses and risk-sharing mechanisms in future PPA structures.
What happened in Spain last week?
On 28 April 2025, Spain experienced one of Europe’s most severe blackouts, with power supply plunging from 27 GW to near-critical levels within seconds. The cascading grid failure, triggered by the near-simultaneous disconnection of two power plants in southwestern Spain, overwhelmed frequency safeguards and left much of the Iberian Peninsula without power for nearly 23 hours. Since the event, Spain’s transmission system operator (REE) has taken a more cautious approach to grid stability, reportedly curtailing non-synchronous renewable generation, particularly solar, while ramping up gas-fired output to provide the inertia needed to stabilise frequency.
This unprecedented event has drawn attention to the complex interplay between physical system risks and commercial PPAs. On the day of the blackout, solar output in Spain fell from a projected 13.4 GW to just 5.0 GW. Since then, renewable capacity has repeatedly been ramped down, with the TSO seemingly curtailing renewable production.
How are such events typically handled in PPAs?
For PPA sellers and buyers, the event raised questions about how contract terms respond to unplanned outages and extended periods of unexpected curtailment. Under Pay-as-Produced (PAP) PPAs — the most common PPA contract structure in Europe — offtakers purchase energy as it is generated. Under normal circumstances, offtakers typically bear the volume risk on days with low or no generation. However, sellers are usually required to meet annual availability thresholds — typically around 90–95% for solar and 85% – 90% for onshore wind — or will face penalties disclosed in the contract.
During unforeseen events, settlement under PAP contracts typically does not occur. In most cases, such events would trigger force majeure (FM) clauses, relieving sellers from liability — especially if the event is a clearly defined emergency — and not count towards availability thresholds. However, according to Pepe Zaforteza, Regional Lead PPA Transactions – Southern Europe at Pexapark, in less common PPA structures such as Pay-as-nominated, the seller would expect settlement to occur as it is based on nominated volumes from the day before, but FM would occur on the buyer side as they were unable to consume it.
More serious issues arise when the asset remains offline or underperforms beyond the immediate event. This may be due to follow-on technical failures, grid constraints, or continued curtailment by the TSO. If an asset cannot meet the availability thresholds due to extended downtime, even following an FM event, liability could shift back to the seller — depending on contractual specification or ambiguity. Curtailment by the TSO thereafter could be treated as grid curtailment, a risk which typically lies with the seller. All of this will depend on the layout of and definition of the FM clause and will differ according to each contract. There is a lot of uncertainty surrounding how unprecedented events are dealt with in PPAs, and this point often receives little attention during PPA negations, where the attention often lies on negotiating prices rather than events that could trigger repeated curtailment.
What lessons can we learn for the future?
The key lesson for future PPAs is that contract structuring around curtailment, FM events, and asset unavailability will need to become more nuanced. Buyers and sellers alike will need to clarify how extended outages, even those triggered by unforeseen events, are handled over time and who will bear the commercial risk if an asset is unable to deliver for days or weeks after the event itself.
According to Mike Forber, Regional Lead PPA Transactions – GB & Ireland at Pexapark: “The recent blackout highlights the growing importance of grid stability and contractual resilience in PPAs. We may expect to see increased scrutiny of force majeure and curtailment clauses in both existing and future agreements, as counterparties seek to balance the risk in a rapidly evolving energy landscape”. Such developments will likely increase the complexity of PPA negotiations, with stronger emphasis on curtailment risk-sharing, FM definitions, and post-event recovery periods embedded in contractual frameworks.