Contract Certainty Backs EU Solar Boom
European solar comes of PPAge; From scorching Seville to rainy Rostock, investors claim that power purchase agreements (PPAs) have made European solar farms bankable without government subsidies. By providing lower risk for cheaper capital, they are powering a renaissance in established PV markets and lowering the cost of solar electricity in Europe.
Benedict O’Donnell, April 20, 2019 (PV Magazine)
“…[S]olar PPA activity in Europe grew from 360 MW in 2017 to more than 2.4 GW in 2018…There are various sources for funding new PV capacity with PPAs becoming a more relevant one as grid parity evolves…The news offers timely respite to Europe’s battered solar sector as governments across the region phase out financial incentives for renewable energy…[N]ew European photovoltaic parks have attracted investment on the back of falling costs for solar technology, relatively high electricity rates, and – usually – excellent irradiation. But the final ingredient that has brought these projects into existence has been the security of a long-term buyer for their electricity…As long as the probability of default of the offtaker is low and PPA terms and conditions are reasonable, funding should not be an issue at all…[T]he cost of generating electricity from renewables dropped below wholesale electricity rates on Southern European electricity exchanges over a year ago…
…[I]n principle it should no longer be necessary to sign a PPA but guarantees of price stability entice investors, lowering interest rates…[G]overnment incentives like feed-in-tariffs, net metering schemes, and auctions were necessary to roll out renewable energy technologies on electricity markets until their cost dropped below that of incumbent energy sources. Since this transition, the second challenge has been to remove the subsidies…Every time a government says that it will hold an auction or feed in a new incentive for renewable energy, international investors paralyze capital flows until they know what will happen…That slows down the roll-out of PV and forces unnecessary costs onto consumers. Today, the largest and fastest moving solar projects in Europe are unsubsidized. They produce the same environmental benefits for the grid but cost nothing to their users… Dealing with risk is exactly where PPAs can help…” click here for more